How can someone with a small amount of money invest in S&P 500?

roro1990

Apologies if this is a silly question. From my research, I've deduced that this an index fund mirroring the S&P 500 is the best place to start saving for my pension. I'm 25 and I've noticed that average return for this fund over the years has been around 10%, which it pretty good.

My problem is that I haven't got a breeze where to find these funds and how to invest in them. I've looked into Vanguard but I don't think it's available in Ireland and I'm only starting off with a small initial sum of 1,000 and trying to build from there. Is there any cheap way of investing in an s&P 500 index fund from Ireland? Thanks for any info.

iainBB

roro1990 wrote: »

Apologies if this is a silly question. From my research, I've deduced that this an index fund mirroring the S&P 500 is the best place to start saving for my pension. I'm 25 and I've noticed that average return for this fund over the years has been around 10%, which it pretty good.

My problem is that I haven't got a breeze where to find these funds and how to invest in them. I've looked into Vanguard but I don't think it's available in Ireland and I'm only starting off with a small initial sum of 1,000 and trying to build from there. Is there any cheap way of investing in an s&P 500 index fund from Ireland? Thanks for any info.

Very simple create an account with degiro and buy and ETF. That traces the S and P 500
Such as spy ivv voo

And wait. That is all.

On the other hand I don't believe in the buy and hold strategy . which is a different topic.

roro1990

iainBB wrote: »

Very simple create an account with degiro and buy and ETF. That traces the S and P 500
Such as spy ivv voo

And wait. That is all.

On the other hand I don't believe in the buy and hold strategy . which is a different topic.

Thanks for that

Cute Hoor

Not a silly question roro, everybody has to start somewhere.

You are investing for your pension, so I would question why you don't invest in a pension fund, pension fund investments are tax deductible so if you are paying tax at 40% every €100 invested will only cost you €60, that is a healthy 66% you are up straight away on your investment and you would hope that your fund manager can add a few % per annum to that. Your fund manager will take his whack of course, probably 1.5% per year irrespective of how your fund is performing. Another thing to keep in mind is that you won't be able to get your hands on that until you get to pension age, in your case that is probably another 50+ years.

Having said all that and assuming you are still keen to go ahead with the S&P (no reason why you can't do a bit of both depending on your circumstances) my suggestion would be as follows (others may have better alternatives):

1. Open a DeGiro account
2. Lodge your €1,000 to your account
3. Place your order for VANGUARD S&P 500 ETF, it's $200 per share at the moment so you will get 5 shares, put in a bit more and you will get 6 shares.
4. DeGiro do not charge a fee for this ETF so it will cost you nothing to buy into it
5. You will receive a dividend every quarter which will be credited to your account.
6 You can top up your holding free of charge every month - I think you have to be topping up by €1k to get it free of charge.
7. Consider other investments, including other ETF's, at a later stage

This investment is not without risk, not least of which is the currency risk.

Here is a chart showing how this ETF has been performing over the last 5 years.
https://www.google.co.uk/finance?q=NYSEARCA%3AVOO&ei=IhG8V4j9DZ2PsQHq64SAAg

Best of luck with it.

iainBB

Cute Hoor wrote: »

Not a silly question roro, everybody has to start somewhere.

You are investing for your pension, so I would question why you don't invest in a pension fund, pension fund investments are tax deductible so if you are paying tax at 40% every €100 invested will only cost you €60, that is a healthy 66% you are up straight away on your investment and you would hope that your fund manager can add a few % per annum to that. Your fund manager will take his whack of course, probably 1.5% per year irrespective of how your fund is performing. Another thing to keep in mind is that you won't be able to get your hands on that until you get to pension age, in your case that is probably another 50+ years.

We are doing the same as pension fund are very limited for family wife myself and children. With low return and high change and massive restrictions out way the tax free incentive.

Have a look at ocean.ie/pensions and pretty bad reviews of them in general. Average return 7% over 20 years. People now a days want a more flexible option. And self managed approach. Pension are risky too.

BrokenArrows

iainBB wrote: »

We are doing the same as pension fund are very limited for family wife myself and children. With low return and high change and massive restrictions out way the tax free incentive.

Have a look at ocean.ie/pensions and pretty bad reviews of them in general. Average return 7% over 20 years. People now a days want a more flexible option. And self managed approach. Pension are risky too.

