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whatsmoney

Registered User
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Hi folks
Hope you are all well!
I started investing with Degiro a few years back so am familiar with funding and buying stocks.

Initially I was buying into a selection of US ETFs which were brilliant, but was forced to stop due to the legislation brought in around those a couple of years back.
(I tried to circumvent that and opened an online account with Interactive Brokers in USA only to find that I couldnt buy US ETFs ... so had to close it)
So, I then constructed my own diversified stock portfolio of ~30 stocks and started 'dollar cost averaging' into those.
Now, I'm a bit nervous of the market but I want to hold what I have and buy into it monthly without much hassle.
I want a simplified approcah.... to buy some sort of fund which I can pay into monthly, while in parallel adding to my existing stocks on market dips.

I have taken a look at the Irish Life MAPS funds etc, but I don't want to be paying ~2% on annual fees.
I was thinking about buying into a UK Investment Trust instead which initially looked good - they have low annual fees, but then you have to pay Stamp Duty for those
at time of buying as well as ~4GBP per trade... so this all adds up....

Can anyone advise of a fund, or type of fund, that I could invest into myself directly on the stock market (or otherwise) on a biweekly/monthly basis,
without getting caught on Stamp Duty, high annual management charges, or 7 year tax rule etc ?

I basically want what would be an equivalent of US ETFs.... and I want a DIY approach.
The funds can be mixed asset funds, or equity funds, I dont mind....
If anyone can advise on what type of fund I should be looking for and where they are available, it'd be appreciated,

Thanks!
 
Just following up on this post from yesterday...

I am increasingly beginning to think that Investment Trusts are the only way forward unless there are funds out there that i am completely unaware of.

I spent some time looking at Life companies, and while they look good initially, the reality is that if you start an investment policy with them, you will be hit by high management charges (that only become fully apparent once you check the fund factsheets), as well as early encashment fees if you withdraw within first few years etc....

With Investment Trusts you'll be hit by the 0.5% stamp duty, but the management fees are clear, as well as the added bonus that these are treated as normal stocks, and you can cash them out whenever you want like normal stocks.

With that being said, I found the JPMorgan MultiAsset Trust (MATE), which has a well diversified portfolio across stocks, bonds etc... but it is relatively new, and gross assets are only about 80 million GBP. I'd be looking to regular invest into this monthly over the long term. It seems to trade at a discount too...

am.jpmorgan.com

JPMorgan Multi-Asset Growth & Income plc | J.P. Morgan Asset Management

View performance data, portfolio details, management information, factsheet, regulatory and other documents
am.jpmorgan.com am.jpmorgan.com

I'd appreciate any thoughts on this particular fund if that is allowed. Also, is it advisable to start to invest into a fund that is relatively small?
Would I be better of focusing on FCIT, SCIN or similar?
 
According to the factsheet, that trust has a prospective dividend yield of 4.6% - that's not going to be very tax efficient if you have a high marginal tax rate.

Before getting into the weeds of an individual investment, are you happy with your overall financial strategy?

Do you have a mortgage? If so, what interest rate are you paying?

Do you have a pension? If so, are you maximising your tax-relieved contributions?

Do you have sufficient cash reserves and insurance cover?
 
No mortgage
Pension, yes and I'm maxing out my pension with AVCs too.
I have cash reserves that I want to dollar cost average into investments... but I'm also planning to keep some boxed off to take advantage of any stock market drops.
 
One strategy you might consider is keeping your pension 100% invested in a global equity fund and keeping your after-tax savings invested in (tax-free) State savings products.

However, if you really want to invest your after-tax savings in equities, I would be inclined to stick with a broadly diversified trust like F&C Investment Trust plc (the oldest collective in the world).
whatsmoney said:
I have cash reserves that I want to dollar cost average into investments... but I'm also planning to keep some boxed off to take advantage of any stock market drops.
Click to expand...
Trying to time the market is rarely a wise strategy.
 
Thanks Sarenco... yes, I'm pretty much doing as you suggested.
The only reason I went for the JPMorgan one is because it's a Mixed Assets fund compared to FCIT which is 100% equities... and I want to just get a fund which is slow/steady.
By the sounds of it, you agree broadly that ITs are the only way to proceed too...
 
whatsmoney said:
By the sounds of it, you agree broadly that ITs are the only way to proceed too...
Click to expand...
No, I wouldn't go that far.

