# Availability of Index tracking funds in Ireland?



## patrickjd (14 Apr 2014)

Does any Irish entity offer a policy (outside of pensions) whereby I can choose several diversified Index tracking funds and cost average into them over time with regular and/or ad hoc lodgements ??
Quinn Life used to offer this type of product under the Freeway funds monicker. I have tried talking to Irish Life several times but I may as well be talking to the wall.


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## rangerscym (16 May 2014)

Rabodirect offer a small range of tracker funds from Blackrock that I'm currently investing in myself.  The tax obligations of investing in such funds is a bit more onerous than your standard insurance policy so you need to check this our before you start.


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## Rory Gillen (18 May 2014)

Just do it yourself through an online stockbroking account. ETFs are available on the market and using a cheap online stockbroking account will save you money and time and will be a lot more transparent compared to a Rabo or unit-linked funds in general.

 The tax implications of owning ETFs are (mostly) similar to unit-linked funds, in Ireland at least, so they are not more onerous but less onerous to deal in and own.

*Rory*


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## patrickjd (20 May 2014)

Rory Gillen said:


> Just do it yourself through an online stockbroking account. ETFs are available on the market and using a cheap online stockbroking account will save you money and time and will be a lot more transparent compared to a Rabo or unit-linked funds in general.
> 
> The tax implications of owning ETFs are (mostly) similar to unit-linked funds, in Ireland at least, so they are not more onerous but less onerous to deal in and own.
> 
> *Rory*


Thanks. I like the sound of ETF's. Can you recommend a reputable cheap online stockbroker please?


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## lathyrus (5 Sep 2014)

Rory Gillen said:


> Just do it yourself through an online stockbroking account. ETFs are available on the market and using a cheap online stockbroking account will save you money and time and will be a lot more transparent compared to a Rabo or unit-linked funds in general.
> 
> *Rory*



Don't the transaction fees make this impossible for regular investments? e.g. if I want to invest €100 every month in a S&P tracker I can do it on Rabodirect at a cost of €0.75 per month, but to buy ETFs via a broker will cost at least €5 per month?


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## RobFer (5 Sep 2014)

With TD Direct it will be at least                          		                         			€20 per a trade. So it would be far affordable to do put money in every six months instead. Yet even every six months you are losing a massive 4% on broker commissions.


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## ashambles (6 Sep 2014)

I haven't seen an alternative to Rabo for modest regular investments. 75c to invest 100 euro is pretty cheap.

Everytime someone asks about regular investing someone suggests to go to online stockbrokers but without precise information. I suspect no one has an alternative for Irish investors in this niche. 

If buying into index trackers isn't cheap, then one of the main reasons for investing in tracker products is weakened.

Saving up and waiting 6 months is not quite the same. Anyone who follows the markets will know that 6 months is a long time, you could get unlucky and keep buying high. Regular investment means you buy at average prices - any element of market timing is removed.  Another problem with waiting 6 months is you're not going to get into the habit of investing. My own guess is someone waiting 6 months to invest is likely to not invest.

UK brokers might be an option - Hargreaves Lansdown for instance seem to give a low cost regular purchase - but I don't think Irish residents can apply. The UK may not have much need for a non-ISA based regular investment program.


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## Boyd (7 Sep 2014)

ashambles said:


> I haven't seen an alternative to Rabo for modest regular investments. 75c to invest 100 euro is pretty cheap.
> 
> Saving up and waiting 6 months is not quite the same. Anyone who follows the markets will know that 6 months is a long time, you could get unlucky and keep buying high. Regular investment means you buy at average prices - any element of market timing is removed. .



Don't forget its .75 each time you sell too. There is also the annual management fee which varies from .45 to 2.1%, meaning you could pay up to 3.6% in fees and charges if you bought and sold a fund within a year, not so cheap now.

Really, six months is a long time?! IMO that's gambling then, not investment.  W Buffets strategy was that nobody could time the market, just that it'll be higher than now in say thirty years time, which its a more sensible investment timescale. At this length of yime, your six months is irrelevant.

However I do agree Rabo do make it easy to invest, but at a cost. I


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## ashambles (7 Sep 2014)

username123 said:


> Don't forget its .75 each time you sell too. There is also the annual management fee which varies from .45 to 2.1%, meaning you could pay up to 3.6% in fees and charges if you bought and sold a fund within a year, not so cheap now.


