Index/ETF low cost Broker recommendations

EMitch

I have recently moved back from the US where I had used Vanguard directly and know I can't use them direct.

I am interested in investing about Euro100K in a couple of index/ETF funds with an execution only broker here over the course of the next couple of months.
I spoke with BOI for my day to day banking and they suggested speaking with one of the FA's who told me they take 1.5% of the value of the investment every year. So with the 20 year timeline I'm looking at they'd take 30K - so that's totally out of the questions.

I'm looking for a low cost broker, ideally with access to Vanguard or other low cost funds that doesn't require a minimum of 100K in each one.

I'm speaking with Davy next week but wanted to reach out and see if anyone had any recommendations?

topper_harley2

Welcome to hell. Investing in index funds/ETFs in Ireland is like nothing you have experienced before. Think you easy and accessible it is in America, invert that and thats what Ireland is.

You cannot invest directly in Vanguard funds in Ireland. You can only access them via ETFs (however, depending on if you have American citizenship some rules may be different, I dont know).

UCIT ETFs attract ridiculous taxes with "deemed dispoal" after 8 years. You pay 41% exit tax on any profits, and losses cannot be offset against gains.

ETF domicile is key. EU/UK/UCIT domiciled funds are terrible for tax efficiency. ETF A could be up 50K, ETF B down 50K but you must pay 41% tax on the 50K gain from ETF A, even though you havent made any money - really bad! This was only recently clarified by revenue.

Im looking into investing in non-UCIT ETF as they are CGT based.

For low cost broker check out Degiro.

valoren

topper_harley2 wrote: »

Welcome to hell. Investing in index funds/ETFs in Ireland is like nothing you have experienced before. Think you easy and accessible it is in America, invert that and thats what Ireland is.

You cannot invest directly in Vanguard funds in Ireland. You can only access them via ETFs (however, depending on if you have American citizenship some rules may be different, I dont know).

UCIT ETFs attract ridiculous taxes with "deemed dispoal" after 8 years. You pay 41% exit tax on any profits, and losses cannot be offset against gains.

ETF domicile is key. EU/UK/UCIT domiciled funds are terrible for tax efficiency. ETF A could be up 50K, ETF B down 50K but you must pay 41% tax on the 50K gain from ETF A, even though you havent made any money - really bad! This was only recently clarified by revenue.

Im looking into investing in non-UCIT ETF as they are CGT based.

For low cost broker check out Degiro.

Is the deemed disposal also applicable to ucit etf's bought under a pension PRSA?

topper_harley2

valoren wrote: »

Is the deemed disposal also applicable to ucit etf's bought under a pension PRSA?

Not sure on that

jive

topper_harley2 wrote: »

Welcome to hell. Investing in index funds/ETFs in Ireland is like nothing you have experienced before. Think you easy and accessible it is in America, invert that and thats what Ireland is.

You cannot invest directly in Vanguard funds in Ireland. You can only access them via ETFs (however, depending on if you have American citizenship some rules may be different, I dont know).

UCIT ETFs attract ridiculous taxes with "deemed dispoal" after 8 years. You pay 41% exit tax on any profits, and losses cannot be offset against gains.

ETF domicile is key. EU/UK/UCIT domiciled funds are terrible for tax efficiency. ETF A could be up 50K, ETF B down 50K but you must pay 41% tax on the 50K gain from ETF A, even though you havent made any money - really bad! This was only recently clarified by revenue.

Im looking into investing in non-UCIT ETF as they are CGT based.

For low cost broker check out Degiro.

Christ, I've been reading about this for months and was going to invest in UCIT ETFs this week (€85k). How is a financial moron like myself meant to figure this out!

For Non-UCIT ETFs I assume you pay your 33% CGT (on selling) plus PRSI + USC (annually)? Are taxes paid on dividends regardless of whether they are distributing/non-distributing?

What US ETFs are you looking at as a matter of interest?

EMitch

I'm looking at Vanguard funds as they are what I am most familiar with from previous experience. VI & VTI, plus one more in there to be determined.

I'm sure there are better funds and routes to go but as someone who isn't as familiar as most on here with the markets and options (thank you all for reading these messages and helping the rest of us, it's invaluable) I just want to give myself the best opportunity to get a modest return on the investment over a long period which will be better than sticking it in a bank for now anyway.
With a couple of diversified funds and the long time horizon I'm hoping that it produces 4-5% annually and see how the taxes shake out at the end. Lot's more research to do...

jive

EMitch wrote: »

I'm looking at Vanguard funds as they are what I am most familiar with from previous experience. VI & VTI, plus one more in there to be determined.

