# Irish Life Funds vs ETF investing



## Joey101 (27 Oct 2014)

Hi all,

Having underwent a lot of research in the last few weeks, I'm going to outline my argument here as to why I believe the an Irish Life fund product would be a better choice for someone looking to invest a lump sum of +20k such as myself and would like to see any feedback. For simplicity, I'm taking the Irish Life Consenus Fund which has the most capital of any fund in Ireland.

*Consensus Fund pros:*


Automatically rebalances your portfolio for no additional charge. There are many articles/books written on the importance of rebalancing a diversified 'lazy portfolio' at least annually. *UPDATE: *Seen as a pro if you're entire 'investments pot' would be in a fund (see post number 7)
Has a 5 year per annum return of 10.3% (before taxes and charges- see cons below) *UPDATE: *Past performance is not an indicator of future performance (see post number 7)
Has assets to the value of €5.3 billion. *UPDATE: *Not seen as particularly important - no research to suggest that large funds perform better. However they tend to have a better record.
Is highly diversified across equities, bonds and a little in cash and property *UPDATE: *This can easily be achieved with ETFs - added as a pro for ETFs.
You are allowed to move your portfolio from one fund to a more/less risky fund free of charge whilst investing.
I believe you can add savings amounts to it occasionally, however I am focusing here on investing a lump sum. *UPDATE*: yes you can invest additional lump sum amounts - they must be at least €1,000. Also you could do this with any type of investment however others may incur transaction costs
All taxation issues are handled by Irish Life (submitting returns/forms, the deduction of stamp duty etc.)
*Consensus Fund cons:*


According to AIB Portfolio Invest (I cant post the link as this is my first post), the annual fee is 1%. According to Irish Life the annual fee is 1.5% - I'm currently investigating this. It should be noted that Irish Life's "regular invest" version of the funds charge 1.65% therefore lump sum is more tempting for me
1% stamp duty wiped off your investment straight away
You are betting on the success of Irish investment managers
Minimum investment of 20k
Additional charges (on top of taxation) for making a withdrawal within 5 years - 5% within 3 years, 3% in 4th year, 1% in 5th year
*ETF pros*:


You get to decide which markets you invest in and at what asset allocation percentages
The expense ratio's of ETFs are generally very low for large ETFs (can be less than 0.1% in most cases) and a highly diversified portfolio can be (arguably) made with as little as 2-3 ETFs
It can be fun and a hobby to be in full control of your portfolio
You don't pay any stamp duty when investing in ETFs
Easy and cheap to achieve portfolio diversification
*ETF cons:*


I believe the cheapest online broker is TD Direct. Charges are €20 per trade. As long as you invest more than 5k, you won't be charged any quarterly fees.
You must declare purchases of any ETFs not listed on the IFSRA website as a UCITS
If you hold an ETF for more than 8 years you need to fill out a form 11 as also discussed in the above thread and pay tax (I believe this is a type of preliminary tax - your actual tax bill will be calculated on actual disposal and you will either pay more or receive a reimbursement at this time)
Detailed records will need to be kept of all purchases and sales, number of shares, price, date, tax rate at that date in order to calculate your taxes due. Having said that, this sounds more complicated than it may be if you are comfortable keeping an excel sheet with the data
It would be advisable to only invest in ETFs that reinvest dividends otherwise all dividends will be taxed and if you wanted to manually reinvest them, you would incur transaction costs with the broker
Lastly, a very important point - the cost of rebalancing an ETF portfolio doesn't seem to be mentioned very much in this forum. Rebalancing effectively means maintaining the asset allocations to each ETF market you are invested in. With ETFs, if you wish to rebalance you will be taxed and also incur the broker transaction costs - the combination of the two on an annual/semi annual basis I think would be crippling to portfolio returns. There was an excellent post here in relation to the matter in the thread "Availability of Index tracking funds in Ireland" by Olivetti but I can't post the link without having more posts myself 
I would like to see what people's responses are in relation to this, - particularly given the fact that AIB appear to be only charging 1% as mentioned above. I was initially drawn to the glamor of ETF investing but this interest has faded the more I've read. I will add to pros and cons of either investment strategy if pertinent points are made. I'd also like to acknowledge that I have no affiliation to Irish Life, AIB or TD Direct.

