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Advice on ETFs for novice investor

  • 19-01-2021 2:17am
    #1
    Registered Users Posts: 51 ✭✭ jake frost


    Hi

    I am a complete novice on buying shares and online investments.. And i want to give it a go. I have been researching here and other places and i have opened an account with DeGIRO. But i want to get a better understanding of the whole process, and i am looking for recommendations for a book that is well laid out and easy to understand for beginers.. And any other information bank you think would be usefull.

    Thanking you in advance.


Comments

  • Registered Users Posts: 17,034 ✭✭✭✭ namloc1980


    Stay away from ETFs until you know exactly what you are dealing with. There are loads of posts on here about them but suffice to say the tax regime is painful.

    https://www.irishtimes.com/business/personal-finance/don-t-invest-in-an-etf-until-you-understand-the-tax-1.3421331


  • Registered Users Posts: 11,386 ✭✭✭✭ Timmaay


    Instead go for a Scottish mortgage trust, very similar to an etf but 33% CGT like shares and no 8yr deemed disposal rules. Not on degiro but on trading 212 (go for invest not the CGTs), SMT the main one.


  • Registered Users Posts: 1,879 ✭✭✭ C0N0R


    Timmaay wrote: »
    Instead go for a Scottish mortgage trust, very similar to an etf but 33% CGT like shares and no 8yr deemed disposal rules. Not on degiro but on trading 212 (go for invest not the CGTs), SMT the main one.

    If someone had 50k they wished to invest long term - 10 years plus would this be a straight forward thing to do?


  • Registered Users Posts: 11,386 ✭✭✭✭ Timmaay


    C0N0R wrote: »
    If someone had 50k they wished to invest long term - 10 years plus would this be a straight forward thing to do?

    From anything I've looked at recently yep it is, does anyone else who has used it have any input? I would call that SMT reasonably high in the risk level (with shares in Tesla etc), so do expect some volatility, and it won't be a straight line upwards. The main thing I would suggest would be not to put in the full 50k in one go, instead put in like 10k every quarter, thats loosely what dollar cost averaging is. The market's are running quite strong right at the minute, lets say you put your full 50k in tomorrow, and we get a big 20% correction next week due to whatever reasons, your in for alot of pain waiting for it to come back, and woundering why the hell did I listen to some randomer on the internet ha, but if you put in across time you'll smoothen out the peaks and dips.


  • Registered Users Posts: 1,879 ✭✭✭ C0N0R


    Timmaay wrote: »
    From anything I've looked at recently yep it is, does anyone else who has used it have any input? I would call that SMT reasonably high in the risk level (with shares in Tesla etc), so do expect some volatility, and it won't be a straight line upwards. The main thing I would suggest would be not to put in the full 50k in one go, instead put in like 10k every quarter, thats loosely what dollar cost averaging is. The market's are running quite strong right at the minute, lets say you put your full 50k in tomorrow, and we get a big 20% correction next week due to whatever reasons, your in for alot of pain waiting for it to come back, and woundering why the hell did I listen to some randomer on the internet ha, but if you put in across time you'll smoothen out the peaks and dips.

    Appreciate what you’re saying re dollar cost averaging. What’s the most simplistic way to buy into something like this? Are currency fluctuations re euro sterling going to dramatically effect value of investments? Or not so much as it’s globally invested? There would be no tax liabilities from my side until withdrawing? What would be the liabilities at that stage?

    Thanks


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  • Registered Users Posts: 51 ✭✭ jake frost


    Thanks for the tip Namloc1980, yes I was aware that the tax implications are confusing for ETFs so I am going to avoid for the moment.

    Thank you also Timmay for your advice regarding Scottish Mortgages as an option especially for its Tax efficiency. Yes I have opened a Trading 212 account, and I find it quite good, they have a mock platform on it where they give you 50K monopoly money to play around with to familiarise yourself with how the system works, its quite useful for beginners. So thank you for that.

    It would also be great if anyone can recommend a good back, explaining the basics, I checked Easons website and there are lots of books to many to choose from.

    Regards and thanks again.

    Jake


  • Registered Users Posts: 4,025 ✭✭✭ digiman


    What options are there on DEGIRO that would be similar to SMT?


  • Registered Users Posts: 11,386 ✭✭✭✭ Timmaay


    Appreciate what you’re saying re dollar cost averaging. What’s the most simplistic way to buy into something like this?