Yes, I'd agree selling costs are high. But it's somewhat academic in having competive selling costs if the buying costs put off customers.

Also Rabo's funds not low cost ETFs, at best they seem to have some indexed funds with a degree of management.  Also the tax with these funds will eventually be a nightmare. However - what's the alternative for regular investing outside of a pension in Ireland? 


username123 said:


> Really, six months is a long time?! IMO that's gambling then, not investment.  W Buffets strategy was that nobody could time the market, just that it'll be higher than now in say thirty years time, which its a more sensible investment timescale. At this length of yime, your six months is irrelevant.


I'm not talking about buying into funds and selling them in 6 months. I'm talking about buying into funds and holding them for a long time.

My point about waiting for 6 months to buy is over 10 years you've picked just 20 entry points if you buy every 6 months. If you buy every month then you've 120 entry points, every week 520 entry points. 

This is the whole point of regular investing, the more often you buy, the more likely you've bought funds at average prices. The less often you pick to buy the more reliant you are on luck.


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## Olivetti (8 Sep 2014)

One more point to note. A basket of ETFs is potentially tax-inefficient because losses on one cannot be offset against gains on another (taxed as exit tax rather than CGT). This is a complicated topic and the Boss has an exploratory thread on it here http://www.askaboutmoney.com/showthread.php?t=188821

A basket of indexed funds from an insurer, on the other hand, if it's within a single policy, forms an "umbrella" for tax purposes and thus gains on one fund are automatically offset against losses on another. There's no downside to the policy version over ETFs apart from the management fee (and the necessity to deal with an insurance company!). Also no need for tax returns since the exit tax is calculated and paid at source by the insurer.

Irish Life are the leaders in indexed fund management in Ireland and offer lots of such funds, as do several others. I can't imagine that they would not be able to deal with regular contributions by DD and the other housekeeping issues that posters here have raised. From memory, Rabobank's product is not structured as an umbrella for some historical reason, hence you have no gain/loss offsets with them and you do need to file the details yourself in your tax return.

For clarity, I'm not recommending an insurer over ETFs, just flagging a potential tax disadvantage of the latter. It is a ridiculous situation that two identical investment strategies can be taxed so differently purely because of the (essentially very similar) legal structure they take, and Brendan is right to consider a submission to the Revenue to regularise this whole area.


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## Olivetti (8 Sep 2014)

One further thought - another advantage of the umbrella approach is that rebalancing between funds is not a tax crystalling event (because it's treated as a "fund switch" within the umbrella) whereas in the non-umbrella basket of ETFs it is - so you pay exit tax if the ETF you sell is in the money, and forgo a loss forever if it's not. It's also extremely complicated in terms of keeping tax records if you are investing small amounts regularly, as the OP proposes, because you will end up with multiple "slices" of the same underlying ETF, each of which has its own tax base, it's own 8-year term etc. Same is true of the insurance policy basket, but at least the insurer's systems are doing the calculating for you.

Just in case anyone thinks this is an abstract issue, take this example. I invest €100k in a US equity vehicle and €100k in a Japanese one. After a period, one is up 50% and the other down 50%. In an umbrella, my tax consequences are identical to my economic ones - I've stood still, and I can do whatever I want with the investments without having to warry about tax impacts; but if I crystallise in a non-umbrella wrap, then I owe €20,500 to the Revenue (€50,000 x 41% on the gain) even though I've made no profit overall, and if I sell the loser fund, my €50k loss cannot ever be utilised for tax purposes.


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## ashambles (9 Sep 2014)

As mentioned by Olivetti Irish life looks to be an option, the entry fee is a 1% government stamp duty, so comparable to Rabo's 0.75%. 

If you can afford to pay in 1250 a month it seems they'll add a 1% bonus - presumably to compensate for the levy but giving them a 0% entry fee (?).

The fund costs seem higher around at around 1.65%. Also there's some penalties for withdrawing earlier than 5 years. 

But the fund choice is reasonable. The tax is far easier than Rabo and you can move between funds without tax problems.

[broken link removed]


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## patrickjd (26 Sep 2014)

ashambles said:


> As mentioned by Olivetti Irish life looks to be an option, the entry fee is a 1% government stamp duty, so comparable to Rabo's 0.75%.
> 
> If you can afford to pay in 1250 a month it seems they'll add a 1% bonus - presumably to compensate for the levy but giving them a 0% entry fee (?).
> 
> ...