*UPDATE:*

*Shares pros:*
Lowest costs of all if you resist the temptation to call the market and avoid trading 
Tax efficient use of capital gains and losses 
Subject to CGT at 33% instead of 41% on unit-linked funds and ? on ETFs. 
0% CGT if you still own the shares when you die - compared with 41% on the unit-linked funds. Older people should only invest directly in shares because of this huge advantage. 


*Shares cons:*

Higher tax on the dividend income than on profits of pooled funds
Illusory disadvantages of shares


Unable to achieve the diversification of funds. This is massively overstressed by people selling funds.


----------



## Steven Barrett (27 Oct 2014)

The management fee is Irish Life's charge for managing the fund, light & heat, profit etc. You also have the cost of buying the various trades. This is factored into the unit price. No Irish insurance company discloses their TER. I was talking to an English fund manager last week and he was shocked at this lack of disclosure. 

Unlike a lot of people who post here, I have no problem in paying someone to invest for me. I do not have the level of expertise that fund managers have. The problem is, most fund managers do not try to beat the average. The Consensus fund being the perfect example. It's goal is to achieve average results. 

If you are going to pick a fund manager, pick one who sole purpose is not to just about beat the average because that is what their bonus is based on. 

If you have the time, interest and expertise, do it yourself. With less charges, you will make more money...if you do it right.


Steven
www.bluewaterfp.ie


----------



## cremeegg (27 Oct 2014)

Excellent post Joey, and I look forward to seeing your points explored further.

The thing that jumps out at me is that investing through an EFT may not be cheaper that through a fund.

You mention the cost of rebalancing and the brokers fees that would be involved.

On the fund side is the 1% or 1.5% management fee the total charge an investor faces, are there not also charges within the fund?


----------



## cremeegg (27 Oct 2014)

SBarrett said:


> Unlike a lot of people who post here, I have no problem in paying someone to invest for me. I do not have the level of expertise that fund managers have.



No reasonable person objects to paying anyone for doing a job. 

However fund managers generally expect to be paid just for turning up, whether or not they do the job.


----------



## RobFer (27 Oct 2014)

Joey101 said:


> Hi all,
> 
> I   would like to see what people's responses are in relation to this,   - particularly given the fact that AIB appear to be only charging 1% as   mentioned above. I was initially drawn to the glamor of ETF investing   but this interest has faded the more I've read. I will add to pros and   cons of either investment strategy if pertinent points are made. I'd also like to acknowledge that I have no affiliation to Irish Life, AIB or TD Direct.



On the issue of rebalancing, I think that many people invest as their surplus earning become available say E5,000 every six months. A E20 broker fee is only 0.4% of a E5,000 sum. Also these instalments can be used to rebalance. You don't need to sell holdings, atleast not for awhile. If you stick to just two or three funds rebalancing might not be so prohibitive as long as the portfolio is a certain size. An Irish life fund certainly does has its strengths but over the long term I still think there is a compelling case for ETFs. 

BTW rebalancing is great for avoiding dramatic short- and medium-term drops in a portfolio's value but it in the long-term whether it necessarily adds a lot to returns is debated. Yet I think its one of these approaches that becomes more important the older an investor is as it restores the portfolio's risk profile.


----------



## Joey101 (27 Oct 2014)

SBarrett said:


> The management fee is Irish Life's charge for managing the fund, light & heat, profit etc. You also have the cost of buying the various trades. This is factored into the unit price. No Irish insurance company discloses their TER. I was talking to an English fund manager last week and he was shocked at this lack of disclosure.
> 
> The problem is, most fund managers do not try to beat the average. The Consensus fund being the perfect example. It's goal is to achieve average results.
> 
> If you are going to pick a fund manager, pick one who sole purpose is to just about beat the average because that is what their bonus is based on



So to confirm, the costs of buying various trades or TER is factored into the return of a fund. Similarly, the TER of of ETFs is factored into the return in that you don't see these costs being deducted from your gains when looking at your portfolio on the broker platform - your gains already include the costs. So as long as the returns look decent for a fund, I feel you don't really need to worry about this. I agree that there should be more transparency around these 'sunk costs'.

