Where to put money as interest rates fall? Long Term ETF, etc.

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Racrus

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As these interest paying platforms emerged in the last couple of years, I have moved all my bank money into them and have it spread across 6 or 7 different places now and is a bit messy.

As the interest rates are dropping, I'm looking for a single long term option of where to park the majority of the money.
I don't need access to this money for 10-15yrs, or even more hopefully.
I currently have a small sum in VWCE ETF via an online Trading platform.

I'm considering just adding all the money on deposit to my existing ETF. Is there any reason why I should consider a Raisin 5yr deposit account, I think 5yrs is the longest, other than it's the safer bet, ie: guaranteed, smaller return most likely compared to ETF.

I realise these are 2 completely different options, but is there any point using Raisin unless it's money you don't want to risk and will need access to in 1-5yrs?

For the long term is the ETF the better option?
Are the only other alternatives the Life Insurance investment fund options? I'm not interested in individual Stocks.

I'm maxing my pension already and know about calculating the ETF tax myself, etc.. and have some money kept aside for easy access.

I think what I'm really asking is, Is it wreckless to go from having it nearly all on safe high deposits to nearly all into an ETF?

There's bound to be a good number of folk in the same boat looking to move their money now too as rates drop so I'd appreciate the thoughts of the community as always.
 
I don't think it's reckless, given your long term horizon.

I am on the same boat, also aiming for the long term. Roughly 50% VWCE and 50% cash here.

I suppose you are aware of the many pitfalls of ETFs - crippled compounding, no offsetting losses, inheritance tax issues, etc. Still, I tend to accept the drawbacks in face of the many positives, also taking into account that maybe ETF taxation will be lowered or simplified over time.

Here is what I am considering, by order of preference:

* Invesco's alternative to VWCE going forward, for the lower 0.15% expense ratio (ISIN IE000716YHJ7)
* Allocating maybe 15-20% to conglomerate stocks for the more favourable CGT and long term compounding, mainly Berkshire Hathaway (even though it's 30% Apple) and potentially Merkel.
* Investments trusts also for CGT
 
I am in a similar position to you in-terms of pension and investment horizon. I have all our savings in a single ETF across a few online platforms. Virtually none in cash because you can sell some of your ETFs and have the money in <24 hours so there is really no need, beyond what is needed for this month.

Whether you go for an ETF, UK trust or Berkshire type conglomerate, the most important thing is to stop procrastinating and get out of cash, it is costing you dearly.
 
Racrus said:
I think what I'm really asking is, Is it wreckless to go from having it nearly all on safe high deposits to nearly all into an ETF?
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Probably not but we need more context.

How is your pension invested?

Do you have a mortgage or any other debts?

Where are you in your career (ie is retirement hovering into view)?
 
Probably really needs a Money Makeover post.

Key Post - Basic information required for the "Money Makeover" forum

It can be difficult, but please try to use a meaningful title in your thread For example "27 year old with mortgage arrears". You will get a much better and much more coherent answer if you give as much information as possible in your first post. For example, if you give your mortgage rate, it...
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Sarenco said:
Probably not but we need more context.

How is your pension invested?

Do you have a mortgage or any other debts?

Where are you in your career (ie is retirement hovering into view)?
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Hear hear. I also worry about the way in which people seem to think that an ETF is an asset class. The query in this thread seems to be along the lines of whether cash should be on deposit or in an ETF. But what kind of ETF? And why an ETF? The queries raised by Sarenco above are hugely relevant.
 
daswerr said:
I don't think it's reckless, given your long term horizon.

I am on the same boat, also aiming for the long term. Roughly 50% VWCE and 50% cash here.

I suppose you are aware of the many pitfalls of ETFs - crippled compounding, no offsetting losses, inheritance tax issues, etc. Still, I tend to accept the drawbacks in face of the many positives, also taking into account that maybe ETF taxation will be lowered or simplified over time.

Here is what I am considering, by order of preference:

* Invesco's alternative to VWCE going forward, for the lower 0.15% expense ratio (ISIN IE000716YHJ7)
* Allocating maybe 15-20% to conglomerate stocks for the more favourable CGT and long term compounding, mainly Berkshire Hathaway (even though it's 30% Apple) and potentially Merkel.
* Investments trusts also for CGT
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What are the inheritance tax issues I would have to worry about. Do you know of any resource that could be used to file deemed disposal yourself in off shore funds part of form 11?
 
Mullsafin said:
What are the inheritance tax issues I would have to worry about. Do you know of any resource that could be used to file deemed disposal yourself in off shore funds part of form 11?
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ETF gains are not exempt from tax on death, compared to stocks which are exempt from CGT, so less money to your estate in case of ETFs.

