S&P 500 ETF

SomeDude

Hi All,

I’m looking at drip feeding some money into an S&P ETF. Looking at DEGIRO, the two most traded are Vanguard S&P 500 [ISIN: IE00B3XXRP09] and iShares S&P 500 [ISIN: IE0031442068]. I’m a novice at this, just wondering if anyone has any words of wisdom or warning? I’d imagine going through a broker like Davy would be less hassle as they will take care of the paperwork in terms of tax, but management fees would obviously be higher.

Thanks

Dunfyy

Only a few companies make money in the 500
Also index funds paid too much when tesler stock went in it over paid by billions
You will also see a covid stock market crash

justfortherecor

I bought some units in the iShares S&P 500 ETF a number of years back. Distribution one as opposed to the accumulating one, so dividends are paid out rather than reinvested by the ETF.

Found it ok, obviously had a good run over last few years and has significantly outperformed some of the other index ETFs I'd bought over the years (FTSE 100 and Euro Stoxx 50).

As you'll probably have seen elsewhere, the tax treatment of ETFs is still comparatively undeveloped/disadvantageous compared to our friends across the Irish Sea. They're treated as a fund investment rather than a share investment so, for individual investors anyway, tax is payable at 41% rather than CGT at 33%. Also no loss allowance or annual small CGT exemption to help returns. Also a deemed disposal provision for funds after 8 years of holding which crystallises a tax liability - I haven't yet experienced this but will need to do so once one of my ETFs nears that age in next year or so.

After a little bit of initial confusion, I've managed the Form 11 tax returns fine for these.

Only other point I'd note is that I just invested a couple of lump sums at any one time into ETF purchases, rather than a drip investment model. Would just need to consider whether that makes your tax analysis upon sale any more complicated to work out (e.g. FIFO workings).

Anyway, in theory, I think the ETF is the perfect instrument for retail investors who want some exposure to the equity markets. Immediate diversification for even small investment amounts and a commoditised product that therefore doesn't suffer from onerous management fees. However, in practice and mainly due to the tax treatment on these shores, it's a very much qualified recommendation.

Ironically, given the lack of tax reform on these products, retail investors are probably still at risk of concentration risk by investing in one or two stocks/products rather than achieving diversification. We've probably just moved on from boring Irish Bank shares and into Tesla / Bitcoin instead!

Jim2007

Dunfyy wrote: »

Only a few companies make money in the 500

Most companies in the index turn a profit, it's a blue chip index

Dunfyy wrote: »

Also index funds paid too much when tesler stock went in it over paid by billions

Learn the concept of indexing and passive funds. There is no concept of paying to much - you are buying the index!

Dunfyy wrote: »

You will also see a covid stock market crash

Learn the concept of dollar cost averaging - it the point of the strategy in the first place.

Jim2007

SomeDude wrote: »

Hi All,

I’m looking at drip feeding some money into an S&P ETF. Looking at DEGIRO, the two most traded are Vanguard S&P 500 [ISIN: IE00B3XXRP09] and iShares S&P 500 [ISIN: IE0031442068]. I’m a novice at this, just wondering if anyone has any words of wisdom or warning? I’d imagine going through a broker like Davy would be less hassle as they will take care of the paperwork in terms of tax, but management fees would obviously be higher.

Thanks

Leaving aside the general risk issues relating to shares, there are a couple of things to look at....


- Taxation: There are special rules relating to the taxation of ETFs in Ireland: Not my area, no doubt someone else will fill you in


- When drip feeding you need to be weary of the fees involved. It might be better to save up a couple of months and then say do a purchase once a quarter, depending on amounts involved.


- If you are only going to have one fund, I'd favour something based on the MSCI World Index, as it would give you a better exposure.

Timmaay

I know they say time in the market beats timing the market, but it's still useful to buy the dips whenever you can, and looking at the monthly chart of the s&p I'd call it quite extended at 3700 at the minute, who knows where it will held towards into 2021, perhaps it will keep going and push on towards 3900 etc, but at some stage the odds are it will pullback towards the likes of 3300, personally I'd still dollar average into it now but I'd definitely save a reasonable few quid for the day it pulls back closer to that 20 moving average (the green line)

SomeDude

[quote="Anyway, in theory, I think the ETF is the perfect instrument for retail investors who want some exposure to the equity markets. Immediate diversification for even small investment amounts and a commoditised product that therefore doesn't suffer from onerous management fees. However, in practice and mainly due to the tax treatment on these shores, it's a very much qualified recommendation.

Ironically, given the lack of tax reform on these products, retail investors are probably still at risk of concentration risk by investing in one or two stocks/products rather than achieving diversification. We've probably just moved on from boring Irish Bank shares and into Tesla / Bitcoin instead![/quote]

Thanks for your very interesting reply. I’m a complete novice, but interested in getting more directly involved with my investments. I already pay monthly into the Zurich Dynamic fund. But that historically hasn’t performed as well as the S&P. Obviously lots of advantages to the Zurich fund, especially for a hands off novice. I’m still tempted to invest directly in individual shares and attempt to create a diversified portfolio. But I’m not sure if it’s too much risk for me. I remember reading a book by Mark Shipman a few years back that put forward a simple strategy based on trend analysis using moving averages. I was considering that be never took the leap.

Jesper

I use DeGiro. How can I select/purchase funds that track of copy popular funds like ARK ETFs etc.
Will they ever have a European registration copy? Or will it always be a copy cat waiting on the fileings and then purchasing (normally at higher prices).
Where is a good place to get information on ETFs. Most of the websites I know are USA based. I'm looking for long term reinvented holds.

namloc1980

Jesper wrote: »

I use DeGiro. How can I select/purchase funds that track of copy popular funds like ARK ETFs etc.
Will they ever have a European registration copy? Or will it always be a copy cat waiting on the fileings and then purchasing (normally at higher prices).
Where is a good place to get information on ETFs. Most of the websites I know are USA based. I'm looking for long term reinvented holds.

www.justetf.com has everything you'll need on European based ETFs.

kelzer

I am in the market for purchasing an S&P 500 Index Fund on a monthly basis but I am overwhelmed by the amount of funds on offer on DeGiro. My question is should I buy a fund that is priced in EUR or in USD? For example these two funds are similar but the USD version (CSPX) is tracking higher than the EUR version (SXR8). Is this because of exchange rate fluctuations on each day? Is it better to buy the USD denom version and worry about exchange rates when I sell or better to stay with the EUR version?

FastFullBack

Jesper wrote: »

I use DeGiro. How can I select/purchase funds that track of copy popular funds like ARK ETFs etc.
Will they ever have a European registration copy? Or will it always be a copy cat waiting on the fileings and then purchasing (normally at higher prices).
Where is a good place to get information on ETFs. Most of the websites I know are USA based. I'm looking for long term reinvented holds.

Just discovered this blog today and it pretty comprehensively covers ETFs from an Irish viewpoint

https://anirishinvestorsguide.com/

brio09

FastFullBack wrote: »

Just discovered this blog today and it pretty comprehensively covers ETFs from an Irish viewpoint

https://anirishinvestorsguide.com/

this is gold!

cooperguy

Why limit yourself to US stocks. Buy a global index like VWCE

phantom_lord

Jim2007 wrote: »

Learn the concept of indexing and passive funds. There is no concept of paying to much - you are buying the index!

One of the downsides that people never mention. Index holders got front run for billions when TSLA joined.