The problem with choosing a fund that ideally strives to beat the market is that they cost more. A prime example of this is the Multi Asset Portfolio Funds offered by Irish Life as an option under clear invest/clear regular invest. There are a number of funds to choose from depending on volatility but the key point is that they charge an average extra 0.15% according to the booklet and this could go up depending on performance. It's a complete shot in the dark as to whether these will actually perform better also.


----------



## Brendan Burgess (27 Oct 2014)

Hi Joey

It's a peculiar comparison - a specific Irish Life fund to ETFs in general. 

I think that the first comparison should be a comparison of unit-linked funds vs. ETFs. 
If you find that unit-linked funds are superior to ETFs, then you try to choose between the different unit-linked funds. 

You list a lot of Pros which are not pros at all


Automatically  rebalances your portfolio for no additional   charge. There are many  articles/books written on the importance of   rebalancing a diversified  'lazy portfolio' at least annually.
This is completely overdone.  If you are investing your entire assets in a fund, it might have some value.  I presume €20k is not your entire assets. You probably have a home, a pension and other savings and investments. 
Has a 5 year per annum return of 10.3% (before taxes and charges- see cons below)
Completely irrelevant.  Past performance is not an indicator of future performance. 5 years is a meaningless term
Has assets to the value of €5.3 billion
So what?  I am not aware of any research that suggests size on its own is an advantage.  Of course, funds with a good record, tend to be larger. 
Is highly diversified across equities, bonds and a little in cash and property
You can achieve all or most of this easily enough. 
You are allowed to move your portfolio from one fund to a more/less risky fund free of charge whilst investing
This may be an advantage if you are able to predict which asset class will do best over the medium term. I can't, but maybe others can.
I believe you can add savings amounts to it occasionally, however I am focusing here on investing a lump sum. *UPDATE*: yes you can invest additional lump sum amounts - they must be at least €1,000
But you can do this with any type of investment. 
All taxation issues are handled by Irish Life (submitting returns/forms, the deduction of stamp duty etc.)
This is an advantage.


----------



## Brendan Burgess (27 Oct 2014)

The biggest advantage of ETFs over funds is the charges.  The very high costs of unit linked funds dramatically reduce the returns over time.  Your example of the early withdrawal charges in Irish Life is just an example of how bad they can be. 

The big advantage of fund over an ETF, is that a loss on one sub-fund can be set against the profit in another, before calculating the tax. #

Say I buy a shares ETF and a bond ETF. The shares ETF rises by €10,000 and the bonds ETF falls by €10,000.  If I need cash, I will sell the shares ETF and pay tax on the gain.  I will have to keep the bonds ETF until it returns to the price I paid for it. 

If I have €10,000 profit on a sub-fund within a unit linked fund and €10,000 losses, if I need cash, I can cash part of it and pay no tax.


----------



## Brendan Burgess (27 Oct 2014)

But the real comparison should be between a "pooled investment" and direct investment in a passive portfolio of shares. 

The shares is a bit more work, but the advantages are many 


Lowest costs of all if you resist the temptation to call the market and avoid trading
Tax efficient use of capital gains and losses
Subject to CGT at 33% instead of 41% on unit-linked funds and ? on ETFs.
0% CGT if you still own the shares when you die - compared with 41% on the unit-linked funds. Older people should only invest directly in shares because of this huge advantage.
The disadvantages of shares 



Higher tax on the dividend income than on profits of pooled funds
Illusory disadvantages of shares


Unable to achieve the diversification of funds.  This is massively overstressed by people selling funds.


----------



## RobFer (27 Oct 2014)

Brendan Burgess said:


> 0% CGT if you still own the shares when you die - compared with 41%  on the unit-linked funds. Older people should only invest directly in  shares because of this huge advantage.


Is this true for US shares as well? How are US shares taxed at death?


----------



## Steven Barrett (27 Oct 2014)

cremeegg said:


> No reasonable person objects to paying anyone for doing a job.
> 
> However fund managers generally expect to be paid just for turning up, whether or not they do the job.



Which is why I also said



SBarrett said:


> The problem is, most fund managers do not try to beat the average.


