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Any thoughts on long term investment

  • 06-08-2018 8:50pm
    #1
    Registered Users Posts: 69 ✭✭ dublin2000


    Currently thinking a long term investment option, one that relatively safe but gives more than inflation return, for example 5-6%. One of the main bank suggested to buy their funds but i'd like to see if there is any other better options as the that fund after mgt fee, tax over the term might only give a net 2% return which is a little low on what i want.

    Any suggestion would be appreciated!


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Comments

  • Registered Users Posts: 226 ✭✭ Shai


    VTI etf. Easiest long-term investment you can make.

    Out of curiosity, could you link me to the investment your bank was trying to get you to make?


  • Registered Users Posts: 85 ✭✭✭ Momento Mori


    Shai wrote: »
    VTI etf. Easiest long-term investment you can make.

    Out of curiosity, could you link me to the investment your bank was trying to get you to make?

    VTI is a great suggestion in general. However, the problem is the high tax that currently goes along with that for us Irish investors.


  • Registered Users Posts: 69 ✭✭ dublin2000


    Thanks Shai and Momento Mori! Is VTI the EFTs? When you buy EFTs on Deirgo, is there a particular one or there are many available which means I have to know which one is good to invest in?

    Shai - this is the link for one of the funds http://fundcentre.bankofireland.com/#factsheet/f-1331-null/


  • Registered Users Posts: 226 ✭✭ Shai


    Couple of things:

    - this fund is a massive rip-off. It's a passively managed fund with a 1.67% expense ratio if held for 7 years and 7.61% expense ratio if held for 1 year. These numbers are insanely bad. The VTI etf has a flat expense ratio of 0.04% per year.

    - VTI is an ETF that invests into the total US Stock Market. Unfortunately because of legislation that became active at the start of this year, it is no longer being offered by DeGiro. Although it is possible to get an account with a US stock broker (like firstrade.com) and buy VTI shares through that. Keep in mind that you will incur wire transfer fees when dealing with US brokers ($25 per transfer), so you would want to transfer sufficiently large amounts so as to keep the number of transfers down. Furthermore, there is a $50 charge for withdrawing money from this broker, so this would very much be for long-term investments only.

    - the closest thing that DeGiro has to a VTI replacement is the VUSD etf. Both VTI and VUSD are owned by the same company (Vanguard) which has a very very solid reputation. Having said that, VUSD has a 0.07% expense ratio, and unlike VTI - which invests in the total US market - it only invests in the S&P500 (which really isn't that big of a difference).

    Now, VUSD is what's called a UCITS etf, which means it is compliant with certain aspects of EU legislation that non-UCITS etfs aren't. This is also the reason why the expense ratio is slightly higher, as well as why DeGiro can offer it. However, UCITS etfs are taxed less favourably than non-UCITS etfs. A thread about this can be found at https://www.boards.ie/vbulletin/showthread.php?t=2057822332.

    Anyways, sorry for the info dump, but that's a bit of background you might find handy when you find yourself trying to figure out what a lot of EU investors have been talking about the last few months. Best of luck!


  • Registered Users Posts: 69 ✭✭ dublin2000


    Wow, thanks so much Shai for your kind advise! A lot of good points to note. So it seems that if I could do a lump sum investment, it is way better to invest either in VTI through an US broker or VUSD through DeGiro rather than invest into the BOI funds.

    One stupid question, is VTI/VUSD the name of EFT/fund or it is a type of it, just wondering when I search on Fairtrade/DeGiro, what do I search for.

    Thanks again!


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  • Registered Users Posts: 134 ✭✭ Corbally


    Yes VTI is the name.
    The full name is Vanguard Total Stock Market ETF (and VTI is the 'symbol' for that fund). It can be a bit confusing if you're new to it.

    Have a look here:
    https://finance.yahoo.com/quote/vti


  • Registered Users Posts: 226 ✭✭ Shai


    On firstrade.com you could just search for VTI. You won't find VTI on DeGiro because it's a US ETF (instead of a UCITS ETF).

    It looks like DeGiro also offers a euro denominated version of VUSD, called VUSA. It tracks the exact same thing as VUSD and has the exact same costs, but it'll spare you from having to exchange your euros into dollars.

    You can find it by doing a search for VUSA on the DeGiro website. This search will return several results, each for a different currency. You'll want to select the one that trades on the Euronext Amsterdam exchange.


  • Registered Users Posts: 69 ✭✭ dublin2000


    Great, thanks again Shai and also Corbally! Can you buy VUSA monthly or it has to be one lump sum? Well I do understand that to buy VTI monthly on Fairtrade wouldn't make sense given the charges on money transfer but do they charge annual management fees?


