Yes - that makes sense. Any suggestions on a reasonable split for capital appreciation vs dividends? I have in my latest post above set these at 3% / 2.5% respectively in response to some comments that my original figures were too high. (I had originally used some figures from my own ETF's which have performed at 7-8% over the last ~10 years or so.)
(Request) Spreadsheet/Model comparing after tax returns of ETF, Life assurance, Directly held shares, non tax relieved pension contribution?
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Yes - that makes sense. Any suggestions on a reasonable split for capital appreciation vs dividends? I have in my latest post above set these at 3% / 2.5% respectively in response to some comments that my original figures were too high. (I had originally used some figures from my own ETF's which have performed at 7-8% over the last ~10 years or so.)
I have assumed that the shares will return 0.5% more than an ETF due to lower charges, but I might be wrong.
Brendan Burgess
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Why is the capital gain higher in the directly held shares than the ETF? You should assume that they are the same.
And maybe show the investment charges separately? Or would that make it unwieldy?
Gordon Gekko
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How is it unattainable?
It’s not wildly out of step with long-term returns from global equities.
As ever, the caveat about looking at returns over a specific start/end date period of time applies, but...
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If my calculations are correct, the relative merits of each option is not that sensitive to the total return that you assume. Using either 5% or 8% does change things but only a little.
The relative outcome is much more impacted by the spilt in gain from dividends vs capital growth.
The marginal rate of tax that you expect to pay on distributions and dividends is also a big factor.
The relative outcome is much more impacted by the spilt in gain from dividends vs capital growth.
The marginal rate of tax that you expect to pay on distributions and dividends is also a big factor.
most investment funds and individual investors only achieve 4.5% a year on average, therefore using 8% as a benchmark for growth is not what the majority of people and funds will be achieving, its an ideal but not typical . There weren't too many people investing everything in the global msci ETF 16 years ago, I don't think it even existed back then as ETFs were still in their infancy. Many irish people were investing in banks, builders like McInerney , baltimore technologies, Elan etc. Therefore doing comparisons based on this ideal performance is not realistic as the majority of funds and investors will never achieve it
I think the caveat should be in bold at the beginning of the post, not at the end.That's why I always place a caveat to verify the information when presenting to a third party and double check if I'm using it myself. We are in the early days of AI and it's improving very quickly, just remember that like VAR in football, today is the worst it will ever be.
The calculations look all wrong. The EFT one only calculates the first 8 years and then claims that's the growth for 20 years. Whereas the share calculation is for the full 20 years. So totally misleading figures.
In fact, I don't think you should post it at all, without doing some basic due diligence of your own first.
There's one mistake in the post by @AJAM . The tax on "dividends" for distributing ETFs is also 41%, not income tax + PRSI + USC.
I would default to all having same growth performance. And model cost seperately.
If we are trying to model cost, I guess it depends on how good a model we are trying to build. or which lifecycle investment we are trying to model, e.g. lump-sum investor, accumulating investor, drawing down investor etc.,
I think there is potentially a few categories, not sure if we need them all though.
I think there is probably original investment/setup cost, onging investment maintenance cost, re-investment (or additional new investment) cost, drawdown costs
e.g. a buy and hold share investor, has some setup cost, has ~0 ongoing maintenance cost, had some cost to invest new money, and has some cost to drawdown from investment.
Alhough even then, if the dividend income > drawdown, then there would be no drawdown cost!
It might be simplest to assume we are focussed on the investor who has a lump-sum, or a lump-sum and accumulating more.
In this old post (by @Brendan Burgess highlighting content from @Steven Barrett ) and commented on by @Gordon Gekko, it was suggested that the split should be roughly 2% (dividend) and the rest (4% or 5%) growth. We probably can find actual data for a given index, but I think that would be good enough to start. @AJAM also features in that thread too
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Some of my best work@AJAM also features in that thread too
Hi Everyone,
Thanks for all those constructive comments. I have updated the sheet now and I think I have addressed everything raised.
The only thing that I have not included is the dealing charges of selling at the end. It's not hard to add this in but it's probably similar across all options so does not have a big influence on the result.
Just one thing I need to verify. Are Income ETFs subject to deemed disposal every 8 years? I had assumed not but now I am questioning that.
Thanks.
Thanks for all those constructive comments. I have updated the sheet now and I think I have addressed everything raised.
The only thing that I have not included is the dealing charges of selling at the end. It's not hard to add this in but it's probably similar across all options so does not have a big influence on the result.
Just one thing I need to verify. Are Income ETFs subject to deemed disposal every 8 years? I had assumed not but now I am questioning that.
Thanks.