----------



## Monksfield (27 Oct 2014)

*Consensus*

Joey

Like Brendan I find focussing on a single unit-linked fund curious but putting that to one side:

- the uplift from the annual management charge to a properly calculated TER would be very small: for a very big fund like Consensus the uplift would be 2/3 bps

- I find references to Consensus as highly diversified odd - it has close to 80% in equities - the fact that those equities are highly diversified is imortant but it is the allocation across the asset classes (bonds/equities etc) which reall offers diversification

- numerous studies have shown that rebalancing is a source of added value if carried out systematically over time; Irish Life "rebalances" Consensus in line with the asset allocation of the average pension managed fund (a dwindling pool BTW) but that is not rebalancing....historically that pool of pension managed funds has allowed the equity content to drift in line with markets with little evidence of net sales at high points or net buyinng at low points

Brendan's point about CGT is interesting bt I think it may be more complicated than that - I believe any CGT on death levied against a unit-linked fund is off-set against any CAT liability on the part of the perso who inherits.I am NOT a tax expert but believe this to be the case. Better to pay no tax than depend on an off-set which of course might not arise if the inheritance were within the relevant threshold


----------



## Brendan Burgess (27 Oct 2014)

Monksfield said:


> Brendan's point about CGT is interesting bt I think it may be more complicated than that - I believe any CGT on death levied against a unit-linked fund is off-set against any CAT liability on the part of the perso who inherits.I am NOT a tax expert but believe this to be the case. Better to pay no tax than depend on an off-set which of course might not arise if the inheritance were within the relevant threshold



Hi Monksfield

I am not a tax expert either, but...

When a unit-linked fund is cashed, an exit tax is paid by the fund.  There is no CGT as such.   I have never heard of a set-off for  the exit tax paid by the fund against CAT or anything else.  

Say I have €1m in my share portfolio and you have €1m in your unit-linked fund and we both have €500k of gains. And we both die. 

My estate will receive €1m. 
Your estate will receive €800k. ( less  €500k gains@41% exit tax).

Your beneficiaries will pay less CAT, because they will receive less money. 

Brendan


----------



## Joey101 (28 Oct 2014)

Brendan Burgess said:


> It's a peculiar comparison - a specific Irish Life fund to ETFs in general.


 
Fair enough, I thought I'd just take a fairly bog standard (and one of the largest funds in Ireland) as a rough comparison though to show what the mangement fees are like on such a product etc.



Brendan Burgess said:


> Automatically rebalances your portfolio for no additional charge. There are many articles/books written on the importance of rebalancing a diversified 'lazy portfolio' at least annually.
> This is completely overdone. If you are investing your entire assets in a fund, it might have some value. I presume €20k is not your entire assets. You probably have a home, a pension and other savings and investments.


 
I'm actually quite young, no mortgage, 6 month old pension and some other cash on deposit.




Brendan Burgess said:


> Has a 5 year per annum return of 10.3% (before taxes and charges- see cons below)
> Completely irrelevant. Past performance is not an indicator of future performance. 5 years is a meaningless term


 
Really? Excuse my ignorance but how else does one go about measuring performance of an ETF or fund - looking at costs and the indexes its linked to only?




Brendan Burgess said:


> You are allowed to move your portfolio from one fund to a more/less risky fund free of charge whilst investing
> This may be an advantage if you are able to predict which asset class will do best over the medium term. I can't, but maybe others can.


 
I think you're being a bit harsh there - surely this an advantage for someone that is older and after say 5 years wants to reduce their appetite for risk and go for something more bonds heavy than equities




Brendan Burgess said:


> I believe you can add savings amounts to it occasionally, however I am focusing here on investing a lump sum. *UPDATE*: yes you can invest additional lump sum amounts - they must be at least €1,000
> But you can do this with any type of investment.


 
True, but you will incur transaction costs with shares, and in this example with TD Direct that would probably be €20... or 2% every time you added €1,000. However RobFer did suggest that most people would probably save up say 5k every 6 months to reduce this.


----------



## Jim2007 (28 Oct 2014)

Joey101 said:


> Fair enough, I thought I'd just take a fairly bog standard (and one of the largest funds in Ireland) as a rough comparison though to show what the mangement fees are like on such a product etc.



I having a very hard time making any sense out of what you are saying!  As far as I can see there is no product bearing the name you are quoting and comparing it to an ETF, for starters....