Pensions are risky if you dont control what fund you have invested in. If you blindly keep investing into the same fund forever without looking for a better one then you are going to lose out.

Cute Hoor

iainBB wrote: »

We are doing the same as pension fund are very limited for family wife myself and children. With low return and high change and massive restrictions out way the tax free incentive.

Have a look at ocean.ie/pensions and pretty bad reviews of them in general. Average return 7% over 20 years. People now a days want a more flexible option. And self managed approach. Pension are risky too.

It's difficult to predict obviously how these things will go, pension funds got hammered in the recession, may do again, obvious risks with managing your own as well.

Just by way of counterbalance to your argument, I will give this example which is my own personal experience. Money (Nett) invested in a pension fund between 2003 and 2010 is currently showing a return of 200% after fees. Maybe I could have done better myself, I don't know?

The obvious restriction of not being able to get your hands on your money of course could be decisive factor for many. Many people bought property in boom times as their pension fund and in many cases they have been left with nothing. It's difficult to predict what will happen.

Cute Hoor

BrokenArrows wrote: »

Pensions are risky if you dont control what fund you have invested in. If you blindly keep investing into the same fund forever without looking for a better one then you are going to lose out.

Ah yea you should definitely be diversifying into different funds, and your appetite for risk is/should be age related.

BrokenArrows

Cute Hoor wrote: »

Many people bought property in boom times as their pension fund and in many cases they have been left with nothing. It's difficult to predict what will happen.

Nobody was left with nothing. Houses don't become worthless.
They may have lost money in the investment if they decided to sell low but that is it. Buying a house that you don't want to live in long term is an investment and carries it own risks.

If people had bought those houses to live in then the fact that the price crashed should be irrelevant.

Negative equity was only a problem for those who intended to flip the property adding to the inflated prices.

iainBB

Cute Hoor wrote: »

It's difficult to predict obviously how these things will go, pension funds got hammered in the recession, may do again, obvious risks with managing your own as well.

Just by way of counterbalance to your argument, I will give this example which is my own personal experience. Money (Nett) invested in a pension fund between 2003 and 2010 is currently showing a return of 200% after fees. Maybe I could have done better myself, I don't know?

The obvious restriction of not being able to get your hands on your money of course could be decisive factor for many. Many people bought property in boom times as their pension fund and in many cases they have been left with nothing. It's difficult to predict what will happen.

200% is very good but that is a specific time frame. The S and P over that time from Jan 01 2003 to Dec 31 2010 was 8.79% per year. so you did pretty well but average pension goes for many years with lock in time frames. . And don't give you that . Can I ask what is your average over all. Not in specific time constraints.

Cute Hoor

iainBB wrote: »

200% is very good but that is a specific time frame. The S and P over that time from Jan 01 2003 to Dec 31 2010 was 8.79% per year. so you did pretty well but average pension goes for many years with lock in time frames. . And don't give you that . Can I ask what is your average over all. Not in specific time constraints.

Yea I know, but that was and is the only timeframe I have, so it's factual. In general of course pension returns are going to be measured over a much longer timeframe. BTW that is the average overall in my pension.

Cute Hoor

BrokenArrows wrote: »

Nobody was left with nothing. Houses don't become worthless.
They may have lost money in the investment if they decided to sell low but that is it. Buying a house that you don't want to live in long term is an investment and carries it own risks.

If people had bought those houses to live in then the fact that the price crashed should be irrelevant.

Negative equity was only a problem for those who intended to flip the property adding to the inflated prices.

Unfortunately houses did become worthless for many who bought them as (pension) investments rather than homes to live in. Many bought houses to let on an interest only repayment basis, it came time to start repaying the capital and they didn't have the money, the house is in negative equity, the lending institution forces a sale, the money received on the sale won't cover the mortgage, the individual is left with no house and still money outstanding on the mortgage, so the house isn't just worthless, it is worse than worthless.

BrokenArrows

I have two funds at the moment. One in Ireland that i dont have the ability to manage with a small amount of money, and one in the UK that i can manage directly online. The UK one is the majority of my pension.

However the one i have no control over has managed about 10% per year on average during the past 10 years. Thats even taking into account the recession.