I'm sure there are better funds and routes to go but as someone who isn't as familiar as most on here with the markets and options (thank you all for reading these messages and helping the rest of us, it's invaluable) I just want to give myself the best opportunity to get a modest return on the investment over a long period which will be better than sticking it in a bank for now anyway.
With a couple of diversified funds and the long time horizon I'm hoping that it produces 4-5% annually and see how the taxes shake out at the end. Lot's more research to do...

I'm genuinely considering just investing in S&P500 75% and 25% in bonds. The taxation is a mess otherwise. Not much diversification here but not much choice considering I don't want accountancy to become my side-job.

valoren

jive wrote: »

I'm genuinely considering just investing in S&P500 75% and 25% in bonds. The taxation is a mess otherwise. Not much diversification here but not much choice considering I don't want accountancy to become my side-job.

The Vanguard All World etf would provide some diversification. 50% US based, 10% Eurozone, 8% Japan, 7% uk, 5% eurozone (excluding euro) etc.

Some good diversification across the industries too.

EMitch

VT would be 58% US, 26% EU and pretty broad diversification - good to get a US based fund with the inverse percentages to try to hedge things a bit more.

VTI would be 98% US which for the last several years had fantastic returns but lots of bear calls over the last week. Not that it matters with a 20-25 year timeline..
Set it and forget it..

jive

Vanguard all world ETF has slightly higher cost. They will both probably perform about the same although you're right it is more diversified.

Reading all about bear market alright and how dumb it is to invest after a 6 year bull run. The way I see it is I'm getting a 6% discount on 2 weeks ago even if it does keep going down. I'm not intending on selling any time soon I just want to put the money to work and forget about it.

Just have to figure out tax regarding dividends and how that works. If it's straight forward for US based then I will keep investing regularly. Really can't be arsed with the tax issues surrounding UCITs ETFs, especially if I want to invest monthly. The more I read the more mental it gets, I think it's a total non-runner unless it's something you're really interested in spending vast quantities of time managing.

jive

Right, after some deliberation I've decided to go for the VT fund, slightly higher cost but better diversification.

1. Open DeGiro account & transfer funds into it.
2. Search Vanguard All World ETF (VT) fund on NASDAQ and purchase.
3. Pay 33% CGT on disposal and pay tax on dividends annual.

Anyone with better knowledge/experience than me confirm this process? The more I read the more it makes my head spin (it all seemed so easy when I started off with the 'Millionaire Teacher' - he didn't mention Ireland's penal tax system though!).

valoren

I'm in the same boat as yourself and spent a year or two figuring out my options and still not being 100% certain.
I still have questions

I set up a PRSA with Davy execution only so I get to pick where the money goes essentially.
I am now putting money in each month to the Vanguard ETF's as a dollar cost averaging strategy.

My plan is to do this until retirement age hence the PRSA account and not a trading account.
I figure I will have a 25-30 year timeframe, short term market drops are of little concern for me.

I've also set myself short, medium, long term goals.

e.g. Set up account.
Own 25 Vanguard units.
Own 50 Vanguard units.
Own 5,000 Vanguard units.
Own 10,000 Vanguard units.

I just want to start putting the savings I have to work and quit procrastinating.

They also pay out a quarterly distributing dividend. I can only assume that these will not be deemed income tax as it will simply be wrapped up and re-invested in the funds.

For example, at the point of having 5,000 units (for arguments sake say that the average unit cost is $50, then the fund would be worth $285,000) and there's a pay out on average dividend $0.35 per quarter, then that would be a quarterly payment of $1,750 or $7,000 p.a. (2% a year from dividends). That $7,000 would then buy a further 140 units at $50. Just an illustrative example here.

Any market corrections I would see as a buying opportunity to get more and more units. That's essentially it. Keep it Simple.

jive

I have the same plan, keep dumping my savings into the fund until I want to save for a mortgage deposit. I've maxed out my AVCs and will keep some money in cash as an emergency fund.

I've €85k to invest (my life savings, pretty much) hence the extreme precaution. This money is just sitting in a savings account at a rate less than inflation.

Can anyone confirm that I just transfer funds from my bank account into DeGiro, put in an order for the VT ETF and that's that?

My understanding is that if the dividend is distributing then it will be taxed. You can avoid this by buying an accumulating dividend which is just reinvested - is that possible with the VT ETF does anyone know?

robp

jive wrote: »

I have the same plan, keep dumping my savings into the fund until I want to save for a mortgage deposit. I've maxed out my AVCs and will keep some money in cash as an emergency fund.