  • Registered Users Posts: 226 ✭✭ Shai


    You can buy VUSA whenever you want :) in many ways ETFs act exactly like shares in a company in that you can buy and sell ETF units on the stock market as you please.

    All ETFs charge annual management fees. However, these fees are already included in the 0.07% expense ratio, which will be automatically deducted by Vanguard from the fund's Net Asset Value on a daily basis. This is handled in-house by Vanguard and these costs are not seen on any investor statements.

    On top of that, your broker will charge you for every transaction (I think it's 2 euro and some change for an ETF transaction on Degiro), as well as an exchange connection fee (2.50 euro a year per exchange on Degiro). These prices are more than reasonable. In fact, you'd be hard-pressed to find lower ones anywhere else.


  • Moderators, Business & Finance Moderators, Recreation & Hobbies Moderators Posts: 7,208 Mod ✭✭✭✭ Gloomtastic!


    As a complete novice, what differentiates a VTI from Bernie Madoff?


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  • Registered Users Posts: 226 ✭✭ Shai


    Bernie Madoff ran a hedge fund which was not regulated by the SEC, whereas Vanguard runs a mutual fund which is regulated and audited by the SEC. A more detailed answer can be found at:

    - https://jlcollinsnh.com/2012/09/07/stocks-part-x-what-if-vanguard-gets-nuked/
    - https://www.bogleheads.org/forum/viewtopic.php?t=73338
    - https://www.quora.com/How-do-we-know-that-the-Vanguard-Fidelity-or-the-robo-advisors-are-not-another-Madoff-Ponzi-scheme


  • Moderators, Business & Finance Moderators Posts: 7,811 Mod ✭✭✭✭ Jim2007




  • Registered Users Posts: 226 ✭✭ Shai


    Unless I'm misreading something, both of those actively managed funds got outperformed by the passively managed VUSD. The Fundsmith one actually looks like it did slightly better than VUSD when looking at just the percentage share value increase. However, when taking its 1.71% expense ratio into account, it ends up falling behind VUSD.

    edit: I miscalculated, they did do better.


  • Registered Users Posts: 21 ✭✭✭ LunAtlFringe


    Would suggest it might be worth looking at some UK Investment Trusts due to the more favourable tax treatment if it is going to be a long term investment (33% CGT at sale rather than 41% exit tax with 8y deemed disposal, no offsetting losses). There are a lot to choose from with different flavours of investments. They cost a bit more than an ETF but they can also provide more protection in a bad market depending on what they are investing in.

    Straight equity exposure could be something like scottish mortgage trust or foreign and colonial.

    Long term capital growth and preservation would generally put you with Personal asset trust, RIT Capital (Rothschild) or Caledonia (Cayzer). There's something reassuring about your money being in the same pot as the poshos but ETFs are very good, especially if you can get US domiciled. One thing to note is that if brexit hits hard it shouldn't do too much damage if you have picked a globally diversified trust as most assets will be earning money outside the UK.

    list below, with charges and performance :-

    http://tools.morningstar.co.uk/uk/cefscreener/results.aspx?LanguageId=en-GB&Universe=CEEXG%24XLON&CurrencyId=GBP&URLKey=t92wz0sj7c&Site=UK


  • Moderators, Business & Finance Moderators Posts: 7,811 Mod ✭✭✭✭ Jim2007


    Shai wrote: »
    Unless I'm misreading something, both of those actively managed funds got outperformed by the passively managed VUSD. The Fundsmith one actually looks like it did slightly better than VUSD when looking at just the percentage share value increase. However, when taking its 1.71% expense ratio into account, it ends up falling behind VUSD.

    edit: I miscalculated, they did do better.

    You are not even comparing like with like.


  • Moderators, Business & Finance Moderators Posts: 7,811 Mod ✭✭✭✭ Jim2007


    Would suggest it might be worth looking at some UK Investment Trusts due to the more favourable tax treatment if it is going to be a long term investment (33% CGT at sale rather than 41% exit tax with 8y deemed disposal, no offsetting losses).

    One of the reasons why I suggest Foreign & Colonial Investment Trust might be worth a look ;)


  • Banned (with Prison Access) Posts: 16 ✭✭✭ positivecarry


    Buying gold long term will be a huge payoff, the next financial crisis when gold would be seriously considered as a gold standard, the supply if gold in terms of the supply of money, it will sky rocket. Buying gold on margin, 5-10% risk with a stop at 500, gold will reach upwards of 10,000 per oz in the next 5-8 years, 10x return. Buying physical gold is less risk as you physically have it but timing has to be right. A little controversial call maybe but my best advice


  • Registered Users Posts: 69 ✭✭ dublin2000


    Would suggest it might be worth looking at some UK Investment Trusts due to the more favourable tax treatment if it is going to be a long term investment (33% CGT at sale rather than 41% exit tax with 8y deemed disposal, no offsetting losses). There are a lot to choose from with different flavours of investments. They cost a bit more than an ETF but they can also provide more protection in a bad market depending on what they are investing in.