The UK one ive been micro managing has me at 12% per year over the past 5 years. This year its currently at about 20% due to a few good choices over the brexit period. I moved out of my Property Fund before Brexit and went into Gold fund, and when gold topped i moved into a FTSE related fund. I like having that kind of control.

I must move my Irish fund into my UK fund now that the exchange rate is good.

newacc2015

Cute Hoor wrote: »

Having said all that and assuming you are still keen to go ahead with the S&P (no reason why you can't do a bit of both depending on your circumstances) my suggestion would be as follows (others may have better alternatives):

1. Open a DeGiro account
2. Lodge your €1,000 to your account
3. Place your order for VANGUARD S&P 500 ETF, it's $200 per share at the moment so you will get 5 shares, put in a bit more and you will get 6 shares.
4. DeGiro do not charge a fee for this ETF so it will cost you nothing to buy into it
5. You will receive a dividend every quarter which will be credited to your account.
6 You can top up your holding free of charge every month - I think you have to be topping up by €1k to get it free of charge.
7. Consider other investments, including other ETF's, at a later stage

This investment is not without risk, not least of which is the currency risk.

Here is a chart showing how this ETF has been performing over the last 5 years.
https://www.google.co.uk/finance?q=NYSEARCA%3AVOO&ei=IhG8V4j9DZ2PsQHq64SAAg

Best of luck with it.

If OP has only a small amount, IMO the biggest benefit of using an ETF will be the fact he can take advantage of €1,270 CGT exemption annually. If he has a small amount say €5k, he could easily capitalise the gain tax annually.

iainBB

newacc2015 wrote: »

If OP has only a small amount, IMO the biggest benefit of using an ETF will be the fact he can take advantage of €1,270 CGT exemption annually. If he has a small amount say €5k, he could easily capitalise the gain tax annually.

And spread it out among family members. To avoid the cgt

robp

I don't know a lot about personal pensions but aren't the tax benefits of personal pensions age-related (assuming you are not an athlete)?

Age
Amount which qualifies for tax relief
Under 30 years 15% of net relevant earnings
30 to 39 years 20%
40 to 49 years 25%
50 to 54 years: 30%
55 to 59 years 35%
60 and over 40%

http://www.citizensinformation.ie/en/money_and_tax/personal_finance/pensions/personal_pensions.html

If one is 25 and the tax relief is only 15%, is it still worth t iif one is compelled to pay high fees? Has anyone done the maths?

Cute Hoor

robp wrote: »

I don't know a lot about personal pensions but aren't the tax benefits of personal pensions age-related (assuming you are not an athlete)?

Age
Amount which qualifies for tax relief
Under 30 years 15% of net relevant earnings
30 to 39 years 20%
40 to 49 years 25%
50 to 54 years: 30%
55 to 59 years 35%
60 and over 40%

http://www.citizensinformation.ie/en/money_and_tax/personal_finance/pensions/personal_pensions.html

If one is 25 and the tax relief is only 15%, is it still worth t iif one is compelled to pay high fees? Has anyone done the maths?

You have it wrong there rob, the 15% relates to the % income you can invest, not the tax relief you will get. For example, you have an income of €100k, you can invest €15k of that in your pension you will get full tax relief (40%) on that €15k, so effectively it will cost you €9k

Cute Hoor

newacc2015 wrote: »

If OP has only a small amount, IMO the biggest benefit of using an ETF will be the fact he can take advantage of €1,270 CGT exemption annually. If he has a small amount say €5k, he could easily capitalise the gain tax annually.

If OP manages to make sufficient profit annually (on a €5k investment) to fully avail of the €1,270 CGT allowance he will be doing extremely well. However your point is well made, everybody should take advantage of the annual CGT allowance if they are in a profit situation.

KevinK

Cute Hoor wrote: »

If OP manages to make sufficient profit annually (on a €5k investment) to fully avail of the €1,270 CGT allowance he will be doing extremely well. However your point is well made, everybody should take advantage of the annual CGT allowance if they are in a profit situation.

Can I ask how would one take advantage of the CGT allowance? Would it involve selling the shares/ETF's? Could you then immediately buy the same shares again?


IS there a form you need to fill in to take advantage of the allowance?

Cute Hoor

KevinK wrote: »

Can I ask how would one take advantage of the CGT allowance? Would it involve selling the shares/ETF's? Could you then immediately buy the same shares again?


IS there a form you need to fill in to take advantage of the allowance?