I've €85k to invest (my life savings, pretty much) hence the extreme precaution. This money is just sitting in a savings account at a rate less than inflation.

Can anyone confirm that I just transfer funds from my bank account into DeGiro, put in an order for the VT ETF and that's that?

My understanding is that if the dividend is distributing then it will be taxed. You can avoid this by buying an accumulating dividend which is just reinvested - is that possible with the VT ETF does anyone know?

US ETFs are compelled by law to distribute dividends.

topper_harley2

If you're buying monthly, for UCIT you need to keep track of monthly buys for calculating deemed disposal tax. Sounds a pain, as we know.
However, if you're doing monthly buys of US ETF and decide to sell all of it in ten years time, how do you calculate profit/loss? Surely you still need to keep a record of each monthly purchase, same as for UCIT version, in order to work out total cost of the 120 monthly purchases?
Hence, is accounting side really much easier? (Ignoring lower tax %). I mean purely the record keeping?

jive

topper_harley2 wrote: »

If you're buying monthly, for UCIT you need to keep track of monthly buys for calculating deemed disposal tax. Sounds a pain, as we know.
However, if you're doing monthly buys of US ETF and decide to sell all of it in ten years time, how do you calculate profit/loss? Surely you still need to keep a record of each monthly purchase, same as for UCIT version, in order to work out total cost of the 120 monthly purchases?
Hence, is accounting side really much easier? (Ignoring lower tax %). I mean purely the record keeping?

Good point, probably not much easier. I suppose the difference is it's easier to track and not forced upon you at an arbitrarily decided point in time. The ability to offset losses is obviously the main reason for avoiding UCIT. The only major negative I see is working out the tax on dividends which is a bit of a pain but other than that you can just track with a very basic excel file (just have a back-up :pac:)

8 years down the line I have one loser and one winner and end up losing overall due to the fact I can't offset losses... that's just ridiculous. I'd rather buy a rental property and deal with the hassle of that than invest in UCITs on the basis that you can't offset losses. 41% tax after 8 years even with no intention of selling, no offsetting losses.. no thanks.

One thing is for certain, there is very little information out there on this for Irish residents. If it wasn't for this forum and ask about money I'd be absolutely nowhere, I mean I still haven't invested due to all the confusion but at least I am forming some kind of picture in my head at this stage.

Cute Hoor

I presume that one can get over the 8 year crux and offsetting losses against gains by selling the UCITS ETF prior to the 8 year limit. So buy a UCITS ETF now, sell in 7.5 years, pay capital gains on gain or offset losses against other gains.

The currency is the big risk with US ETFs like Vanguard, relatively close to parity now if it went back up to $1.50 your profits could be (more than) wiped out.

Is there any difference between how dividends from EU domiciled ETF's and US domiciled ETF's are taxed, assuming one is already in the higher tax bracket

robp

Cute Hoor wrote: »

Is there any difference between how dividends from EU domiciled ETF's and US domiciled ETF's are taxed, assuming one is already in the higher tax bracket

I don't think so but with EU domiciled ETFs you can avail of accumulating ETFS.

Blacktie.

Cute Hoor wrote: »

The currency is the big risk with US ETFs like Vanguard, relatively close to parity now if it went back up to $1.50 your profits could be (more than) wiped out.

Is there any difference between how dividends from EU domiciled ETF's and US domiciled ETF's are taxed, assuming one is already in the higher tax bracket

Realistically any country that trades in America or anywhere outside the Eurozone has currency risk. Don't fool yourself into thinking because the stock is in euro there's no currency risk or that it's even mitigated against.

Cute Hoor

Blacktie. wrote: »

Realistically any country that trades in America or anywhere outside the Eurozone has currency risk. Don't fool yourself into thinking because the stock is in euro there's no currency risk or that it's even mitigated against.

Ah yea I know, many many companies are truly international, but you will still get a very significant number of companies whose earnings are primarily in one currency zone and in those cases the currency risk is a real one.

phantom_lord

US stocks are inversely correlated to the currency, so the currency risk is less than you think.

keane2097

phantom_lord wrote: »

US stocks are inversely correlated to the currency, so the currency risk is less than you think.

Can you flesh that out a bit?

Also, I guess that whole world indices are intrinsically hedged to some extent?

Amirani

keane2097 wrote: »

Can you flesh that out a bit?