As to filing disposals, you'll need access to the ROS income tax system (which is different than MyAccount) in order to file and submit a form 11. You can register for income tax via Revenue MyAccount -> Tax Registrations.
 
daswerr said:
ETF gains are not exempt from tax on death, compared to stocks which are exempt from CGT, so less money to your estate in case of ETFs.

As to filing disposals, you'll need access to the ROS income tax system (which is different than MyAccount) in order to file and submit a form 11. You can register for income tax via Revenue MyAccount -> Tax Registrations.
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Thank you, but stocks only exempt from cgt for spouses or civil partners ?
 
daswerr said:
I am not sure. I recommend sending Revenue a message if you are concerned about these specifics.
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Capital Gains Tax

Capital Gains Tax is charged on the capital gain or profit made on the disposal of an asset. Some assets are exempt from Capital Gains Tax. Find out if you are liable for Capital Gains Tax and how to pay it..
www.citizensinformation.ie www.citizensinformation.ie

After a death​

There is no Capital Gains Tax on assets that are passed on death. The assets are treated as if the person who died got the assets at the same value they have on the date of death.

If a personal representative disposes of the assets, they are responsible for any gains between the date of the person’s death and the date of disposal.
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Sarenco said:
Probably not but we need more context.

How is your pension invested?

Do you have a mortgage or any other debts?

Where are you in your career (ie is retirement hovering into view)?
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My pension is invested in a single worldwide index fund. Only started recently so maxing it out to make up for lost time, to a certain extent. Was considering paying a large lump into it in advance now so it could grow quicker but there's pro's and cons to that and I decided I'd just keep paying to it from my weekly payroll. Plus, I don't want all my money tied up in a pension just incase some unknown opportunity presents itself in later life that requires access to money.

No mortgage or other debts. Don't plan on requiring any debt in future unless something completely out of the blue crops up or something horrible like health as one thing I don't have is health insurance; either through my job or by myself. I run older cars, won't be financing a vehicle.

In early 40's, career wise don't expect any significant changes to role / salary, happy balance where I'm at, on median salary with overtime and nixxers if I want.

Basically, I'm just looking for somewhere to invest my non pension money I suppose, have medium to high risk tolerance. I like the VWCE ETF because it's worldwide and includes the S&P and it has cheap fee and is on Degiro's list of "free" / cheaper ETF's and I don't have to research it like individual stocks.

So, both my pension and non-pension money would both be invested in Index fund's, is this an issue?
 
Thanks for coming back to us.

Not contributing to a pension until recently was a mistake, particularly if you were building material after-tax savings. But I guess you are where you are.

I think you should really have health insurance at this stage. It’s expensive but it’s not really an optional extra, IMO.

I think you should also take out an income protection policy in case you can’t work due to illness.

No issue having your pension and after-tax savings both invested in a global equity index fund given your investment horizon.
 
Racrus said:
In early 40's,
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Sarenco said:
I think you should really have health insurance at this stage. It’s expensive but it’s not really an optional extra, IMO.
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Agree totally that you should have health insurance and in light of the Lifetime Community Rating loading the sooner you take it up the better:

Lifetime community rating​

Lifetime community rating means that the amount you pay for health insurance does not depend on the age you are now but can be higher depending on the age you were when you first took out health insurance. This applies only to people from age 35 and above.

For example, a 50-year-old who has held insurance since they were aged 30 would pay the same as a 30-year-old, but a 50-year-old who purchases insurance for the first time would pay more than a 30-year-old.



Charges if you start health insurance at 35 years or older​

Higher charges apply if you are 35 years of age or older when you first take out health insurance. If you are aged 35 or above but you already have health insurance, the cost of your health insurance will not change based on your age.

There is a 2% increase in price (known as a loading) for each year over 34 years of age. For example:

  • If you are 35, the cost is 2% higher than for a person aged 34
  • If you are 44, the cost is 20% higher (2% x 10 years).
The longest you will have to pay a loading for is 10 years.
 
You should consider investing in Gold even tough it is expensive but it is still worth it. I am not reading too many people here encouraging it. As it is an ETF you will be subject to the harsh tax rule but it is still worth it.

I have gold in my portfolio and since last December it has yielded a whopping 18%!
 
franc82 said:
As it is an ETF you will be subject to the harsh tax rule but it is still worth it.
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Gold whether physical or traded on an exchange is not subject to exit tax or deemed disposal. It is very likely your ETF is actually an ETC (commodity) and subject to CGT.
 
Corola said:
Berkshire Hathaway is not 30% Apple.

Apple is 30% of its holdings in publicly listed companies. Berkshire Hathaway is also made up of many fully owned private companies.
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Fair point - I was incorrectly focused only on BH's equity holdings and forgetting about their core/owned businesses.
But the point still applies - holding Apple separately when one already has a significant indirect investment in them via holding BH is questionable from a diversification point of view.
 
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