Yes, you have to sell the shares (at a profit obviously) to take advantage of the CGT allowance.

To the best of my knowledge you can buy the shares back immediately without the Revenue being upset (I'm not 100% certain of this), I know there was a time when brokers would do a 'Bed & Breakfast' for you, effectively a selling & buying process that allowed you to avail of the CGT allowance, not sure if this is now considered kosher.

You just declare the Capital Gain in your annual tax return (Form 11), no special form that I am aware of.

jdmartinho

Cute Hoor wrote: »

Not a silly question roro, everybody has to start somewhere.

You are investing for your pension, so I would question why you don't invest in a pension fund, pension fund investments are tax deductible so if you are paying tax at 40% every €100 invested will only cost you €60, that is a healthy 66% you are up straight away on your investment and you would hope that your fund manager can add a few % per annum to that. Your fund manager will take his whack of course, probably 1.5% per year irrespective of how your fund is performing. Another thing to keep in mind is that you won't be able to get your hands on that until you get to pension age, in your case that is probably another 50+ years.

Having said all that and assuming you are still keen to go ahead with the S&P (no reason why you can't do a bit of both depending on your circumstances) my suggestion would be as follows (others may have better alternatives):

1. Open a DeGiro account
2. Lodge your €1,000 to your account
3. Place your order for VANGUARD S&P 500 ETF, it's $200 per share at the moment so you will get 5 shares, put in a bit more and you will get 6 shares.
4. DeGiro do not charge a fee for this ETF so it will cost you nothing to buy into it
5. You will receive a dividend every quarter which will be credited to your account.
6 You can top up your holding free of charge every month - I think you have to be topping up by €1k to get it free of charge.
7. Consider other investments, including other ETF's, at a later stage

This investment is not without risk, not least of which is the currency risk.

Here is a chart showing how this ETF has been performing over the last 5 years.

Best of luck with it.

What about the dividends? Seen as they are given to you instead of accumulating do you need to declare them every year? If so, how do you do that?

topper_harley2

jdmartinho wrote: »

What about the dividends? Seen as they are given to you instead of accumulating do you need to declare them every year? If so, how do you do that?

You (not broker) declare them to revenue and pay the tax yourself, after accounting for DWT, which differs per country. See here for info https://www.paylesstax.ie/share-dividends/. If you are unsure what DWT is, you are probably not in a good place to start doing your own dividend tax returns without alot of research.

I wouldn't put much into the S&P 500 currently. I'm all for cost averaging etc etc over time but buying now when the S&P 500 is at more or less an all time high and the euro is really weak against the dollar should be enough to encourage real consideration before investing in it.

I've said that quite a few times in the last few months, long before Friday's 2% drop.

Blacktie.

Augeo wrote: »

I wouldn't put much into the S&P 500 currently. I'm all for cost averaging etc etc over time but buying now when the S&P 500 is at more or less an all time high and the euro is really weak against the dollar should be enough to encourage real consideration before investing in it.

I've said that quite a few times in the last few months, long before Friday's 2% drop.

Lol a 2% drop is hardly run for the hills time.

Blacktie.

Blacktie. wrote: »

Lol a 2% drop is hardly run for the hills time.

Definitely not, I didn't suggest it was.

jdmartinho

topper_harley2 wrote: »

You (not broker) declare them to revenue and pay the tax yourself, after accounting for DWT, which differs per country. See here for info. If you are unsure what DWT is, you are probably not in a good place to start doing your own dividend tax returns without alot of research.

I know about DWT. I was more interested in figuring out the dynamics of declaring the income from dividends in Ireland. I assume I must fill out some extra form and send it to Revenue (or possibly do it online on the Other Income section). After that I imagine I'll have to pay the amount of tax on the dividends lumped together with my PAYE income.

Thank for the reply.

Cute Hoor

jdmartinho wrote: »

I know about DWT. I was more interested in figuring out the dynamics of declaring the income from dividends in Ireland. I assume I must fill out some extra form and send it to Revenue (or possibly do it online on the Other Income section). After that I imagine I'll have to pay the amount of tax on the dividends lumped together with my PAYE income.

Thank for the reply.

You will be using Form 11

TiGeR KiNgS

Cute Hoor wrote: »

You will be using Form 11

PAYE anytime have an option to return dividends