As far as I can figure out, what you are describing is an actively managed account with Irish Life, in which they will buy positions in their fund range known as Consensus Funds.  If that is the case then your comparison is total nonsense!

To have any semblance of a comparison you need to compare it to some kind of life strategy fund, where the TER is usually around a quarter of a percent, which is a far cry from the fees you are quoting



Joey101 said:


> Really? Excuse my ignorance but how else does one go about measuring performance of an ETF or fund - looking at costs and the indexes its linked to only?



The point is that Irish Life are not providing you with any of the figures needed to make a reasonable comparison!   However based a couple of quick calculations I feel the funds are under performing by around 2% or 3% on average. Add another 1% or there about to it in charges and you are wiping anything between 50% and 66% of your potential gain!


----------



## monagt (28 Oct 2014)

> The point is that Irish Life are not providing you with any of the figures needed to make a reasonable comparison! However based a couple of quick calculations I feel the funds are under performing by around 2% or 3% on average. Add another 1% or there about to it in charges and you are wiping anything between 50% and 66% of your potential gain!



Is this approximately the same for Rabodirect, Standard Life, etc, Funds?

If Yes, what is the alternative available to the small investor (€10k-50k)??


----------



## Joey101 (28 Oct 2014)

Jim2007 said:


> I having a very hard time making any sense out of what you are saying! As far as I can see there is no product bearing the name you are quoting and comparing it to an ETF, for starters....
> 
> As far as I can figure out, what you are describing is an actively managed account with Irish Life, in which they will buy positions in their fund range known as Consensus Funds. If that is the case then your comparison is total nonsense!


 
It's all here, see the pdf for 'Consensus'
It's passively managed

(you'll need to format the link properly - I can't post links): 

irishlife.ie/investments/fund-prices-and-performance


----------



## Joey101 (28 Oct 2014)

Jim2007 said:


> there is no product bearing the name you are quoting and comparing it to an ETF, for starters....


 

I simply wanted to look at the pros and cons of one _strategy _against another. A basket of ETFs vs a diversified fund. I chose a typical fund that a lot of pensions use to give readers a starting point. It doesn't have to be this fund, it can be any fund with any company.


----------



## patrickjd (28 Oct 2014)

Hi Joey,

FWIW my advice would be to read John Bogles book: http://www.amazon.com/Little-Book-Common-Sense-Investing/dp/0470102101. Also, take time to view this series of videos : http://www.sensibleinvesting.tv/ before parting with the returns crippling fees charged by Irish Life or any other active fund "Manager". Personally I would buy a broad based ETF that automatically reinvests dividends. For 20,000 the broker cost to buy an ETF might be a couple of hundred but after that the AMC/TER on a broad based index from Vanguard or Ishares is in the region of 0.07% to 0.25% in most cases, a fraction of the Irish Life charges (1.65% annually?). Good luck.


----------



## Joey101 (28 Oct 2014)

patrickjd said:


> Personally I would buy a broad based ETF that automatically reinvests dividends. For 20,000 the broker cost to buy an ETF might be a couple of hundred but after that the AMC/TER on a broad based index from Vanguard or Ishares is in the region of 0.07% to 0.25% in most cases, a fraction of the Irish Life charges (1.65% annually?). Good luck.


 
I fully understand this and to be honest, ETFs are what I would love to invest in. The only real thing putting me off are the requirements for taxation and the lack of transparency from the Revenue on the matter

Note: Per AIB this particular fund costs 1% not 1.65%, hence I'm looking to see is there an arguement to go for that


----------



## Jim2007 (28 Oct 2014)

Joey101 said:


> It's all here, see the pdf for 'Consensus'
> It's passively managed
> 
> (you'll need to format the link properly - I can't post links):
> ...



Joey, the entire investment is based on the opinions of various fund managers and you are being charged for the privilege of that advice.  In the industry we call that actively managed!!!


----------



## Jim2007 (28 Oct 2014)

Joey101 said:


> IA basket of ETFs vs a diversified fund.



But you are not!  You are comparing it to an actively managed account where you have no idea of that the costs are!  For a start to do you know what the retro payments are and how they impact your account???


----------



## Jim2007 (28 Oct 2014)

Joey101 said:


> I fully understand this and to be honest, ETFs are what I would love to invest in. The only real thing putting me off are the requirements for taxation and the lack of transparency from the Revenue on the matter



How does total lack of transparency from Irish Life trump the partial transparency of the Revenue???