    Straight equity exposure could be something like scottish mortgage trust or foreign and colonial.

    Long term capital growth and preservation would generally put you with Personal asset trust, RIT Capital (Rothschild) or Caledonia (Cayzer). There's something reassuring about your money being in the same pot as the poshos but ETFs are very good, especially if you can get US domiciled. One thing to note is that if brexit hits hard it shouldn't do too much damage if you have picked a globally diversified trust as most assets will be earning money outside the UK.

    list below, with charges and performance :-

    http://tools.morningstar.co.uk/uk/cefscreener/results.aspx?LanguageId=en-GB&Universe=CEEXG%24XLON&CurrencyId=GBP&URLKey=t92wz0sj7c&Site=UK

    Hi LunAtlFringe, many thanks for your reply. The link lists out hundred of investment trusts, it is little overwhelming for my limited knowledge. How should I find out which fits into my wished bracket, i.e. long term, not very high risk, provides return of 5-7% annually (average). Thanks


  • Registered Users Posts: 69 ✭✭ dublin2000


    Shai wrote: »
    You can buy VUSA whenever you want :) in many ways ETFs act exactly like shares in a company in that you can buy and sell ETF units on the stock market as you please.

    All ETFs charge annual management fees. However, these fees are already included in the 0.07% expense ratio, which will be automatically deducted by Vanguard from the fund's Net Asset Value on a daily basis. This is handled in-house by Vanguard and these costs are not seen on any investor statements.

    On top of that, your broker will charge you for every transaction (I think it's 2 euro and some change for an ETF transaction on Degiro), as well as an exchange connection fee (2.50 euro a year per exchange on Degiro). These prices are more than reasonable. In fact, you'd be hard-pressed to find lower ones anywhere else.

    Thanks again Shai !


  • Registered Users Posts: 21 ✭✭✭ LunAtlFringe


    Hi dublin2000 - if you go to the "closed-end fund screener" below you can select the risk level you can tolerate (e.g. low, -avg, avg) and your minimum acceptable return (e.g. 5% on 5y and 10y). You can also filter out funds with high fees.

    http://tools.morningstar.co.uk/uk/cefscreener/default.aspx?LanguageId=en-GB&Universe=CEEXG$XLON&CurrencyId=GBP&Site=UK

    Once you've picked some promising ones the best thing to do would be to open their profiles and read their last annual reports (especially what it says with regard to investment strategy) and see if that fits with your preferences.

    It can be a bit daunting for sure, lots of info there, but take your time and make sure you get something that is right for you. I'm just a retail investor like yourself, investing savings for the future.


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  • Registered Users Posts: 117 ✭✭ Squozen


    I am invested in VUSA as my growth fund with VX5E and VHYL as my dividend funds. Can't go wrong with VUSA over time, IMO.


  • Moderators, Society & Culture Moderators Posts: 6,769 Mod ✭✭✭✭ nuac


    Buying gold long term will be a huge payoff, the next financial crisis when gold would be seriously considered as a gold standard, the supply if gold in terms of the supply of money, it will sky rocket. Buying gold on margin, 5-10% risk with a stop at 500, gold will reach upwards of 10,000 per oz in the next 5-8 years, 10x return. Buying physical gold is less risk as you physically have it but timing has to be right. A little controversial call maybe but my best advice

    Any basis for that prediction for Gold?


  • Registered Users Posts: 19,020 ✭✭✭✭ Water John


    Think he believes in armaghgeddon. A far bigger meltdown than 2008.
    I think most investment advice, would to have about 10% of your portfolio, in precious metals.


  • Moderators, Business & Finance Moderators Posts: 7,811 Mod ✭✭✭✭ Jim2007


    Squozen wrote: »
    I am invested in VUSA as my growth fund with VX5E and VHYL as my dividend funds. Can't go wrong with VUSA over time, IMO.

    How exactly is VUSA a growth fund? It is simply a large caps index tracker... and with such a high concentration of companies reporting in dollars it might become uncomfortable if say the Chinese decide to reduce their position in US bonds.

    You seem to be completely concentrated on large caps, thus missing out on most of the growth that comes from mid caps and small caps.

    If you want dividends you’re probably better to pick up some of the traditional dividend companies directly when they are going cheap and avoid the Irish tax implications of holding through an ETF.


