index funds

cdlmarie

Hi, I would like to start investing in index funds but I have no idea where to do that.
I always hear about vanguard but it's not available in ireland.
does anyone know a reliable website where I could invest my money?
thanks.

newacc2015

cdlmarie wrote: »

Hi, I would like to start investing in index funds but I have no idea where to do that.
I always hear about vanguard but it's not available in ireland.
does anyone know a reliable website where I could invest my money?
thanks.

You can buy Vanguard funds on Degiro online stock broker.

sob1467

I think that Davy is another option, but there are fees for foreign etfs, someone else he may know particulars.

cdlmarie

Etfs?is it different from index funds?

ftse100

cdlmarie wrote: »

Etfs?is it different from index funds?

An ETF can represent almost anything. There are indexed ETFs, yes. They may however trade at a premium or discount to NAV.

newacc2015

cdlmarie wrote: »

Etfs?is it different from index funds?

ETF are exchanged trade funds. They are index funds, but they traded like stocks. They are generally highly liquid and have low fees as they are often funds in tens of billions of euro.

Rob87

Adding to the OP's question and discussion re Vanguard. As most of us hold our cash in EUR - is there an additional risk investing in asset classes priced in USD vs EUR? i.e.
VWO - https://personal.vanguard.com/us/FundsSnapshot?FundId=0964&FundIntExt=INT
VTI - https://personal.vanguard.com/us/FundsSnapshot?FundId=0970&FundIntExt=INT
There are also options to purchase ETFs priced in EUR i.e. 
VANGUARD S&P500 (Euronext Amsterdam)
Sorry for the newb question

TiGeR KiNgS

Rob87 wrote: »

Adding to the OP's question and discussion re Vanguard. As most of us hold our cash in EUR - is there an additional risk investing in asset classes priced in USD vs EUR? i.e.
VWO - https://personal.vanguard.com/us/FundsSnapshot?FundId=0964&FundIntExt=INT
VTI - https://personal.vanguard.com/us/FundsSnapshot?FundId=0970&FundIntExt=INT
There are also options to purchase ETFs priced in EUR i.e. 
VANGUARD S&P500 (Euronext Amsterdam)
Sorry for the newb question

Yes, exchange rate risk.
The underlying ETF shares are based in dollars so there is an exposure to fx gains/losses regarding both dividends and capital.

Rob87

Thanks. Given the dollars current strength vs the euro does that make hedged EFTs a more conservative investment? Assuming that most of us in Ireland are investing with Euro

StGriffen

Have a look at this before you start investing:

http://www.revenue.ie/en/about/publications/exchange-traded-funds-guidance-note.pdf

The taxation of funds (and ETFs treated a such) is very complicated. Taxation of normal companies (and ETFs treated as such) is more straightforward.

StGriffen

TiGeR KiNgS wrote: »

Yes, exchange rate risk.
The underlying ETF shares are based in dollars so there is an exposure to fx gains/losses regarding both dividends and capital.

This is wrong - it doesn't matter what currency an ETF is priced in. The S&P 100 in EUR is simply the USD S&P 100 multiplied by the current exchange rate. What determines your currency exposure is the underlying companies exposure to different currencies. For example CRH makes close to half of profit in USD and yet is traded in EUR.

ftse100

StGriffen wrote: »

This is wrong - it doesn't matter what currency an ETF is priced in. The S&P 100 in EUR is simply the USD S&P 100 multiplied by the current exchange rate. What determines your currency exposure is the underlying companies exposure to different currencies. For example CRH makes close to half of profit in USD and yet is traded in EUR.