Here is another gem form Irish Life:  Their index is composite of activities of the fund managers they are holding in your active account, so it is not wonder the tracking error is so small.  It is a bit like the rule in gambling: the house always wins...

If you go down this road I would say you will be very luck to come out with capital in tact in 10 or 15 years time.  Because between churning, retros, fees and under performance it will just get eaten away!


----------



## Jim2007 (28 Oct 2014)

monagt said:


> If Yes, what is the alternative available to the small investor (€10k-50k)??



Well I have been critical of Brendan in the past for this... but as I get to understand the lack of options available to the Irish investor, I think his suggesting of holding say 5 to 10 individual stocks might have merit if you are not interested in ETFs for whatever reason.

I suggest considering large cap, high dividend yield companies.  So for instance take the DOW and the STOXX 30 dividend indexes and pick the five highest dividend yielding stocks from each after eliminating any sector over lap.  You should get a good dividend return on those and given that such stock are usually undervalued you should also get a good capital bounce out of them in the long term.  You should also have achieved reasonable diversification if you have eliminated and sector over laps.


----------



## monagt (29 Oct 2014)

It would appear that Deposit Interest income is gone as well if we are to believe this article.



> http://www.marketwatch.com/story/why-british-interest-rates-will-never-go-up-again-2014-10-29?page=1



And most say the equity markets are way over valued and the Bond crash is coming so where can people invest?


----------



## patrickjd (29 Oct 2014)

Joey101 said:


> I fully understand this and to be honest, ETFs are what I would love to invest in. The only real thing putting me off are the requirements for taxation and the lack of transparency from the Revenue on the matter
> 
> Note: Per AIB this particular fund costs 1% not 1.65%, hence I'm looking to see is there an arguement to go for that


 
Even at 1% it is still taking at least 4 or 5 times as much in charges every year compared to an index ETF from Vanguard or Ishares. Re TAX, someone posted here recently that UCITS ETF's which are recognised by IFSRA are taxed under the "Gross Roll Up" regime where a deemed disposal takes place every 8 years and you pay tax at that time. This tax payment is then offset against the tax liability upon actual full disposal. Apparently no annual tax is due if the ETF accumulates and they do not qualify for loss offsetting. The poster was told by revenue that if you receive a payment from the ETF you must submit a FORM 11. All the more reason to buy an accumulating ETF. *I cannot vouch for the accuracy of this information*, just trying to help. DYOR.


----------



## Joey101 (29 Oct 2014)

patrickjd said:


> Even at 1% it is still taking at least 4 or 5 times as much in charges every year compared to an index ETF from Vanguard or Ishares. Re TAX, someone posted here recently that UCITS ETF's which are recognised by IFSRA are taxed under the "Gross Roll Up" regime where a deemed disposal takes place every 8 years and you pay tax at that time. This tax payment is then offset against the tax liability upon actual full disposal. Apparently no annual tax is due if the ETF accumulates and they do not qualify for loss offsetting. The poster was told by revenue that if you receive a payment from the ETF you must submit a FORM 11. All the more reason to buy an accumulating ETF. *I cannot vouch for the accuracy of this information*, just trying to help. DYOR.


 
Yep I've read that thread. I'm coming back around to my original ETF plan, which will probably just involve 3 or so accumulating global ETFs, declare the purchase in a form 11 and sit on them for a few years, hoping that exit tax rates come down , adding to the investment once a year with savings and using this to rebalance.

Does anyone have the bottom line on whether Irish domicled ETFs are taxed more/less than non Irish domicled ETFs? (assuming both are 'good' UCITS ETF's)

As tempting as Brendan's suggestion is, I don't think I'd have the patience, knowledge or nerve to invest in individual companies and build a portfolio that way.

Thanks for all of the input on this thread


----------



## Jim2007 (29 Oct 2014)

Joey101 said:


> Yep I've read that thread. I'm coming back around to my original ETF plan, which will probably just involve 3 or so accumulating global ETFs, declare the purchase in a form 11 and sit on them for a few years, hoping that exit tax rates come down , adding to the investment once a year with savings and using this to rebalance



A far more sensible approach.  I much prefer to have the tax problem rather than fore go the gain!


