# Long Term investing Advice needed - Index Funds/ETF & low cost strategy



## Evan Mitchell (10 Jan 2016)

I need some help and after reading through quite a bit of the forum over the last couple of days I thought I'd ask a couple of questions.  I posted this on another forum and was hoping I could get some advice here also.  

I have recently moved back from the US where I had used Vanguard directly and know I can't use them direct.  My goal is to invest in a couple of low cost broadly diversified funds for 20-25 years but the more I learn about the tax structure in Ireland and the way funds are treated (8 year deemed disposal) 41% exit tax it seems like it may not be the best way to go.

There's no point in talking about how it is anywhere else but that just seems like there's little to no upside in investing in funds if the taxes are going to be that high and you're forced to sell every 8 years anyway.  Is there any better route to take or something that I'm missing?  I incorrectly assumed that it would be a straightforward process to just invest and continue to dollar cost average but the more I read about the events caused by each subsequent investment I'm less inclined to do so.

I am interested in investing about Euro100K in a couple of index/ETF funds with an execution only broker here over the course of the next couple of months.
I spoke with BOI for my day to day banking and they suggested speaking with one of the FA's who told me they take 1.5% of the value of the investment every year. So with the 20 year timeline I'm looking at they'd take 30K - so that's totally out of the questions.

Anyone have any advise for how to invest in a broadly diversified portfolio that isn't subjected to all of these ridiculous taxes that effectively negate the point of taking the risk in the first place - maybe I'm better off paying off my mortgage


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## Sarenco (10 Jan 2016)

No, I don't think you're missing anything (although technically you don't have to sell ETF shares after 8 years - it's a deemed disposal). The pension regime here isn't too bad for pre-tax savings and paying off a mortgage ahead of schedule is certainly a tax efficient option.  There is no equivalent here to a Roth IRA for post-tax savings.


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## landlord (10 Jan 2016)

If your mortgage rate is more than 3 or 4%, then I would definitely consider paying this.  Short to medium term yields in the stock market at the moment in my view don't look as rosy as they did in the last few years.  
 You might be getting a little mixed up with what you have been reading on this site regarding funds and the tax associated issues.  If you were previously dealing with Vanguard direct, then these funds are considered NON EU ETFs or NON UCITS ETFs. 
You can simply purchase the same vanguard funds through a stockbroker like DEGIRO with very cheap transaction charges. 

https://www.degiro.ie/?gclid=Cj0KEQ...Ou0wx7NoNwzj5IdLehrtsJ_lrOygTC6ELMaAhXX8P8HAQ

You will be able to bypass that eight year deemed disposal rule and the 41% tax  
I have a table here which gives information on the costs and tax issues...

http://www.askaboutmoney.com/threads/summary-of-stock-market-investment-costs.194304/


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## Gordon Gekko (10 Jan 2016)

US ETFs aren't subject to the 8 year rule / special funds tax regime.


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## Boyd (10 Jan 2016)

US ETFs open you up to dividend withholding tax hassle and estate tax issue as well though. Maybe not applicable to OP if he's US citizen


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## Gordon Gekko (10 Jan 2016)

username123 said:


> US ETFs open you up to dividend withholding tax hassle and estate tax issue as well though. Maybe not applicable to OP if he's US citizen



They don't really. If you're a client of an Irish broker, they'll have QI status, so you'll suffer US withholding tax at a rate of 15%. That 15% will be fully offsettable against your Irish income tax liability, so it generally just washes through.

As for estate tax issues, these only arise in practice where you use a US broker. If you're a client of an Irish broker, the IRS will not be aware of your death. Irish brokers don't look for a US grant of probate...just an Irish one. From a US perspective, a disposal on death looks no different to a regular sale. All that happens is that shares held in the name of "Irish Broker Nominees Ltd" cease to be so.


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## RichInSpirit (10 Jan 2016)

Have a look at spread betting.


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## Evan Mitchell (10 Jan 2016)

Thanks for the responses.  Not a US citizen, lived there for some years and now back in Ireland.  While there I invested in Vanguard Index Funds - low cost, easy to manage, well diversified and somewhat uncomplicated for a not so sophisticated investor. 

Being back for a couple of months I'm ready to start looking at my options here also and want to do something similar - where I can set it and forget it for a 20-25 year period with regular investments and while I done most of the management and research on my own in the past I'm beginning to think that things are more complicated here, especially when it comes to tax treatment.

In reality I'm a small time investor but determined to find a way to diversify with Index Funds or ETF's and just looking for the broadest range of low cost options.

Anyone have any thought on investing in US funds at this point given how strong the UD$ is?

My mortgage rate is 1.2% so not worth considering paying off in reality but I underestimated how much more complicated it is to how I have been able to invest in the past - not necessarily a bad thing, I just need to get re-aquainted with things here as fast as possible so I can put this money to work.