Stocks of US companies in general could tend to benefit from a weaker US Dollar. So cost bases in USD, but revenue streams in international currency. Financial accounts stated in USD.

So while you're losing money by being long USD in such a scenario, this could be offset somewhat by also being long companies that benefit from this.

Dardania

jive wrote: »

Right, after some deliberation I've decided to go for the VT fund, slightly higher cost but better diversification.

1. Open DeGiro account & transfer funds into it.
2. Search Vanguard All World ETF (VT) fund on NASDAQ and purchase.
3. Pay 33% CGT on disposal and pay tax on dividends annual.

Anyone with better knowledge/experience than me confirm this process? The more I read the more it makes my head spin (it all seemed so easy when I started off with the 'Millionaire Teacher' - he didn't mention Ireland's penal tax system though!).

So, based on the above recommendation of the Millionaire teacher, I read the book, and think it may be possible to apply the theory using a PRSA account, like the Davy execution only PRSA (https://www.boards.ie/b/thread/2057725181 ) - in a tax sheltered way.

I'm in the process of masterplanning my portfolio, and was wondering if anyone would have any feedback/observations/criticisms on it?

I plan to use roughly the couch potato strategy (so my age is the percentage of government bonds, and the rest diversified among global low cost ETFs)

The selection criteria for the ETFs is:
- Domiciled in Ireland (and that way, per what I understand from Davy Select in this thread https://www.boards.ie/b/thread/2057725181, there shouldn't be any Dividend Witholding Tax, as Revenue will recognise the funds)
- Dividends are accumulated rather than distributed - that way I can maximise the "compound interest"idea
- passive / low fees ETFs
- when buying non € funds, doing so in $, rather than € hedged, to avoid bad hedging. And also, in the case of Emerging Markets, I'm guessing they peg their currency against $. so it makes sense to use $ there...
- not essential, but, choosing tickers / bourses to buy in to the funds based on high average volume (so that when it comes time to sell, there are plenty of customers) and also with good info given on Yahoo Finance (just so I can get a good read on charts etc.)

Proposed Choices:
- Bonds - 33%: Vanguard Euro Government Bond Index Ins EUR
https://lt.morningstar.com/m3dllinql4/snapshot/snapshot.aspx?id=F0GBR04SKM / https://uk.finance.yahoo.com/quote/IE0007472990.IR?p=IE0007472990.IR

- Europe - 30%, split:
20% iShares Core EURO STOXX 50 UCITS ETF (Acc) https://www.justetf.com/en/etf-profile.html?isin=IE00B53L3W79 / https://uk.finance.yahoo.com/quote/SXRT.DE
10% iShares MSCI Europe SRI UCITS ETF https://www.justetf.com/en/etf-profile.html?isin=IE00B52VJ196 / https://uk.finance.yahoo.com/quote/IUSK.DE

- US - 20%: iShares Core S&P 500 UCITS ETF (Acc)
https://www.justetf.com/de-en/etf-profile.html?isin=IE00B5BMR087 / https://uk.finance.yahoo.com/quote/CSPX.L

- Emerging Markets - 10%: db x-trackers MSCI Emerging Markets 1C UCITS ETF (DR)
https://www.justetf.com/en/etf-profile.html?isin=IE00BTJRMP35 / https://uk.finance.yahoo.com/quote/XMME.L?p=XMME.L

- Gamble - 7%: Equity de jour for me! (I have some stock in a wind energy that had it's IPO a few weeks ago - feeling pretty positive about it)

My rough judgement on the fees for the above is a weighted average of 0.15% (and I plan to settle the 0.75% Davy fee from my normal everyday income to maximise compounding interest possibilities through the funds).

Does the above portfolio make sense to people?

I am a bit concerned on the make-up of the European ETFs - I want to have more exposure to mid and small capitalisation companies, but the fees on an ETF following either Stoxx 600 or MSCI Europe are quite higher than something following Stoxx 50. There is this option with 0.19% fee (https://www.justetf.com/en/etf-profile.html?isin=IE00B60SWW18) but it then has the risk of being a synthetic unfunded swap fund, which I don't understand or trust...
With buying the $ ETFs through London, I'm a small bit worried about exposure to Brexit disconnects financially, and also of course liable for 0.5% stamp duty when buying. I am overthinking it by going for $ Emerging Markets fund?
I'm conscious of no exposure to Asia, however it's somewhat hard to find an Irish domiciled, accumulating ETF with low fees - best I came across is this: https://www.justetf.com/en/etf-profile.html?groupField=none&sortField=ter&sortOrder=asc&assetClass=class-equity&region=Asia%2BPacific&from=search&isin=IE00B466KX20 - but quite a sharp 0.55% fee
And am I truly wrong about allowing an equity gamble in a pension fund? They do have the advantage of not attracting fees, which is a feeble mitigating factor...