----------



## monagt (30 Oct 2014)

it is the case that many assets — almost all the major types of assets on earth, in fact — are at the high end of their historical valuations.

http://www.nytimes.com/2014/10/30/upshot/quantitative-easing-is-about-to-end-heres-what-it-did-in-seven-charts.html?partner=rss&emc=rss&smid=tw-nytimes&abt=0002&abg=1



> almost all the major types of assets on earth,


http://www.nytimes.com/2014/07/08/upshot/welcome-to-the-everything-boom-or-maybe-the-everything-bubble.html?abt=0002&abg=1

If this is the case, what does an investor do? 
Put cash/savings into "assets" hoping all will go higher and can sell on the asset at a profit (greater fool theory)?


----------



## Jim2007 (30 Oct 2014)

monagt said:


> If this is the case, what does an investor do?
> Put cash/savings into "assets" hoping all will go higher and can sell on the asset at a profit (greater fool theory)?



Unless you are a trader,  you do not try to time the market.  Instead you Dollar Cost Average, so that in times when prices are high you end up with fewer shares and in times when prices are low you buy more. 

And on top of that you stop listening to talking heads!


----------



## monagt (31 Oct 2014)

> Tracker fees down again - Legal & General cuts to 0.1%. http://on.ft.com/1zQNE1r


http://t.co/pdk9kpCLo8

Why can we not get access to these low cost funds in Ireland?


----------



## patrickjd (31 Oct 2014)

monagt said:


> http://t.co/pdk9kpCLo8
> 
> Why can we not get access to these low cost funds in Ireland?


 That's a question I have been asking a lot recently. There is effectively no cheap, accessable entry point for small investors in this country. Everywhere you turn there is exorbitant fees, charges and loads. If you do want to invest in an index fund then the insurance companies lob on an AMC of upto 1.65% or so for "managing" an index fund which eats away at your capital year after year. We can only dream about the plethora of low cost entry points open to small investors in the U.S. It is quite unfair and frustrating.


----------



## RobFer (2 Nov 2014)

Brendan Burgess said:


> 0% CGT if you still own the shares when you die - compared with 41% on the unit-linked funds. Older people should only invest directly in shares because of this huge advantage.


What if the fund was passed on to a surviving spouse and not a son or daughter? Would it then be exempt from CGT?


----------



## Jim2007 (2 Nov 2014)

monagt said:


> Why can we not get access to these low cost funds in Ireland?



Your link requires a subscription, howover if the funds are not available in Ireland it is because the provider chooses not to do so.  While all the legal mechanisms are in place to allow it, a provider can not by forced to do business in Ireland.


----------



## monagt (2 Nov 2014)

Legal & General's FTSE World ex-UK index all-in cost is 0.14 per cent.
Fidelity tracking funds to 0.07-0.0 per cent, if funds were held on its own platform.
Hargreaves, the two UK funds and the US fund will now cost 0.06 per cent a year, while the world fund will cost 0.09 per cent.

So why do the providers here charge so much as compared to charges on same/similiar  funds in Belfast?


----------



## Olivetti (3 Nov 2014)

Just for clarity, the very low fees quoted above are the "wholesale" prices. Retail investors will also pay a platform fee of 0.35%+ on top of them, so the total charges will be in the 0.4-0.6% range ... still better than Ireland, but not as outrageously so as the above comments suggest. Also the platforms (Fidelity, Hargreaves etc) may have minimum investments that are outside the scope of the really small investor.

I can't post a link but google an FT article of 30 October by Jonathan Eley.


----------



## monagt (3 Nov 2014)

> Just for clarity, the very low fees quoted above are the "wholesale" prices.



Thx, FT article did not make that clear.


----------



## Rory Gillen (18 Nov 2014)

ETFs are by a stretch the better option. Less costs, better transparency, no salesman (insurance broker) and therefore no early redemption fees. As for automatic rebalancing, that is routine in Asset Allocation ETFs if you look for one. The following link is just one example among many of an ETF from Global X (The Permanent Portfolio) that invests equally across the asset classes in a non-subjective manner and rebalances.



