Investment Trust options

Many thanks for that information AJAM, its excellent to see some real portfolio figures and I may end up doing something similar, in the sense that my wife, on a relatively low retirement income, could opt for the higher dividend trusts while I, on a higher tax bracket pension, could do something similar to yourself, aiming for lower dividends and trying to grow the fund over time.
 
FYI there are a lots of Investment Trusts that do not pay dividends:
Third Point Offshore, Allianz Technology, HarbourVest, Mobius, Pantheon, Polar Capital Tech & Smithson.

Rank by dividend at theaic.co.uk & there are lots with no dividend.
 
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Why would you pay off the mortgage quickly when the interest is low like 2% and you csn get a better return by investing the money in Etfs? Surely the only benefit is the poece of mind of not having a mortgage over your head but if you run the figures its better to slowly pay off the mortgage and invest instead?

Also, I am wondering whether pensions are actually beneficial if you are in the 20% income tax bracket? Are you not worth taking the tax hit and then investing separately perhaps in Degiro with an ann charge of say 0.2 rather than a 1% charge with a pension, say its a prsa and your employer does not contribute. Might it be better to avoid the pension route in this case?
 
Younginvestor93 said:
Why would you pay off the mortgage quickly when the interest is low like 2% and you csn get a better return by investing the money in Etfs?
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It's about the risk/return trade off.

By paying down your mortgage ahead of schedule, you are guaranteed to get a (tax-free) return equivalent to the weighted average mortgage rate over the original term of your mortgage. That's guaranteed.

If you invest in a global equity fund or ETF, you might get a return that is higher than the savings you would make on your mortgage, over the same term. Or you might not.

But you have to pay tax on any return that you make on the investment fund. Currently an exit tax of 41% is payable on any return on an Irish/EU domiciled fund so your fund would have to return nearly double your mortgage rate for you to come out ahead.

That's certainly possible, but it's far less likely. So, paying down your mortgage has a higher projected return, on a risk adjusted basis.
Younginvestor93 said:
Also, I am wondering whether pensions are actually beneficial if you are in the 20% income tax bracket?
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There are certainly circumstances where it makes sense to contribute to a pension in circumstances where you do not pay income tax at the higher rate.

However, unless your employer is making a matching contribution to your pension, I would concentrate on paying off debt (including mortgage debt) in the first instance.
 
Thanks.

I am trying to figure out currently whether to invest in etfs within a pension 1% charge or outside a pension in Degiro. Pension has tax free growth and compounding and tax savings straight off the bat although it is only at the 20% tax bracket. Outside investments have exit tax at 41% although the money is yours and you you get a better annual charge and dont get tax at the end like a pension. You do have access unlike a pension which is another pro.

The figures are complex on this one, do you have thoughts on this scenario?
 
RedOnion said:
If you're a lower rate tax payer, and will be for a while, why look at ETFs at all?
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I want to invest excess income to make more money of course...I could put it in my pension but there is a question whether, there would be better returns outside of a pension when at the low tax rate?
 
Younginvestor93 said:
I want to invest excess income to make more money of course...
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Why question was why ETFs in particular?

All gains are taxed at 41%.

You're a low rate tax payer. With shares, dividends would be 20%, and capital gains 33%.

I'm not saying one us better than the other, but trying to understand why you've decided ETFs are best option outside of a pension wrapper.
 
Very good points. Well wouldn't building a big portfolio of shares bringing dividends push me into the high income tax bracket. Im just on the edge I think. What wiuld you suggest, investing in the big value stocks like Johnson a Jonnson etc, apple et all and take the dividends?

Shares are riskier though and I feel like you can't go wrong with All World etfs, a safe set and forget approach. Yes dividends at 41% is not the best but Etfs are solid over the long run and if I miss out on a little income then so be it, it will just take me slightly longer to be FI. What do you think?
 
I think you are over complicating things.

An All World ETF is far from “safe”. Equities are volatile and there is no guarantee that they will produce a positive return over your holding period.

If you have a mortgage, pay it down ahead of schedule.

Keep it simple.
 
The last 100 hundred years of global equities says otherwise?

What do you suggest to do after as you advise maxing pension, paying off mortgage asap. Then you still have excess, whats next?
 
Younginvestor93 said:
The last 100 hundred years of global equities says otherwise?
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But, what's your investment period? You're asking a lot of questions in abstract.

Do you need the money available for anything in particular in the next 5 to 10 years? Can you handle a drop in value of investment over multi year periods?

Have you actually paid off your mortgage? Or are you planning to buy a house? Or a car? What kind of money are you talking about?

You mentioned maxing out pension already. What's it invested in?

There are several factors to consider, before suggesting a 'best' approach for your circumstances.
 
27. Saving in bank for house. Nearly ready to get a mortgage. Self employed sole trader. 6k in a crap irish life pension but changing it to a better one either 1% zurich dynamic fund or davy prsa 0.75% and in vwce all world vanguard fund adding 0.22 on, if pension works out to be the most efficient route. If it is, il max it out. Il maybe pay off mortgage quickly as Sarenco advised or invest any excess I have....just need to find out where. Currently have a small Degiro etf position with some excess I have now.
 
Curious Aaron, did you make a decision on ETFS vs Investment Trusts and what did you decide on and why?
 
I’d like to just check something if I may.

question: are U.K. investment trusts always subject to income tax and CGT?

if you think the answer is yes, please like the post
If not please set out your reasons below.
I’ll run this for say a week.

thanks
 
I have only read that they are but could Brexit change this. I have been looking into them but some of them are not available on degiro now, which is odd, wonder if anyone knows if this is also attributable to Brexit?
 
There are some closed-ended funds listed on the London Stock Exchange that are domiciled in the Channel Islands and treated as offshore funds for Irish tax purposes.

Best avoided.
 
Sarenco said:
There are some closed-ended funds listed on the London Stock Exchange that are domiciled in the Channel Islands and treated as offshore funds for Irish tax purposes.

Best avoided.
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Hi Sarenco,

I have been looking at UK investment trusts this past weekend as many knowledgeable Irish investors seem to say they are better than accumulating ETFS over a long hold period.

Where is the best place to purchase them if it is still possible with Brexit, I can only find Murray International Trust and City of London Investment Trust at the moment on the LSE? Is it a good time to purchase them now, I have an account with Degiro and a position in ETFS but I am open to looking into some Investment Trusts if they are a better alternative?
 
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I don't think that UK investment trusts are necessarily "better" than accumulating ETFs.

However, I think that investment trusts are a good option for somebody with significant capital outside a pension wrapper, with a low marginal income tax rate. For example, a retiree on a modest pension and a paid for house who receives a significant inheritance.

I'm afraid I don't know anything about Degiro - I don't hold any equities outside my pension.
 
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