Please help - How do I get started in investing in Ireland?

excitementcity

Hi

Could really do with some advice. I feel I know the strategy I want to pursue of long term investing but I just can't seem to figure out how to get started.

I used to live in Canada and investing seemed so much easier over there. The basis premise, from all the research I did, was to invest in index funds e.g. Vanguard being the most recommended and a portion in bonds. Adding to this investment over time and then withdraw a max of 4% of your investment over time. There was lots of online places to buy these funds. Before I got started I moved back to Ireland and now I'm lost.

Since moving back to Ireland I cannot for the life of me figure out
1. How can I do the same thing? e.g. invest in Vanguard S&P Index
- Is this even a good idea when doing it from Ireland given tax consequences etc?
- To do the same thing in Ireland do you have to invest in EFT's instead?

2. What is the cheapest platform for doing so? From my understanding the Goodbodys/Davys of the world are just too expensive.

Would really appreciate some straightforward advice...I just can't seem to find the simple answer.

Thanks a mil

topper_harley2

There is no simple answer - it is much harder than Canada/USA. Also, most investment books are written from US perspective and have no idea about our Ireland's draconian tax laws. Hence, transplanting a US investment strategy straight to Ireland is (as you are discovering) not easy.

Most people just invest via pensions for above reason (others include tax relief and company contributions).

Yes, you must buy ETFs. Index funds don't really exist in Ireland - some Life Companies market themselves as selling index funds, but they aren't really passive funds, and they have AMC to reflect this (e.g. Irish Life MAPS).

Degiro is the cheapest DIY platform by a mile.

Please search this forum for more info. There are hundreds of threads on this exact topic, including discussion tax issues, UCIT funds, CGT vs exit tax etc.

Here is a handy search: http://www.boards.ie/search/submit/?query=index%20fund&forum=859

excitementcity

topper_harley2 wrote: »

There is no simple answer - it is much harder than Canada/USA. Also, most investment books are written from US perspective and have no idea about our Ireland's draconian tax laws. Hence, transplanting a US investment strategy straight to Ireland is (as you are discovering) not easy.

Most people just invest via pensions for above reason (others include tax relief and company contributions).

Yes, you must buy ETFs. Index funds don't really exist in Ireland - some Life Companies market themselves as selling index funds, but they aren't really passive funds, and they have AMC to reflect this (e.g. Irish Life MAPS).

Degiro is the cheapest DIY platform by a mile.

Please search this forum for more info. There are hundreds of threads on this exact topic, including discussion tax issues, UCIT funds, CGT vs exit tax etc.

Here is a handy search: http://www.boards.ie/search/submit/?query=index%20fund&forum=859

Thank you so much for taking the time to reply. Yes, it's so totally frustrating isn't it trying to establish an investment strategy in Ireland. Yet I know plenty of people must be doing it and doing it well. But it seems really difficult to get clear information in Ireland.

Yes had seem MAPS and was suspicious for that reason.

Ok great re ETF's at least I'm right in that respect and thanks for the direct link...and great also re Degiro. From an intense review of boards threads last night this does seem to be the one that makes most sense.

So is my basic understanding correct with regarding to investing in Ireland. I understand you or anyone on this board are not allowed to give financial advice but just wondering from a general perspective?

ETF's/Share Investing
- Not possible to invest index funds directly in Ireland
- Next best method is to invest in ETF's which will follow the index
- Best to invest in US ETF's - in this way dividend gains will be taxed as income and gains subject to CGT rules. You will be subject to 30% US withholding tax on any US dividends however if you fill out a W8 BEN form tax will be limited to 15% withholding tax and credited on your tax return.
- If you buy Irish, UK or EEA ETF's you are subject to UCITS rules and any dividends can be invested on a gross roll up basis and will be subject to 41% tax on exit. Disposals will be deemed to occur every 8 years and any tax paid at this stage will be credited against tax due on disposal.
- You are required to file a Form 11 to declare your investment in any EFT's Irish or otherwise (AFAIK) or maybe just offshore funds.
- You are best off buying ETF units on lump sum basis rather than on a monthly basis.
- When you have an adequate portfolio you could withdraw 4% of your portfolio and in theory you would have sufficient annual income based on typical index yearly returns.
- Otherwise if not investing in ETF's best off just buying individual shares or bonds to build a portfolio.

Pensions:
- You can invest through your company pension or through and AVC subject to Revenue limits per age.
- However any pension funds will not be accessible until age 66/68
- You should also be eligible for government pension depending on contributions.

Therefore investment strategy in order:
1. Best to fund pension
2. Have emergency cash savings.
3. Then focus on building a share portfolio based on EFT's (US best option) potentially investing through Degiro
4. Pay down mortgage
5. Potentially have a rental investment

Would appreciate if you feel the above understanding is correct. And again thanks so much for taking the time to reply.

topper_harley2

Well you certainly have done your research, many posters here could learn alot from your above post.