As for taxation of ETFs, my understanding is that UCITS regulated products (which includes EU domiciled ETFs) are taxed disproportionately, just as life company unit-linked funds are - but it is most likely that non EU-domiciled ETFs are taxable as shares. That's the current 'tax expert' view as I hear in the market place. Hence, the vast majority of ETFs listed on markets outside the EU most likely attract CGT with loss relief  available (against gains elsewhere). Same most likely applies to investment trusts; most likely they, too, are subject to CGT and loss relief should be available. These issues are not dealt with in Irish Revenue law, so they'd have a hard time suggesting otherwise, in my view.

*Rory Gillen*
*Founder*
*GillenMarkets*


----------



## exdrummer (13 Dec 2014)

I fully agree with Rory here and I might add (with due caution!, and respect) look at your timeline, ensure you're not trying to 'beat the market', and please, please please 1) Ensure, within comparable ETF's the rebalancing strategy does not bring with them excessive trading costs (and at the wrong times i.e. typical end of month/quarter when everyone's in the game) and 2) Be aware of good offshore funds and bad offshore funds (ETFs UCITS etc) for tax. It's an OECD thing as far as Revenue are concerned. (Also distributing and non distributing). Just keep an eye on that.


----------



## exdrummer (13 Dec 2014)

First post, and it's been a long, long day. Good to be here.


----------



## Joey101 (18 Dec 2014)

I had a quick question regarding the CGT annual exemption of €1,270. As I understand it, this can be used against gains made on share disposals. However, this doesn't apply to ETFs as they are not taxable under CGT?


----------



## thumbelina (19 Dec 2014)

Hi Joey,

One other tax experts on here can confirm but that is what I understand also - another downside to holding ETFs personally is that there is no annual CGT allowance.

Instead disposals fall under the 'exit tax' treatment which is different to CGT.

Hope that helps, this has been a useful thread.


----------



## Joey101 (19 Dec 2014)

I have given much thought to my options over the last few months and finally reached a conclusion that shares might indeed be the best option for someone that wants to make better use of a lump sum of cash and have occasional top ups to their investment.

Berkshire Hathaway has been mentioned on here in a few of the older threads and it seems like a relatively low risk option that will equal or beat the S&P500. Really that's all most people are looking for. I won't go into anymore discussion on it as this is not the place for it.

I will have losses forward that can be used against the gains made on this (losses made on a silly gamble I took years ago before properly reading up on the stock market and how easily you can be stung)


To summarise:

Passive funds are simply too expensive (stamp duty & fund manager commission) and are too restrictive in terms of penalties for leaving the scheme early.
ETFs are a decent choice but the exit taxes are higher than shares. If I were to go down this route I'd keep it as simple as possible with 1 _maybe_ 2 accumulating ETFs, one of which tracks the MSCI World Index.
Non dividend paying shares are in many peoples opinions the best choice due to their lower level of taxes (CGT rate vs Exit tax rate on ETFs), the opportunity to use losses on shares within your portfolio against gains on others and the annual exemption that can be used against gains.
Of course the points above are dependent on what the government does in the future regarding tax rates etc. Exit tax rates may become lower than CGT... or ETFs may be possibly taxed under CGT if their popularity continues to increase


----------



## Marc (7 Jan 2015)

Look out for an ETF feature in this week's Sunday Business Post


----------



## monagt (8 Jan 2015)

Marc said:


> Look out for an ETF feature in this week's Sunday Business Post


I hope it covers the cheapest method for Irish investors to acquire ETFs and some clarification on Tax from Revenue


----------



## vgrainge (11 Jan 2015)

Marc said:


> Look out for an ETF feature in this week's Sunday Business Post


pity still no clarification from revenue


----------



## Boyd (11 Jan 2015)

Can anyone post a free link to the ETF article?


----------



## dub_nerd (11 Jan 2015)

SBP content isn't free, unfortunately.


----------



## Joey101 (11 Jan 2015)

I read the article today, wouldn't bother picking it up to be honest. Seemingly there is some clarification on taxation being written by the Revenue currently but other than that it doesn't feature any new information.


----------



## Boyd (11 Jan 2015)

dub_nerd said:


> SBP content isn't free, unfortunately.



Yeah I know, was hoping someone would copy/paste content. I'd already bought Sunday Times, one Sunday paper is enough for me


----------

