DEGIRO Account and first investment.

august12

Have just opened an account with 2,500 euro. No idea what to purchase but as I am in my early 50s with no mortgage, loans and family are educated, is there any advice out there as to where to invest this money for a 10 to 12 year period. Will be adding maybe 1,000 to 2000 a year for the next 10 years to this. I have read some articles about the tax implications but still very unsure. One is at the mercy of currency fluctuations if investing in us shares but the tax seems to be straight forward i.e. one pays capital gains on profit but one can utilise the annual allowance. Is this a better option than European/Irish shares? Should I stick to the relatively safe etfs i.e vanguard, S and P etc?

topper_harley2

You dont give any information about what you want from this venture. Also, its a little unusual to put in 2.5K and have no plan or idea what to do next. In that context I'm unsure whether investing is a good idea, since you admit to having no idea about what to buy.

A visit to independent (fee based, not commission based) financial advisor would be a decent idea, who will ask you the following at least:

• What is attracting you to investing
• What existing savings have you
• Do you want to save or invest (and do you know the difference?)
• Have you any high interest credit card etc
• Have you a rainy day fund of 3-6 months salary
• Have you a pension
• Have you any investment property
• What exactly constitutes success for any investment portfolio
• How long are you happy to be without this money, you say 10-12 years but any chance of early access needed?
• What would you do if value dropped 30% overnight
• What is your tax rate
• Are you taxed in Ireland
• Have you any existing CGT losses

Unless you answer all of those, you can't expect any useful advice. Most people when asked why they want to invest generally say "I want to get better return than in normal bank account"......that is not a goal, that's a vague pipe dream that you cannot quantify.
Your target will determine what you invest in. There is no point investing in ETF for US equities if you dont know why you are doing this.

august12

topper_harley2 wrote: »

You dont give any information about what you want from this venture. Also, its a little unusual to put in 2.5K and have no plan or idea what to do next. In that context I'm unsure whether investing is a good idea, since you admit to having no idea about what to buy.

A visit to independent (fee based, not commission based) financial advisor would be a decent idea, who will ask you the following at least:

• What is attracting you to investing
• What existing savings have you
• Do you want to save or invest (and do you know the difference?)
• Have you any high interest credit card etc
• Have you a rainy day fund of 3-6 months salary
• Have you a pension
• Have you any investment property
• What exactly constitutes success for any investment portfolio
• How long are you happy to be without this money, you say 10-12 years but any chance of early access needed?
• What would you do if value dropped 30% overnight
• What is your tax rate
• Are you taxed in Ireland
• Have you any existing CGT losses

Unless you answer all of those, you can't expect any useful advice. Most people when asked why they want to invest generally say "I want to get better return than in normal bank account"......that is not a goal, that's a vague pipe dream that you cannot quantify.
Your target will determine what you invest in. There is no point investing in ETF for US equities if you dont know why you are doing this.

Have sufficient savings accumulated and looking for some investment advice.
I pay my credit card bill in full each month.
I have a rainy day account.
I have property in the form of land and some potential investment property.
I have a guaranteed pension which will generate about 300 p.w. at 65 and a 40,000 lump sum.
Won't need early access to this money.
Tax rate is 20% at the moment but this may rise to higher next year.
Taxed in Ireland.
No capital gains tax losses and all cgt paid.
If value dropped by 30, I would hold my nerve but naturally I would prefer to see it rise. Would also prefer to purchase and forget about it. I don't want to invest in something that needs to be constantly monitored. Would also prefer an option where the dividend, if there is one, to accumulate into the fund as opposed to paid out every quarter.
It's difficult to say what is attracting me to this type of investment, maybe it's the pathetic bank rates on savings but I would also like to dabble a bit in ETFs, not shares as I feel I would need to have a greater understanding of investing which I openly admit I do not have. I know there are different tax treatments for etfs purchased in Europe as opposed to US investments and the currency issue is another consideration. My initial investment is 2,500 euro and would be adding this amount every year for next 10 years approx.
P.S. Would be hoping in 12 years time, this fund might have accumulated some additional money which I could transfer to a secure account and withdraw a weekly amount to add to my other pension. I will also have the 40,000 lump sum available to me.

topper_harley2

Sounds like you are in a fairly strong position and are very much in control. No mortgage, guaranteed pension, land and 40K lump sum. This leads me on from why I was wondering what attracted you to investing. I'm not sure if you need to invest in equities outside a pension wrapper. Since you already have a guaranteed pension, do you really need to take on the investment risk of equities? If you saved 2.5K per annum for ten years you'd have 25K (obviously), which is a good lump sum when coupled with your 40K. At this point, your pension is almost kicking in, so between them I think you're in good spot.

BTW if you do invest regularly, you should be hoping your investment drops in value, so that you are buying your next month allocation at a discount. You shouldnt be hoping the value rises until you want to cash out. UCIT ETFs are terrible for regular investing, dont invest in these. The tax treatment is awful (its exit tax, not CGT). Stick with US ETFs if going down this route. However, US ETFs must pay dividends by law, they cannot accumulate. Also, they have US estate tax issues if you have more then 60K equities and you die. You can look at Canadian ETFs as alternative, which dont have estate tax issues, but are taxed via CGT.

august12

topper_harley2 wrote: »

Sounds like you are in a fairly strong position and are very much in control. No mortgage, guaranteed pension, land and 40K lump sum. This leads me on from why I was wondering what attracted you to investing. I'm not sure if you need to invest in equities outside a pension wrapper. Since you already have a guaranteed pension, do you really need to take on the investment risk of equities? If you saved 2.5K per annum for ten years you'd have 25K (obviously), which is a good lump sum when coupled with your 40K. At this point, your pension is almost kicking in, so between them I think you're in good spot.

