Invest in Low Cost Funds Or A Pension

[RedOnion]

But it may not be only about the total. If you want to be FI by 45,

We're talking about a lower rate tax payer here. How many will be 'FI' by 45? Plus, you can access pension early once you've left employment.

Pension definitely wins over outside pension investments at 40% tax rate and I think at 20% tax considering we are talking about a good pension with total fees of 1% or less but its tighter than at 40%. If pension fees are much higher and you get like 95% allocation rate it can change things.

Repeating the same thing over and over doesn't make it true.
Do the maths and show the numbers.

 

[Gordon Gekko]

I have not run the numbers on it. Paddy Delaney from informeddecisions has however in one of his blogs.

informeddecisions.ie/taxation-of-investment-trusts-versus-ucits-blog-160

He says how exit tax regime will win out in the long run as the bottom line is a differential in fees of say 1% or more will erode more of the benefits of being taxed at 33% as opposed to 41% tax. Also his example refers to fees of 1% for etfs but in actual fact that can be got for as low as 0.15 percent or lower if needed.

Do you disagree with the above calculations?

What wonderful analysis...he just makes up a fee differential to support his argument

And, as has been pointed out a couple of times, Investment Trusts often apply a small amount of leverage which reduces the impact of the fee.

I’m pretty disappointed with the Investment Trust that I hold to be honest. They charge a whopping 0.3% per annum and it only increased in value by circa 95% last year.

 

[Younginvestor93]

What wonderful analysis...he just makes up a fee differential to support his argument

And, as has been pointed out a couple of times, Investment Trusts often apply a small amount of leverage which reduces the impact of the fee.

I’m pretty disappointed with the Investment Trust that I hold to be honest. They charge a whopping 0.3% per annum and it only increased in value by circa 95% last year.

What investment trust is that?

0.3% is the absolute total charge of all fees of the investment trust?
Now thats comparable to say a 0.2% Degiro for an IWDA accumulating ETF?

I thought it is common investing knowledge that managed funds don't beat the market over the long run?

Also, I thought investment trusts have high fees, managing fees, ongoing costs fees and maybe more?

Maybe unlike the rest of Europe and US, there is another option to compete with the passive ETF way!

 

[RedOnion]

Do you disagree with the above calculations?

By the way, I reran the calculations, and in my opinion they are slightly misleading.

Apart from the fee differential, there is an assumption that the exit tax at year 8 is paid without selling any units of the ETF. On a 1m investment, that might not be realistic.

Let's say it is. Then for a 'like for like' comparison, the 293k cashflow in the ETF scenario to pay tax should also be included as being invested at the same time in the Investment Trust scenario.

Using fees of 1% for IT, and 0.2% for ETF, and a smooth 6% gross annual return, the IT wins out over longer holding periods, because of the impacts of exit tax.

 

[Younginvestor93]

By the way, I reran the calculations, and in my opinion they are slightly misleading.

Apart from the fee differential, there is an assumption that the exit tax at year 8 is paid without selling any units of the ETF. On a 1m investment, that might not be realistic.

Let's say it is. Then for a 'like for like' comparison, the 293k cashflow in the ETF scenario to pay tax should also be included as being invested at the same time in the Investment Trust scenario.

Using fees of 1% for IT, and 0.2% for ETF, and a smooth 6% gross annual return, the IT wins out over longer holding periods, because of the impacts of exit tax.

Ok, sounds like you have looked at the figures.
Maybe they are a competitor to Etfs or even better than etfs. But isnt there no guarantee which trust will beat the markets or return the same as the index and because they are actively managed, they wont beat the markets over the long term?