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## Boyd (10 Jan 2016)

Im invested in UCIT ETFs at moment and am thinking of moving to US or Canadian domiciled funds for less penal tax I.e. 33% cgt v 41% exit, no deemed disposal etc.

The more I think about it, CGT approach has to be used. Deemed disposal and no loss relief is insane. Also, US ETFs lower TER far as I can see. I'm not used to filling tax return forms, which I'll need to do for US dividend but similarly keeping records of every purchase if buying month must be more difficult, which is required for UCIT versions.
Not sure about strong dollar effects if companies invested have global interests. Plus if buying monthly, shouldnt this even out over time theoretically?
Effects of currency explained here: https://www.gillenmarkets.com/featured_articles/currency-exposure-frequent-questions-answered.cfm


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## Evan Mitchell (12 Jan 2016)

Keeping records for every monthly investment is just madness but seems like there's no changing that.  The ability to dollar cost average over a long period should technically negate the exposure to the dollar but as US interest rates rise over the next few years you would expect the dollar to weaken versus the Euro so who knows how it will all shake out.   

But for now - I'm thinking - Irish Broker - 3-4 US based funds, broadly diversified. Anyone know if TD have access to Vanguard? Or is there a specific fund family that anyone would recommend?


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## landlord (12 Jan 2016)

Evan Mitchell said:


> Keeping records for every monthly investment is just madness but seems like there's no changing that.  The ability to dollar cost average over a long period should technically negate the exposure to the dollar but as US interest rates rise over the next few years you would expect the dollar to weaken versus the Euro so who knows how it will all shake out.
> 
> But for now - I'm thinking - Irish Broker - 3-4 US based funds, broadly diversified. Anyone know if TD have access to Vanguard? Or is there a specific fund family that anyone would recommend?



It took me many many months to open an account with TD with there ridiculous identification checks,  then only to find that half of the funds I wanted were not available.  I then opened up an account with Degiro in 48 hours, the transaction charges were half as much and I had all the funds I wanted !!!!


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## Evan Mitchell (12 Jan 2016)

landlord said:


> It took me many many months to open an account with TD with there ridiculous identification checks,  then only to find that half of the funds I wanted were not available.  I then opened up an account with Degiro in 48 hours, the transaction charges were half as much and I had all the funds I wanted !!!!



Is TD really that cumbersome?  What funds are you investing as a matter of interest?


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## landlord (12 Jan 2016)

Evan Mitchell said:


> Is TD really that cumbersome?  What funds are you investing as a matter of interest?



 In my experience yes definitely !!!! I forgot to mention if you need their assistance try getting through to them on the phone up to half an hour sometimes !!
I had i share UCITS EU domiciled ETFs,  however I sold them a few months back.


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## Sarenco (12 Jan 2016)

Evan Mitchell said:


> My mortgage rate is 1.2% so not worth considering paying off in reality .



I wouldn't necessarily agree.  

In a world where the nominal yield on German government debt is negative out to 5 years, a guaranteed, tax free return equivalent to 1.15% over the ECB refi rate, with no hassle or investment costs, doesn't look too shabby to me.  You certainly wouldn't get a nominal return of 1.2% after DIRT and PRSI (where applicable) on an instant access deposit.

If was in your position, I'd try to maintain 3-6 months of your typical expenses on deposit as an emergency fund, use a sigificant portion of the balance of the €100k to pay down your mortgage and make sure you are in a position to maximise your pension contributions/AVCs going forward (maintaining a suitable allocation to equities within your pension wrapper).

Unlike the position in the US, there is no preferential tax treatment here for qualified dividends and long term capital gains on stocks and this changes the risk reward dynamics quite dramatically in my opinion.  In general, I think it makes sense to try and keep your equity exposure within a tax deferred pension wrapper and to use any after-tax savings to pay down debt or to hold it in cash/savings bonds if you want/need the liquidity.

Obviously I'm making all sorts of assumptions regarding your personal circumstances and investment objectives.  However, my main point is that you shouldn't necessarily try and replicate the strategy that you had when you were in the US - the rules of the game are really quite different here.


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## kyledmw (20 Jul 2016)

Evan Mitchell said:


> Keeping records for every monthly investment is just madness but seems like there's no changing that.  The ability to dollar cost average over a long period should technically negate the exposure to the dollar but as US interest rates rise over the next few years you would expect the dollar to weaken versus the Euro so who knows how it will all shake out.
> 
> But for now - I'm thinking - Irish Broker - 3-4 US based funds, broadly diversified. Anyone know if TD have access to Vanguard? Or is there a specific fund family that anyone would recommend?



Have you any updates on what broker you used and how its working out so far?

I'm looking into execution-only long-term (15+ year) investments myself. I've done a bit of research however I am still very much new to all of this.

Thanks!


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