 
1.65% is a HUGE burden over the long term. I think I will investigate ETF's instead. thanks all.


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## monnigblower (20 Oct 2014)

Yes, I'm rather tempted by an Irish Life policy especially as they will sort out the tax part of it and all I've to do is bang in 100 Euro a month and as long as it is better than the deposit rate in the bank that's good. One thing though is that in addition to the 1.65% management fee there is also the intermediary/sales remuneration which from what I understand the payer must also cover as there seems to be expenses along with the charges.  From reading their Clear Regular Invest booklet of 2012 on paying in 230 Euro per month at a 5.9% growth this is generally ~40/50 Euro a year apart from the first year when it is 718 Euro. These expenses seem to be spread over a couple of years. I thought that this was rather high myself and makes feel a little uncomfortable, then again they are doing all the administration and if it's better than a bank deposit rate...


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## patrickjd (20 Oct 2014)

monnigblower said:


> Yes, I'm rather tempted by an Irish Life policy especially as they will sort out the tax part of it and all I've to do is bang in 100 Euro a month and as long as it is better than the deposit rate in the bank that's good. One thing though is that in addition to the 1.65% management fee there is also the intermediary/sales remuneration which from what I understand the payer must also cover as there seems to be expenses along with the charges. From reading their Clear Regular Invest booklet of 2012 on paying in 230 Euro per month at a 5.9% growth this is generally ~40/50 Euro a year apart from the first year when it is 718 Euro. These expenses seem to be spread over a couple of years. I thought that this was rather high myself and makes feel a little uncomfortable, then again they are doing all the administration and if it's better than a bank deposit rate...


They are raking a huge chunk of your money for simple indexing. If you work it out over time you would be shocked how much this influences your returns (see John Bogles "Little Book of Common Sense Investing"). As it happens I just faxed off a withdrawal form to cash in my Irish Life Index funds policy. I will put the proceeds into a Global Broadbased index tracking ETF with Vanguard or I-shares which will incur an upfront brokerage fee but after that the Total annual Mgmt charge is a very low 0.25% (some ETF index product amc's are even lower than that) . As Warren Buffet said _"Rule No.1 is never lose money. Rule No.2 is never forget rule number one."_ It's such a pity Irish residents cannot avail of low cost drip feed investing plans to cost average their contributions for example: http://monevator.com/bestinvest-vanguard/
However, that level of thrifty convenience is not available for us mere mortals in Ireland unless you have 100's of thousands to invest upfront. I would highly recommend viewing the "How to win the losers game" video series available here: http://www.sensibleinvesting.tv/ before investing your hard earned. Good luck.


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## Redshoes (21 Oct 2014)

Where will you buy your Global Broadbased index tracking ETF (with Vanguard)?
Also, you mentioned Warrant Buffet.  He has recommended to his wife, after he dies, that she invest cash in S&P 500 Index fund (Vanguard).  Why do you prefer the global broad based fund rather than the S&P?


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## patrickjd (21 Oct 2014)

Redshoes said:


> Where will you buy your Global Broadbased index tracking ETF (with Vanguard)?
> Also, you mentioned Warrant Buffet. He has recommended to his wife, after he dies, that she invest cash in S&P 500 Index fund (Vanguard). Why do you prefer the global broad based fund rather than the S&P?


 
Hi Redshoes, I will most likely use Goodbodys in Dublin (who are horrendously expensive at EUR32 per trade) via AIB online share-dealing. I use them because I already have an account there, I intend to hold the ETF for many years, and because it is to convoluted and uneconomical to open an account elsewhere for my small investment amounts. Re Buffet, I believe he wants 10% in short term government bonds and 90% in a very low cost S&P index tracker after he dies. Even he admits stock picking is not for the masses. However, the S&P is purely an American Equity play. I want to invest on a broader scale. I could buy an ETF that tracks the S&P, another that tracks the FTSE, another that tracks the Japanese equities etc etc. However that would incur a brokerage fee for each ETF which adds up to a considerable amount. I am no expert at all believe me I just want to keep costs to a minimum. By buying a *low cost *(amc=0.25%), broad based global Index ETF (the am mentioned Vanguard All World FTSE ETF) I aim to benefit from the long term growth of several international indexes for only one brokerage fee (2 fees if I ever cash it in). DYOR. GL.


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