I think ITs can be a very good solution for investors with a low marginal tax rate. However, a fund that's subject to the exit tax regime might actually turn out to be more tax efficient for an investor with a high marginal tax rate.
 
Ok ... so my understanding of this is (1) for an IT you have to file tax return at "marginal rate + USC + PRSI" on both dividends, and when selling, on the IT gains, whereas (2) an Exit tax regime fund pays tax at 41% on encashment, and this tax return is all taken care of by the fund administrators.... Is my understanding correct?
 
whatsmoney said:
Is my understanding correct?
Click to expand...
Sort of.

Dividends on IT shares are subject to income tax, USC and PRSI and capital gains are subject to CGT.

Some - but not all - fund providers will take care of an investor's tax obligations on a fund that is subject to exit tax.
 
A couple of things to bear in mind about investment trusts :

1. They can take on debt so there may be extra volatility in the underlying returns.

2. They can trade at a discount/premium to underlying NAV. Woodfords Patient Capital (not one of my better choices) had a discount of 50pc the last time I looked. This is extreme but 10 to 20pc can be possible.

3. They can be illiquid so there can be high bid offer spreads on the market. One of the trusts that I have regularly has a bid/offer spread of 5-8pc. A lot larger than I had envisaged when I bought in a couple of years ago.

I think there’s a place for investment trusts and I use them myself. You just have to bear in mind the factors above.
 
Ok thanks Sarenco, I missed that point on tax. All clear now.

Zebedee... I suppose the message is not to get too 'fancy' on which IT trust to pick... just go for one of the main ones like FCIT so that liquidity is there.
Thanks for that insight. I might steer clear of the JPMorgan one now as a result.
 
Congratulations on successfully building up a portfolio of 30 stocks.

When you invest in a stock you are buying into (a) the risk of holding the individual stock and (b) the risk of investing in the stock market as a whole. With 30 stocks, assuming your stocks are spread between different market segments etc. you are well diversified, so you are really holding market risk. If you then invest in a collective investment product in the same universe of stocks (e.g. US stocks, euro-denominated stocks, etc.) you are just buying more of what you already have (i.e. your are buying more of the the risk associated with investing in that particular market). So, for example, if you are invested in US stocks and have no euro stocks or UK stocks, why not use your investment skills to buy euro-denominated or GBP-denominated stocks? If, however, you have good reasons not to go down this road you could buy a collective product such as an Investment Trust, that invests in markets to which you have no exposure. Or if you are well diversified between global markets you could, e.g. invest in State Savings products and buy returns that while very low are both risk free and non correlated with market returns, so you are lowering your overall portfolio risk.

As for investment trusts, (and I hold a few), I don't think it prudent to pick these based on a few metrics, e.g. current yield, discount to NAV, etc. These are money management companies and should be assessed accordingly. If you can successfully invest in 30 stocks you certainly have to skills to select appropriate investment trusts.
 
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Thanks PMU, that info is very clear and sensible. Yes, I'm invested in US stocks. I use Degiro where constructing a big US portfolio is relatively cheap fees wise. The fees for investing on UK/Euro exchanges are considerably higher so it's not really sensible to buy separate individual stocks on those - so I'll be looking to use ITs instead to target those markets.

I found a good link to share below, with details on ITs and their costs etc. Hope it is useful to some readers.

Compare investment companies

www.theaic.co.uk www.theaic.co.uk
 
whatsmoney said:
Ok thanks Sarenco, I missed that point on tax. All clear now.

Zebedee... I suppose the message is not to get too 'fancy' on which IT trust to pick... just go for one of the main ones like FCIT so that liquidity is there.
Thanks for that insight. I might steer clear of the JPMorgan one now as a result.
Click to expand...

I agree. I had a look at the JPM fund bid/offer spread on Hargreaves landsdowne just now. They are quoting a spread of >5pc. This is quite high in “calm market conditions” so could easily blow out in a market panic. Not a huge issue if you don’t want to sell but it should be classified in the “illiquid” portion of a portfolio (I’d keep that to some maximum %age of your overall portfolio).
 
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