    Very simple, open a trading212 online account, verify your ID and all that, setup your IBAN (you can use a debit card but there are charges), and the every few months lodge your money, and buy your shares.

    Are currency fluctuations re euro sterling going to dramatically effect value of investments? Or not so much as it’s globally invested?

    Yep only uk based stocks within the SMT will be effected by changes in stg/euro.

    There would be no tax liabilities from my side until withdrawing? What would be the liabilities at that stage?

    33% cgt when you sell, with an exemption on the 1st 1270e of gains per year.

    https://www.boards.ie/vbulletin//showthread.php?t=2058070895&page=4
    Bit more about them here


  • Moderators, Business & Finance Moderators Posts: 7,827 Mod ✭✭✭✭ Jim2007


    C0N0R wrote: »
    If someone had 50k they wished to invest long term - 10 years plus would this be a straight forward thing to do?


    You might want to wait until you see the outcome of the UK/EU financial services agreement in March. Both access and taxation treatment may be impacted....


  • Registered Users Posts: 7,399 ✭✭✭ Nonoperational


    8 year deemed disposal is a ridiculous piece of legislation. But it shouldn’t necessarily put you off completely. You can still buy and hold for 8 years which is a reasonable time horizon. If you exclude all ETFs because of this and go with for example SMT you’re going for a decidedly riskier proposition than some ETFs with massive Tesla exposure and unlisted exposure also.


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  • Registered Users Posts: 14,544 ✭✭✭✭ Supercell


    MNKS is on Degiro and doesnt have the Tesla exposure SMT has, maybe thats a good or bad thing, time will tell.

    Have a weather station?, why not join the Ireland Weather Network - http://irelandweather.eu/



  • Registered Users Posts: 11,386 ✭✭✭✭ Timmaay


    8 year deemed disposal is a ridiculous piece of legislation. But it shouldn’t necessarily put you off completely. You can still buy and hold for 8 years which is a reasonable time horizon. If you exclude all ETFs because of this and go with for example SMT you’re going for a decidedly riskier proposition than some ETFs with massive Tesla exposure and unlisted exposure also.

    41% cgt rate on EFTs tho, nuts


  • Registered Users Posts: 7,399 ✭✭✭ Nonoperational


    Timmaay wrote: »
    41% cgt rate on EFTs tho, nuts

    Especially when you've already paid 50% on the money that goes in.


  • Registered Users Posts: 168 ✭✭ Cilar


    It's a big mess for any type of investment.

    Tax on income (eg - dividends): Income tax + PRSI + USC for trusts. That can be above 55% whereas for most ETF, 41% applies on income.


  • Registered Users Posts: 698 ✭✭✭ Viscount Aggro


    Cilar wrote: »
    It's a big mess for any type of investment.

    Tax on income (eg - dividends): Income tax + PRSI + USC for trusts. That can be above 55% whereas for most ETF, 41% applies on income.

    41% tax on income too, even if you are lower rate taxpayer. And Revenue now deduct at source.


  • Registered Users Posts: 17,034 ✭✭✭✭ namloc1980


    Especially when you've already paid 50% on the money that goes in.

    The money you put in isn't taxed. The 41% tax is on any gain you make, not the whole investment.


  • Registered Users Posts: 17,034 ✭✭✭✭ namloc1980


    Cilar wrote: »
    It's a big mess for any type of investment.

    Tax on income (eg - dividends): Income tax + PRSI + USC for trusts. That can be above 55% whereas for most ETF, 41% applies on income.

    If you invest in Accumulating ETFs the dividends are reinvested tax free (at least until the 8 year deemed disposal event). Whereas with dividends in shares you are liable for tax as they are paid.


  • Registered Users Posts: 1,917 ✭✭✭ bilbot79


    Depending on where you are in your timeline/life stage it could be well advisable to throw net money into your pension. Assuming you are already maxed out on tax benefits at least you'll still pay no cgt (as far as I am aware)


  • Registered Users Posts: 7,399 ✭✭✭ Nonoperational


    namloc1980 wrote: »
    The money you put in isn't taxed. The 41% tax is on any gain you make, not the whole investment.

    Yeah but it’s still quite frustrating that there’s no options outside of pension to invest some of your salary before they take their 50%.


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