If you buy a USD ETF and your base currency is EUR of course you are exposed to Exchange rate risk

StGriffen

ftse100 wrote: »

If you buy a USD ETF and your base currency is EUR of course you are exposed to Exchange rate risk

Indeed. And that exchange risk is not eliminated by buying the EUR version of a USD index. Which is what Rob87 was asking about.

cute geoge

Does anyone know if you can buy etf through goodbody stockbrokers as they have a base locally

Rob87

StGriffen wrote: »

ftse100 wrote: »

If you buy a USD ETF and your base currency is EUR of course you are exposed to Exchange rate risk

Indeed. And that exchange risk is not eliminated by buying the EUR version of a USD index. Which is what Rob87 was asking about.

And with the dollar currently almost with parity to the Euro this would make it a bad time to invest in USD priced ETFs?
I was looking at investing the cash I've held in EUR in the same mix as my USD (i'm living in the US right now), assuming all are available through Degiro.
Current portfolio allocation:
U.S. Stocks - Vanguard VTI ETF 35%
Foreign Stocks - Vanguard VEA ETF 22%
Emerging Markets - Vanguard VWO ETF 17%
Dividend Stocks - Vanguard VIG ETF 8%
Natural Resources - State Street XLE ETF 5%
Municipal Bonds - iShares MUB ETF 13%

If there is a reason why a different mix of ETFs are used by European investors vs US investors then i'd love to hear it.

sob1467

StGriffen wrote: »

Have a look at this before you start investing:

http://www.revenue.ie/en/about/publications/exchange-traded-funds-guidance-note.pdf

The taxation of funds (and ETFs treated a such) is very complicated. Taxation of normal companies (and ETFs treated as such) is more straightforward.

This really complicates things for investing in a USA eft in Ireland. Anyone here able to explain, if you were to invest in a US etf, what taxes you'd be liable to pay?

newacc2015

sob1467 wrote: »

This really complicates things for investing in a USA eft in Ireland. Anyone here able to explain, if you were to invest in a US etf, what taxes you'd be liable to pay?

If you buy a US ETF, you will be liable to income taxes (and I think PRSI and USC) on dividends. Plus CGT on appreciation. But you will have your annual exemption of €1270 with your capital appreciation. If you sell your ETF with a loss, you can carry over the loss to offset a gain. You only pay CGT when you sell.

If you buy an Irish based ETF. You pay income tax on capital appreciation and i think in year 7 you are forced to pay income tax on any appreciation. You cant carry over capitals losses

Pawwed Rig

newacc2015 wrote: »

If you buy a US ETF, you will be liable to income taxes (and I think PRSI and USC) on dividends. Plus CGT on appreciation. But you will have your annual exemption of €1270 with your capital appreciation. If you sell your ETF with a loss, you can carry over the loss to offset a gain. You only pay CGT when you sell.

If you buy an Irish based ETF. You pay income tax on capital appreciation and i think in year 7 you are forced to pay income tax on any appreciation. You cant carry over capitals losses

That is pretty poor advice. You would need to assess each fund individually to assess the tax treatment. You have omitted the whole funds regime where income and gains are taxed at 41%. The Irish brokers will provide a document showing how each fund they invest in should be treated for IT purposes. It is not something I would say you could ascertain without their help. If I was doing it for a client from scratch I would be charging alot.

sob1467

Pawwed Rig wrote: »

That is pretty poor advice. You would need to assess each fund individually to assess the tax treatment. You have omitted the whole funds regime where income and gains are taxed at 41%. The Irish brokers will provide a document showing how each fund they invest in should be treated for IT purposes. It is not something I would say you could ascertain without their help. If I was doing it for a client from scratch I would be charging alot.

Sorry not trying to derail the thread, but 41 percent tax on gains and income is extortion. Factor inflation and small fees into the mix and you are getting very little return for the risk.

keane2097

Pawwed Rig wrote: »

That is pretty poor advice. You would need to assess each fund individually to assess the tax treatment. You have omitted the whole funds regime where income and gains are taxed at 41%. The Irish brokers will provide a document showing how each fund they invest in should be treated for IT purposes. It is not something I would say you could ascertain without their help. If I was doing it for a client from scratch I would be charging alot.

What in his post is incorrect?