BTW if you do invest regularly, you should be hoping your investment drops in value, so that you are buying your next month allocation at a discount. You shouldnt be hoping the value rises until you want to cash out. UCIT ETFs are terrible for regular investing, dont invest in these. The tax treatment is awful (its exit tax, not CGT). Stick with US ETFs if going down this route. However, US ETFs must pay dividends by law, they cannot accumulate. Also, they have US estate tax issues if you have more then 60K equities and you die. You can look at Canadian ETFs as alternative, which dont have estate tax issues, but are taxed via CGT.

topper_harley2, thanks for the feedback, very much appreciated, I take it, if you were in my position, you would save the 2,500 into a savings account and be done with it, in other words, you wouldn't risk the gamble on etfs?

Prezatch

10-12 years is a long enough time horizon for investment in a US ETF even if there is a recession at some stage along the line. Start dollar cost averaging into an ETF now and you'll make yourself a tidy return I'd imagine. Like you mentioned, something low cost like Vanguard products would be a good shout (VOO)

topper_harley2

august12 wrote: »

topper_harley2, thanks for the feedback, very much appreciated, I take it, if you were in my position, you would save the 2,500 into a savings account and be done with it, in other words, you wouldn't risk the gamble on etfs?

I suppose it comes down to how risk adverse you are (or not). The ETFs will be more hassle with dividend, doing tax return etc, but you certainly have the potential (not guaranteed!) to make more money than deposit accounts. Ive been toying with this myself recently. Im maxing my pension contribution (DC pension), so I have been wondering should I just save outside that in regular deposit account, with zero risk. I've been leaving towards this approach recently, simply due to already having equity exposure in my pension. Remember you'll pay 33% CGT on any US ETF profit, which isnt great, considering the risk. If it were 20% CGT, I'd almost certainly go with investment rather than savings. Perhaps that will come down in future budgets, who knows. Dont forget, you will have OAP coming in at 68 as well (I'm assuming).

august12

topper_harley2 wrote: »

I suppose it comes down to how risk adverse you are (or not). The ETFs will be more hassle with dividend, doing tax return etc, but you certainly have the potential (not guaranteed!) to make more money than deposit accounts. Ive been toying with this myself recently. Im maxing my pension contribution (DC pension), so I have been wondering should I just save outside that in regular deposit account, with zero risk. I've been leaving towards this approach recently, simply due to already having equity exposure in my pension. Remember you'll pay 33% CGT on any US ETF profit, which isnt great, considering the risk. If it were 20% CGT, I'd almost certainly go with investment rather than savings. Perhaps that will come down in future budgets, who knows. Dont forget, you will have OAP coming in at 68 as well (I'm assuming).

You assume incorrectly, I'm a Public Sevant, you know, one of the people with a massive guaranteed pension on retirement (lucky me), will have approx. 30 years service at 65. No state pension as paying D rate PRSI which entitles me to basically nothing. Am currently paying superannuation of 5% of salary, also paying the PRSI as mentioned and pension levy. But I am grateful to have a secure job but have not seen a payrise for the last 8 years and then I got a pay cut of approx. 1,500 euro, then came the introduction of pension levy plus all the other taxes all citizens are subject to but I suppose someone has to pay for the massive pension pot of senior public servants.
To get back to the topic, I have seen hedged etfs mentioned, this is a currency fluctuation safeguard, is it worth investing in these type of etfs.?

august12

Prezatch wrote: »

10-12 years is a long enough time horizon for investment in a US ETF even if there is a recession at some stage along the line. Start dollar cost averaging into an ETF now and you'll make yourself a tidy return I'd imagine. Like you mentioned, something low cost like Vanguard products would be a good shout (VOO)

Hi Prezatch, In relation to dollar cost averaging, is it better to invest maybe 500 every two months as opposed to 1,500 twice a year? Should I also consider hedged etfs. to protect against fluctuations in currency? Could you recommend a Vangaurd ETF. There are quite a few i.e. emerging markets, all world etc. IF you have any you have invested in personally, would appreciate some inside knowledge.

topper_harley2

august12 wrote: »

You assume incorrectly, I'm a Public Sevant, you know, one of the people with a massive guaranteed pension on retirement (lucky me), will have approx. 30 years service at 65. No state pension as paying D rate PRSI which entitles me to basically nothing. Am currently paying superannuation of 5% of salary, also paying the PRSI as mentioned and pension levy. But I am grateful to have a secure job but have not seen a payrise for the last 8 years and then I got a pay cut of approx. 1,500 euro, then came the introduction of pension levy plus all the other taxes all citizens are subject to but I suppose someone has to pay for the massive pension pot of senior public servants.
To get back to the topic, I have seen hedged etfs mentioned, this is a currency fluctuation safeguard, is it worth investing in these type of etfs.?

Don't know who or what that semi rant was aimed at so I'm just ignoring it. Avoid currency hedged ETFs. Companies in world ETFs are already currency diversified. The extra cost of hedge ETF is IMO not required. Don't bother with sector ETF, just buy VOO or VT.

august12

topper_harley2 wrote: »

Don't know who or what that semi rant was aimed at so I'm just ignoring it. Avoid currency hedged ETFs. Companies in world ETFs are already currency diversified. The extra cost of hedge ETF is IMO not required. Don't bother with sector ETF, just buy VOO or VT.

Thanks for that, the rant wasn't directed at you, just needed to explain not all Public Servants will be retiring on inflated pension pots.

topper_harley2

august12 wrote: »

Thanks for that, the rant wasn't directed at you, just needed to explain not all Public Servants will be retiring on inflated pension pots.

OK, though not sure why you felt the need, nobody on thread claimed they were! Best of luck with investment.