Advice for a beginner - ETFs through Degiro

zofia

Hi All,

I was hoping I could get a more 'personalized' advise here after doing some research online. Shortly about me - I'm 28 and have around 5k to invest with additional 200-300€ each month to be added. I am not looking for a quick profit, but I would also prefer to invest in something that is not too time consuming.

I was looking into opening an account with Degiro and buying ETFs through them, but I am still confused about the taxes here and whether it makes sense for me to buy ETFs (I am an EU citizen, working in Ireland for 1,5 years) or which ETFs would be best.

I found a post on askaboutmoney (' The Tax Treatment of ETFs for Irish residents') that goes through a lot of things (EU vs US domiciled ETFs, the "gross roll-up regime" etc): ETFs and read several other articles, but I am still not sure if it is the best option for me - is there anything in particular that I should be paying attention to?

Does anyone have experience with using Degiro? Would you say that ETFs are a good strategy for a person in my situation or is there anything else I should be looking into?

Thanks!
Zofia

AlmightyCushion

ETFs are a very good strategy when you have a relatively low amount to invest. They give you instant diversification which helps limit risk. Degiro are excellent. They have very low fees and they a number of ETFs that are commision free including VOO, a popular ETF that tracks the S&P 500. Here's a link to list of commission free ETFs.

In Ireland, non EU domiciled ETFs are treated like shares. You pay CGT on them only when you sell them and you can also offset loses against gains. EU domiciled ETFs are treated differently. Every 8 years you have to do a deemed disposal, where you work out the profit you would have made in those 8 years and pay tax on it. You also cannot offset loses on these ETFs against gains made elsewhere. I think EU domiciled ETFs are charged a higher rate of tax on the gains as well. I don't really know as I don't bother with EU domiciled ETFs. I only got into investing a few months back but to me it looks like ETFs seem like a no brainer and non EU domiciled ones are the way to go until revenue change how they treat EU domiciled ETFs for tax purposes.

keane2097

Yeah the EU domiciled ones will be charged at marginal rate of income tax rather than CGT iirc so probably higher for most people.

Geuze

AlmighthyCushion,

thanks very much.

I have past CGT losses from bank shares, so it seems that buying non-EU domiciled ETFs might be sensible?

I will check the DeGiro list.

AlmightyCushion

Geuze wrote: »

AlmighthyCushion,

thanks very much.

I have past CGT losses from bank shares, so it seems that buying non-EU domiciled ETFs might be sensible?

I will check the DeGiro list.

I'm not sure if you can carry CGT losses from previous years.

Cute Hoor

AlmightyCushion wrote: »

I'm not sure if you can carry CGT losses from previous years.

You can carry CGT losses, indefinitely I think

Geuze

AlmightyCushion wrote: »

I'm not sure if you can carry CGT losses from previous years.

Yes, you can.

The DeGiro list doesn't specifically mention VOO, can I assume it is the Vanguard S&P500 ETF based in the USA?

AlmightyCushion

Geuze wrote: »

Yes, you can.

The DeGiro list doesn't specifically mention VOO, can I assume it is the Vanguard S&P500 ETF based in the USA?

Good to know about CGT loses being carried forward. I wasn't sure about that. That list doesn't show stock ticker codes, only ISINs. The ISIN for VOO is US9229083632. Yeah, it's based in the US.

BrokenArrows

Also note that its only Commission Free if you buy €1000/$1000 or more in a single trade once per month.

So if you put your whole €5000 into VOO then to remain commission free you would need to save up your €2-300 per month until you had greater than €1000 or just pay the fee of € 2.00 + 0.02%

gavmcg92

Might be slightly off topic here but it is in a similar vain to the OP's question. As a newbie, it seems very strange that as an Irish investor Irish domiciled ETFs are less favourable than US domiciled ones. Is this due to rules beyond Revenue's control or are they just being awkward for the sake of it?

TiGeR KiNgS

gavmcg92 wrote: »

Might be slightly off topic here but it is in a similar vain to the OP's question. As a newbie, it seems very strange that as an Irish investor Irish domiciled ETFs are less favourable than US domiciled ones. Is this due to rules beyond Revenue's control or are they just being awkward for the sake of it?

Good question.
Im not sure if the EU have an impact on this.