From the PDF on the Revenue website it looks ok to me:

http://www.revenue.ie/en/about/publications/exchange-traded-funds-guidance-note.pdf

US domiciled ETFs are liable for income tax on dividends, CGT on appreciation and can offset; Irish domiciled ETFs are liable for 8 year roll-up, income tax on gains and no roll-up.

newacc2015

Pawwed Rig wrote: »

That is pretty poor advice. You would need to assess each fund individually to assess the tax treatment. You have omitted the whole funds regime where income and gains are taxed at 41%.

How is my advice "pretty poor"? sob1467 asked about US domiciled funds which are taxed differently to EU domiciled funds ie they are non-UCTIS. An ETF on the NYSE which is domiciled in the US and not regulated under UCTIS is not taxed at 41% for CGT purposes. It is taxed at 33% as a capital gain.

http://www.williamfry.com/newsandinsights/news-article/2015/05/18/revenue-guidance-for-irish-investors-in-exchange-traded-funds

Pawwed Rig wrote: »

The Irish brokers will provide a document showing how each fund they invest in should be treated for IT purposes. It is not something I would say you could ascertain without their help. If I was doing it for a client from scratch I would be charging alot.

Where are Irish brokers getting this info that laymen can't get? You dont need to be handing bags of money to a tax partner in a big 4 to find out whether or not an ETF is domiciled in the EU or outside the EU or regulated under UCTIS or not. If you are buying a niche ETF which you can't tell if it is UCITS or not(which I find it hard to believe, as each ETF often has a ton of info easily available online), more than likely it is not commonly traded and the ETF expense management fee will eat up so much of your investment returns that it isnt worth it.

The whole point of ETFs is that they are easy to understand, low expense fee and tax favourable. If you are looking an ETF which may not tick all three boxes, more onto the thousands of other ETFs that do(as this info is easily available online).

Tom Dunne

newacc2015 wrote: »

If you buy a US ETF, you will be liable to income taxes (and I think PRSI and USC) on dividends. Plus CGT on appreciation. But you will have your annual exemption of €1270 with your capital appreciation. If you sell your ETF with a loss, you can carry over the loss to offset a gain. You only pay CGT when you sell.

I find it very strange that you pat PRSI and USC on anything outside your main employment. Are you sure this is correct?

Pawwed Rig

Tom Dunne wrote: »

I find it very strange that you pat PRSI and USC on anything outside your main employment. Are you sure this is correct?

You pay USC and PRSI on most income now (for the last couple of years). An exception would be gains or income from relevant funds which are more similar to DIRT than anything else.

topper_harley2

There is a thread on ask about money specifically on tax treatment of ETFs: http://www.askaboutmoney.com/threads/the-tax-treatment-of-etfs-for-irish-residents.199443/

It has also been discussed at length on multiple threads on this forum. Have a search for more information as we are just rehashing the same information here about 41% tax, eight year rules etc.
http://www.boards.ie/vbulletin/showthread.php?t=2056532008
http://www.boards.ie/vbulletin/showthread.php?t=2057576587
http://www.boards.ie/vbulletin/showthread.php?p=101572467
http://www.boards.ie/vbulletin/showthread.php?p=101311086
http://www.boards.ie/vbulletin/showthread.php?p=101249656
http://www.boards.ie/vbulletin/showthread.php?p=99848313
http://www.boards.ie/vbulletin/showthread.php?t=2057218487

StGriffen

Tom Dunne wrote: »

I find it very strange that you pat PRSI and USC on anything outside your main employment. Are you sure this is correct?

Yes. You pay it on rental income,l dividend income, all kinds of income. Unsurprisingly it is income tax rather than "tax on your main employment". Consult the revenue website or the Taxes Consolidation Acts if you are in doubt.

cdlmarie

thanks you guys for your replied! sorry I didnt post anything sooner but I didnt receive any notification!
i know that the 41% tax rate also applies when you buy discounted espp ...i think.