Appreciate any thoughts / ideas / criticisms...

kenon

Dardania wrote: »

So, based on the above recommendation of the Millionaire teacher, I read the book, and think it may be possible to apply the theory using a PRSA account, like the Davy execution only PRSA (https://www.boards.ie/b/thread/2057725181 ) - in a tax sheltered way.

I am pretty much the same as yourself. I read the Millionaire Teacher as it gets recommended quite a bit on Boards and decided to try and implement an Irish strategy based on it. I came up with the same solution as you. Davy Execution only PRSA and 3 index funds. One of which should be bonds. I have just started this plan in the last month and as of yet I have moved money into the same US fund as you. I haven't decided what other funds I am going to use though. I will decide when my next payments to Davy go through.

I can't really add anything to what you have said as you are a level above me in knowledge!

Dardania

kenon wrote: »

Dardania wrote: »

So, based on the above recommendation of the Millionaire teacher, I read the book, and think it may be possible to apply the theory using a PRSA account, like the Davy execution only PRSA (https://www.boards.ie/b/thread/2057725181 ) - in a tax sheltered way.

I am pretty much the same as yourself. I read the Millionaire Teacher as it gets recommended quite a bit on Boards and decided to try and implement an Irish strategy based on it. I came up with the same solution as you. Davy Execution only PRSA and 3 index funds. One of which should be bonds. I have just started this plan in the last month and as of yet I have moved money into the same US fund as you. I haven't decided what other funds I am going to use though. I will decide when my next payments to Davy go through.

I can't really add anything to what you have said as you are a level above me in knowledge!

Thanks for that - it's a tough topic to get into with a steep learning curve -  I assure you I'm not above anyone in knowledge yet! And reassuring to hear others out there taking the same tack (great minds think alike/fools seldom differ)

Two things to mention that might be helpful to others - this thread on another forum is extremely helpful: https://www.askaboutmoney.com/threads/looking-for-etf-that-reinvests-dividends.189531/ and it linked me onto www.justetf.com for searching for ETFs - great resource. I think each year when I rebalance, I will scan through that justetf site to see if any newer, lower fee funds come onto the market that give same exposure...
That thread also suggested an additional criteria to be cognisant of when choosing investments: open-ended rather than closed ended funds. Enables max accumulation over time.
I am also tracking my portfolio on www.morningstar.co.uk (free way) - let's you get some additional cross fund info like tracking transactions costs. And I have it set to send me a weekly email to get an idea how each fund invested in is performing - handy.

Similar to your awaiting deposit from another fund - I am waiting for my last fund with Irish Life to pay out. I by the way received the statement from them for the year - not a mention of actual fees paid - not so transparent.

I have changed slightly the composition of what to buy - I'm forgetting about equities, and going for more diverse funds around the world, with low TERs:


Still need to determine best bond to buy...not so easy to find info on those...

kenon

There is a bonds subsection on this page that I have found useful. Unfortunately bond allocation in a portfolio seems to be a subject of debate at the moment.

Dardania

kenon wrote: »

There is a bonds subsection on this page that I have found useful. Unfortunately bond allocation in a portfolio seems to be a subject of debate at the moment.

Really great page by the way - many thanks!

I went  for the bonds myself (http://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F0GBR04SGN ) bearing in mind the dispute over them - my hope is that in times of turn (if we enter this bear market being predicted) they should hold their value, at least relative to ETFs, and I can flog the bonds to buy low priced ETFs at that time.

Question: has anyone encountered on ISE a decent Eurozone ETF? I found this, but there appears to be not too much volume (http://www.ise.ie/Market-Data-Announcements/Funds/Individual-Fund-Instrument-Data/ShowSubFund/?subFundID=10577&subgroupID=6171 , which is a version of this: https://www.wisdomtree.eu/en-ie/etfs/quality-dividend-growth/wisdomtree-eurozone-quality-dividend-growth-ucits-etf-eur-acc )
I'm looking for a Eurozone accumulating ETF, domiciled in Ireland, that I can buy whenever I top-up my PRSA account. At the moment, if I buy anything outside of Ireland or UK, I have to pay over €25 each trade...and I'm a little cautious about buying in London due to Brexit (e.g. will these funds get locked away?)