All points on ETFs and pensions are correct IMO. One point is that some people contend gross roll up could work out better than CGT, due to tax-free re-investments of dividends, whereas with CGT ETFs you must pay USC and PRSI on dividends.

Regarding points 1...5 of plan. Personally I'd rejig them around to be
1. Emergency fund
2. Pension
3. Mortgage
4. Pension AVC
5. Investment portfolio
89. Rental investment - I have zero interest in that!

Personally, I'm maxing my AVCs and overpaying mortgage and have affor stopped investing. 3.5% guaranteed return on mortgage overpayment trumps investing for me currently.

excitementcity

topper_harley2 wrote: »

Well you certainly have done your research, many posters here could learn alot from your above post.

All points on ETFs and pensions are correct IMO. One point is that some people contend gross roll up could work out better than CGT, due to tax-free re-investments of dividends, whereas with CGT ETFs you must pay USC and PRSI on dividends.

Regarding points 1...5 of plan. Personally I'd rejig them around to be
1. Emergency fund
2. Pension
3. Mortgage
4. Pension AVC
5. Investment portfolio
89. Rental investment - I have zero interest in that!

Personally, I'm maxing my AVCs and overpaying mortgage and have affor stopped investing. 3.5% guaranteed return on mortgage overpayment trumps investing for me currently.

Cheers topper really appreciate that! I only wish I had half your knowledge though. Your posts are mines of information. It's amazing when you have a free couple of hours and kids in bed what you can gleen!

It's great just to know at least I'm on the right track. Was thinking of chatting to financial adviser but tbh I'm so wary of them trying to sell me something.

Yeah that's what I'm trying to figure out too if gross rollup works better than the opposite other option even though you'll have the 8 year scenario...You probably need to model it out I'd say. I would be wary though of not having the cash to pay the 8 year tax for some reason....

I suppose my next thing to figure out now is the portfolio split and research the ETF's given the above.

Again if I was back in Canada I would invest in a Candian index, a world index and Canadian bonds but I'm not sure if this principle holds true for Ireland. I.e. do you buy an Irish bond ETF or any EURO bond ETF? Do you buy your Irish ETF or forget about it because it's too small a market and instead focus on a Vanguard S&P index fund? with maybe a world ETF thrown in?

Separately, do you know if there are any self directed PRSA's that are of good value in the market currently? I need to set one up now as I moved to a smaller company who don't have a company pension scheme but will contribute some to my pension.

Yeah re reordering you're probably right....I have been toying with the paying down mortgage or investing. I totally agree with you on the 3% saving of paying off the mortgage. When you say that are you just focusing on the overpayment that you can make by 10% or are you agressively adding lump sums too? I hope you don't mind me asking. I'm currently doing the monthly overpayment at the moment to the 10% max but wondering whether to add lump sums to this as I save or to use this to establish my ETF portfolio...Aggh decisions, decisions...

Thank you so much again for the advice. I really appreciate it.

gavmcg92

Hi there,
Not going to add much more than topper already has but here are a few places to take a look at in relation to self directed PRSAs. There was a discussion here a few weeks ago and it was decided that Davy is probably the best provider as far as cost is concerned.

https://www.boards.ie/b/thread/2057540862

Some of the lads over on AskAboutMoney have also bashed this topic out over the past few years. You can check out that discussion here

https://www.askaboutmoney.com/threads/the-cheapest-prsa.6253/page-6

There is a google doc that runs through all providers and their offering.

https://drive.google.com/file/d/0Bwsxfnty94iTallwYUZuLVV1WHM/view

topper_harley2

Regards PRSA, I have no knowledge over the above on this topic as I have occupational pension.

Regarding ETFs I have MSCI world ETF, EURO Stoxx 50 and EURO Gov bond. That was again based on the lazy 3 fund portfolio before I bought house and before I fully understood the tax headache of buying them monthly!

As I said, I parked that once i bought the house. I now aggressively overpay mortgage, by 125% monthly. I'm about to switch mortgage to AIB as well for cheaper rate. I'm on LTV mortgage, hence no cap on monthly overpayment. Thoughts of being debt-free trumps ETF portfolio for me currently.

Investing post tax is not priority for me currently as my pension is ticking away also.

gavmcg92

Also implementing a lazy portfolio strat on my side. Went with the 2nd grader portfolio to keep costs as low as possible.
http://www.marketwatch.com/lazyportfolio/portfolio/second-grader-starter

excitementcity

gavmcg92 wrote: »

Also implementing a lazy portfolio strat on my side. Went with the 2nd grader portfolio to keep costs as low as possible.
http://www.marketwatch.com/lazyportfolio/portfolio/second-grader-starter

gacmcg92 sorry for the late reply. I hadn't realise you'd replied. Was caught up there with life for the last few days. Thank you so much for the links above re the PRSA's. I had heard that since re Davy's albeit it looks that self directed PRSA's mightn't be the way to go based on higher fees than actively managed funds. Looks like Ireland mightn't be up to speed yet on doing that type of investing within a PRSA.

