ETF Recommendation

Sarenco said:
Hi @landlord

My take is bit more nuanced than that.

I think investment trusts (which are taxed under the usual income tax/CGT regime) are a good option for somebody with a low marginal tax rate. For example, a retired person living on the State Contributory pension who receives a substantial inheritance.

I don't think I've ever recommended that anybody invests outside a pension wrapper while carrying a mortgage - even a cheap tracker.

If somebody has a paid for house and is maxing out their pension contributions, then investment trusts might well be a good home for their after-tax savings.

However, most people in that scenario would typically be pretty well advanced in their career and may well be thinking about de-risking their portfolio in the run up to retirement. My suggestion in those circumstances is to maintain a high equity allocation in the pension wrapper and use after-tax savings to buy (tax-free) State savings products.

Hopefully that all makes sense.
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For someone paying the higher tax rate, If pension is maxed out and mortgage is 0.5% above ECB, then would I be right that you are saying that over let’s say a 15 year investment period you consider it safer investing in state savings and over paying your 0.5% mortgage than the returns from investment trusts or ETFs. I understand that investment trusts will pay a dividend which will be taxed at the higher rate. But over a 15 year period I would of thought that your investment trust/ETF investments would have done better? Thanks
 
@landlord

You would always expect an investment in equities to outperform a fixed-income investment over a 15-year holding period. But the market has no obligation to meet your expectations.

While somewhat unusual, there have been 15-year periods in the past where equities have underperformed bonds in all developed economies.

Paying down a mortgage ahead of schedule would give you a guaranteed, tax-free, return equal to the weighted-average rate that you would otherwise pay on the mortgage. That is not an expectation - it's a mathematical guarantee.

Also, bear in mind that tracker mortgages are not fixed-rate loans - there is always the risk that interest rates will rise appreciably in the future.

The State guarantees the return on its savings products. Again, you know with certainty in advance what return you will receive over the relevant term.

It's also important to look at your financial position in its entirety rather than focusing on any particular account. For example, you may well have adequate exposure to equities in your pension fund for your given investment horizon/objectives. Or, alternatively, you may have scope to increase your allocation to equities in your pension.
 
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@landlord

3 very solid pieces of advice there IMO ...as I have adopted that strategy myself.

So all funds with An Post are guaranteed ...or is there a max limit?

With Mortgage paid, AVCs Maxed out and a lets just say a large chunk with An post already.
What would number 4 on your list be?
 
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