My suspicion is the government don't want you saving, they want you spending so they can collect the tax receipts and reduce the capital reserves in the banks. It basically mimics the situation with deposit interest which is taxed at an extortionate 41% for the above reasons.

adlerhn

BrokenArrows wrote: »

Also note that its only Commission Free if you buy €1000/$1000 or more in a single trade once per month.

So if you put your whole €5000 into VOO then to remain commission free you would need to save up your €2-300 per month until you had greater than €1000 or just pay the fee of € 2.00 + 0.02%

Actually, I think the first transaction per month per ETF is always free, and the second on the same month has to be in the same direction (buy/sell) and over €1000/$1000.

Every calendar month, the first trade executed in an ETF of the "Free ETF Selection" is free of charge regardless of size and direction as long as it does not lead to a short position. The following trades made in that same instrument during the same calendar month will also be free as long as: the trade is in the same direction (i.e. buy/sell) as the first trade made that month in that instrument and the order value is greater than 1000 EUR (or USD)

adlerhn

I am looking at investing via DeGiro in an ETF domiciled in the US or Canada, for tax reasons. No Irish, FTSE or UCITS ETFs. Maybe a Vanguard ETF or another one based on the US or Canada, with international spread for diversification and to minimise exposure to the US market. And ideally an accumulating one (though this is secondary). I still need to check which ETFs meet these requirements.

keane2097

adlerhn wrote: »

I am looking at investing via DeGiro in an ETF domiciled in the US or Canada, for tax reasons. No Irish, FTSE or UCITS ETFs. Maybe a Vanguard ETF or another one based on the US or Canada, with international spread for diversification and to minimise exposure to the US market. And ideally an accumulating one (though this is secondary). I still need to check which ETFs meet these requirements.

VTI & VXUS would be the obvious two. None of the US domiciled ETFs accumulate so far as I know, pretty sure there's some law that says the dividends have to be paid out.

Leinster D

New also to investing and recently opened an account with DeGiro.

So would people recommend as a long term investment a Vanguard (VOO or VT) US ETF ? Also is it better to use it like a regular saver and make regular transactions or is it better to simply invest a lump sum on an ETF?

Finally in Degiro, sorry if this is simplistic, but what is the difference between a limit order and market order and also should one select day trade or GTC in the order duration drop down?

AlmightyCushion

Leinster D wrote: »

New also to investing and recently opened an account with DeGiro.

So would people recommend as a long term investment a Vanguard (VOO or VT) US ETF ? Also is it better to use it like a regular saver and make regular transactions or is it better to simply invest a lump sum on an ETF?

Finally in Degiro, sorry if this is simplistic, but what is the difference between a limit order and market order and also should one select day trade or GTC in the order duration drop down?

A limit order is where you set the maximum price you want to buy at. It won't make the trade until there are shares at or below that price. Market price will buy it at the price the share is at when you initiate the transaction. Day trade means that the order is valid for the rest of the day). With GTC the order is valid until you cancel it.

Leinster D

This was helpful AlmightyCushion.

Does anyone have any thoughts on my other query on VOO or VT as a long term 5 - 10 investment where I wouldn't need to manage.

So would people recommend as a long term investment a Vanguard (VOO or VT) US ETF ? Also is it better to use it like a regular saver and make regular transactions or is it better to simply invest a lump sum on an ETF?

gavmcg92

Leinster D wrote: »

New also to investing and recently opened an account with DeGiro.

So would people recommend as a long term investment a Vanguard (VOO or VT) US ETF ? Also is it better to use it like a regular saver and make regular transactions or is it better to simply invest a lump sum on an ETF?

Finally in Degiro, sorry if this is simplistic, but what is the difference between a limit order and market order and also should one select day trade or GTC in the order duration drop down?

It's always a good idea to invest regularly as you are "dollar cost averaging". You are basically reducing the impact of the highs/lows in price.

https://en.wikipedia.org/wiki/Dollar_cost_averaging

Just make sure you keep some cash in your trading account to cover your 2.50 exchange charge.

keane2097

DCA is not universally recommended, e.g.

http://jlcollinsnh.com/2014/11/12/stocks-part-xxvii-why-i-dont-like-dollar-cost-averaging/

There's something to be said for the idea that DCA is just another attempt at timing the market.

Personally, my feeling is that getting my money invested for as long as possible is the way to go so if I have say 12k to invest I'm not going to invest 1k a month and miss out on a whole year in the market for my last installment.