  • Registered Users Posts: 19,020 ✭✭✭✭ Water John


    Fidelity Funds seem generally to have performed very well, except for telecommunications, over the past 10 years. Do these have the same issue?


  • Registered Users Posts: 727 ✭✭✭ jcon1913


    Jim2007 wrote: »
    How exactly is VUSA a growth fund? It is simply a large caps index tracker... and with such a high concentration of companies reporting in dollars it might become uncomfortable if say the Chinese decide to reduce their position in US bonds.

    You seem to be completely concentrated on large caps, thus missing out on most of the growth that comes from mid caps and small caps.

    If you want dividends you’re probably better to pick up some of the traditional dividend companies directly when they are going cheap and avoid the Irish tax implications of holding through an ETF.

    The large funds that track shares aim to benefit from the principal of diversification, which you get from a fund that tracks a large basket of shares.

    The phrase ''blindfolded monkeys outperform fund managers'' springs to mind.

    If you are interested in it, have a read of ''A random walk down Wall Street'', written by Burton Malkiel and published in 1973, now in it's 11th edition. According to the author the principal holds true to the present day - stocks picked at random outperform investment managers. He was asked by the Wall Street Hournal IIRC to do the first random selection many years ago and was pitted against fund managers, and his picks beat the fund managers picks.

    Heres a summary of the Wikipedia entry for the book:
    ''Malkiel examines some popular investing techniques, including technical analysis and fundamental analysis, in light of academic research studies of these methods. Through detailed analysis, he notes significant flaws in both techniques, concluding that, for most investors, following these methods will produce inferior results compared to passive strategies.
    Malkiel has a similar critique for methods of selecting actively managed mutual funds based upon past performance. He cites studies indicating that actively managed mutual funds vary greatly in their success rates over the long term, often underperforming in years following their success, thereby regressing toward the mean. Malkiel suggests that given the distribution of fund performances, it is statistically unlikely that an average investor would happen to select those few mutual funds which will outperform their benchmark index over the long term.''


  • Moderators, Business & Finance Moderators Posts: 7,811 Mod ✭✭✭✭ Jim2007


    jcon1913 wrote: »
    The large funds that track shares aim to benefit from the principal of diversification, which you get from a fund that tracks a large basket of shares................
    ...........

    I've spent over 25 years working in the Swiss financial services sector primarily as a vendor of performance and attribution services. I've read all the materials you have quoted and an awful lot more.

    Your post in no way answers my question to the OP: why he considers a tracker on a large cap index to be a growth fund.


  • Registered Users Posts: 727 ✭✭✭ jcon1913


    Jim2007 wrote: »
    I've spent over 25 years working in the Swiss financial services sector primarily as a vendor of performance and attribution services. I've read all the materials you have quoted and an awful lot more.

    Your post in no way answers my question to the OP: why he considers a tracker on a large cap index to be a growth fund.
    I appreciate your experience in the financial services is far in excess of most of us on here.

    I think you are asking the wrong question at the wrong time for the OP. He is starting out in investment, and could use a steer IMHO. Plus a reading list to educate himself.

    I think your own advice is contained and expounded upon in another book ''the Zulu Principle'' by Jim Slater where he explains how to select small dynamic stock and shares.


  • Registered Users Posts: 117 ✭✭ Squozen


    Jim2007 wrote: »
    How exactly is VUSA a growth fund? It is simply a large caps index tracker... and with such a high concentration of companies reporting in dollars it might become uncomfortable if say the Chinese decide to reduce their position in US bonds.

    I put money in, it went up. Maybe I'm using the wrong terms. I'm not in any way an expert.
    You seem to be completely concentrated on large caps, thus missing out on most of the growth that comes from mid caps and small caps.

    If you want dividends you’re probably better to pick up some of the traditional dividend companies directly when they are going cheap and avoid the Irish tax implications of holding through an ETF.

    Do you have any suggestions? I was planning to cash out when I buy a house in the next 12 months but I'd still want to be putting money into stocks afterwards. I thought the ETF tax issue only hit when you had invested for 8 years?

    Disclaimer: I am Australian and know very little about Irish tax, probably to my detriment.


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  • Registered Users Posts: 372 ✭✭ Skelet0n


    Squozen wrote: »
    Do you have any suggestions? I was planning to cash out when I buy a house in the next 12 months but I'd still want to be putting money into stocks afterwards. I thought the ETF tax issue only hit when you had invested for 8 years?

    Disclaimer: I am Australian and know very little about Irish tax, probably to my detriment.

    12 months is much too short for an ETF I would say.

    Tax is due at 8 years or upon realisation of gains.


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