Are ETFs suitable for retired couple?

[adropofred]

My wife and myself are both retired and in living off our pensions and some rental income. I am 65 and my wife is 64 and both in good health. We have 40k sitting in a bank account that we probably won't need for 7-10 years. We have a seperate rainy day fund.
I had planned to invest in some ETFs to track some of the main indexes (S&P500, EURO SOXX 50 Etc.) and reinvest any dividends year on year. I've the Degiro account set up to go. Looks like I'll have to pay 41% on any profits every 8 years. I may just sell off everything after 7-10 years depending on performance. I understand there is a risk to losing some money but in general the main indexes rise over time.
However I am getting cold feet after reading some posts wrt tax on ETF. Have to admit I don't understand all the tax implications.
At our stage of life are ETFs a good option?
Are there any other alternatives that we could consider?
Many thanks

 

[ClubMan]

Are there any other alternatives that we could consider?

Why wouldn't you invest directly in a suitably mixed bag of shares and benefit from CGT tax treatment on capital gains/losses?

 

[Marc]

In my professional opinion based on 30 years experience, one shouldn’t be trying DIY investing in general in Ireland it’s essentially too difficult.

Although it is possible to have a tax efficient portfolio of ETFs managed for you, at this size of investment and given the comments in your post I think you would be better off with a life insurance product that takes care of all of the investment and tax issues for you.

If you had a larger sum then I’d lean towards a professionally managed ETF portfolio but most people shouldn’t be having a go with a De Giro account.

 

[Marc]

Why wouldn't you invest directly in a suitably mixed bag of shares and benefit from CGT tax treatment on capital gains/losses?

Over a 90 year period of study of the US stock market over 60% of shares performed worse than treasury bills.

Most stocks under perform the market so picking a few stocks at random is a recipe for disaster

Most stocks are flops: just 1% of stocks account for all market gains

Picking the handful of stocks that deliver the bulk of investor returns is seeking a needle in a haystack

www.irishtimes.com

 

[ClubMan]

Over a 90 year period of study of the US stock market over 90% of shares performed worse than treasury bills.

Most stocks under perform the market so picking a few stocks at random is a recipe for disaster

Nobody mentioned US stocks or T bills or picking stocks at random.

 

[Marc]

Then what prey is a “mixed bag of shares” when it’s at home?

 

[ClubMan]

Then what prey is a “mixed bag of shares” when it’s at home?

Not random.

 

[Marc]

Not random.

The performance of all stocks ex-post is random. See “a random walk down Wall Street” by Burton Malkiel

 

[adropofred]

Why wouldn't you invest directly in a suitably mixed bag of shares and benefit from CGT tax treatment on capital gains/losses?

I feel I don't have the in depth knowledge to start picking stocks - it's just too risky imho. ETFs 'seem' to be a safer option.

 

[bankrupt]

I feel I don't have the in depth knowledge to start picking stocks - it's just too risky imho. ETFs 'seem' to be a safer option.

Index ETFs would usually be a good option if the tax regulations in Ireland didn't make it both over complicated (deemed disposal) and expensive (CGT treatment). In almost any other country just putting your money into something like a Vanguard All-World index fund and forgetting about it would probably be a reasonable choice but for some reason the Irish authorities do not seem to want people doing that.
Some people suggest holding Berkshire Hathaway shares as an alternative to an Index ETF. Certainly trying to pick a basket of shares is a risky proposition and impractical to think that you could achieve any realistic diversification.

 

[Concrete]

I found this: https://www.*****************.com/buying-exchange-traded-funds-etfs-in-ireland.html (I don't know why but the name of the site has been replaced by *'s - it's money guide ireland (all one word))
I'm open to correction but I think it gives a good overview of the current situation regarding purchasing/selling ETFs in Ireland, the tax implications and the downsides (like not being able to offset losses).
Based on this, it seems feasible for most people to invest in ETFs directly themselves (and to manage the tax aspects).

 

[adropofred]

I found this: https://www.*****************.com/buying-exchange-traded-funds-etfs-in-ireland.html (I don't know why but the name of the site has been replaced by *'s - it's money guide ireland (all one word))
I'm open to correction but I think it gives a good overview of the current situation regarding purchasing/selling ETFs in Ireland, the tax implications and the downsides (like not being able to offset losses).
Based on this, it seems feasible for most people to invest in ETFs directly themselves (and to manage the tax aspects).

Thanks for that Concrete - I've found this to be a useful site. Also looking at anirishinvestorsguide.com for anyone that might be interested.
Appreciate all the replies everyone

 

[uli84]

In my professional opinion based on 30 years experience, one shouldn’t be trying DIY investing in general in Ireland it’s essentially too difficult.

Although it is possible to have a tax efficient portfolio of ETFs managed for you, at this size of investment and given the comments in your post I think you would be better off with a life insurance product that takes care of all of the investment and tax issues for you.

If you had a larger sum then I’d lean towards a professionally managed ETF portfolio but most people shouldn’t be having a go with a De Giro account.

have you got any recommendations of a professionally managed ETF portfolio or even a life insurance product you’re talking about? Thanks

 

[Marc]

I penned this post recently which sets out some of issues we regularly see when we advise clients who have had a go at DIY investing.

Should DIY investors have a go at investing with a Degiro or eToro account?

67% of retail investor accounts lose money, so is DIY investing through low cost platforms like Degiro or eToro really a good idea?

globalwealth.ie

 

[Concrete]

I penned this post recently which sets out some of issues we regularly see when we advise clients who have had a go at DIY investing.

Should DIY investors have a go at investing with a Degiro or eToro account?

67% of retail investor accounts lose money, so is DIY investing through low cost platforms like Degiro or eToro really a good idea?

globalwealth.ie

Thanks Marc. That appears to set out the pros of going to yourselves for advice, particularly as you say "if your circumstances are complex enough". I personally don't read anything there to say that (with suitable reading and understanding of the investment platforms, products and the tax obligations) it's a bad idea to invest directly, rather than via an advisor like yourselves, especially in more straightforward situations. Ultimately, the biggest risk to everyone is the market as a whole tanking and being on etoro (or wherever) or having gone for advice won't make any difference then.