Thanks also regard the lazy fund portfolio. I hadn't heard of that and it sounds right up my ally. Really appreciate the advice

excitementcity

topper_harley2 wrote: »

Regards PRSA, I have no knowledge over the above on this topic as I have occupational pension.

Regarding ETFs I have MSCI world ETF, EURO Stoxx 50 and EURO Gov bond. That was again based on the lazy 3 fund portfolio before I bought house and before I fully understood the tax headache of buying them monthly!

As I said, I parked that once i bought the house. I now aggressively overpay mortgage, by 125% monthly. I'm about to switch mortgage to AIB as well for cheaper rate. I'm on LTV mortgage, hence no cap on monthly overpayment. Thoughts of being debt-free trumps ETF portfolio for me currently.

Investing post tax is not priority for me currently as my pension is ticking away also.

Topper thanks again for the comprehensive answer. Sorry for the delay I had missed the replies to this thread.

Sure thanks re PRSA. I had an occupational pension myself but now have had to change as new company is smaller so doesn't have a big company pension scheme.

Yeah I understand regarding the paying down of the mortgage. Oh didn't realise that as long as you're on the variable you can pay in as much as possible. Yeah I'm really torn between loading money into the mortgage and paying it off as quick as possible or giving the time to funds in the market. If I had a good portfolio I might feel more comfortable having all my money tied up in the house. Saying that there is enormous comfort and financial freedom not having to pay a mortgage. It gives massive freedom of decision making.

Thanks again

BogleIreland

excitementcity wrote: »

Again if I was back in Canada I would invest in a Candian index, a world index and Canadian bonds but I'm not sure if this principle holds true for Ireland. I.e. do you buy an Irish bond ETF or any EURO bond ETF? Do you buy your Irish ETF or forget about it because it's too small a market and instead focus on a Vanguard S&P index fund? with maybe a world ETF thrown in?

Hey excitementcity, did you ever figure out an Irish version of the 3 fund portfolio?


I am also just starting out investing and looking at creating a tax efficient Irish investing portfolio to hold (after-tax) for the next 40+ years.



From my research, a tax efficent Irish portfolio looks like :

1) 100% : US domiciled Vanguard world etfs are the way to go

2) 1 year emergency fund in "high" interest savings

3) 0% : Bond ETF (at least starting out)
- bonds are generally held in a portfolio to help smooth the recessions, provide emergency funds if needed and to help with re-balancing

- holding bonds works from a US investment point of view, but with the lack of self administered tax free savings accounts in Ireland re-balancing is not tax efficient and expensive

- being young investors smoothing out dips in the stock market is not really an issue if holding for 40+ years, as long as you can sleep with 50%+ loses in any given year (if you wish to protect your gains as you approach retirement you could start re-balancing to a 60/40 stock/bond)

- also generally you want your bonds in your home spending currency (Euro) because if you need emergency funds you don't want the forex risk of usd/eur, this leads you to invest in European domiciled etf's that have inefficient tax structures and create more accounting work especially if re-balancing yearly




From my research it looks like 100% stocks and 1 year emergency fund might be the way to go for a long term (40+ years) Irish after tax investment portfolio.


Would like to hear others feedback on not holding bonds from an Irish investment perspective?

gavmcg92

BogleIreland wrote: »

From my research it looks like 100% stocks and 1 year emergency fund might be the way to go for a long term (40+ years) Irish after tax investment portfolio.


Would like to hear others feedback on not holding bonds from an Irish investment perspective?

I would argue that a 1 year emergency fund is a little too much considering the deposit rates that are on offer at the moment. Your money is not being used to the best potential. Most people recommend 3 to 6 months of a fund and then the rest invested.

topgolfer101

excitementcity wrote: »

Hi

Could really do with some advice. I feel I know the strategy I want to pursue of long term investing but I just can't seem to figure out how to get started.

I used to live in Canada and investing seemed so much easier over there. The basis premise, from all the research I did, was to invest in index funds e.g. Vanguard being the most recommended and a portion in bonds. Adding to this investment over time and then withdraw a max of 4% of your investment over time. There was lots of online places to buy these funds. Before I got started I moved back to Ireland and now I'm lost.

Since moving back to Ireland I cannot for the life of me figure out
1. How can I do the same thing? e.g. invest in Vanguard S&P Index
- Is this even a good idea when doing it from Ireland given tax consequences etc?
- To do the same thing in Ireland do you have to invest in EFT's instead?

2. What is the cheapest platform for doing so? From my understanding the Goodbodys/Davys of the world are just too expensive.

Would really appreciate some straightforward advice...I just can't seem to find the simple answer.

Thanks a mil

Investing in the forex market is your best bet. Low spreads which means very low costs because of the liquidity of the market. Tax exempt in Ireland as it's considered spread betting due to the product the brokers provide us. It's called CFD's