Basics of investment funds; ask paul

bs2014

I don't work in investments but have a vague idea how it works. I've always saved in bank and credit union but after getting nowhere I'm wanting to try make something. Got a 5k bonus from work so willing to invest and grow it a little.

1. I want to buy a house in the next 2 years so since I want my main big savings accessible and not tied up for 5 years, thats why I'm only investing the bonus as its incremental money.
2. I've been following AskPaul on insta. He promotes the Zurich Dynamic Fund. They charge €150 for a consultation. Surely its cheaper to just go to Zurich direct since it seems to be managed by Zurich fund managers anyways? Is this just Insta PR and would I better going to a local financial advisor in my local town. I don't know what I don't know. It does seem a good proposal I just wonder how they make their money.

What questions to ask. Annual management charge, access to funds etc.

Thanks in advance.

jams100

bs2014 wrote: »

I don't work in investments but have a vague idea how it works. I've always saved in bank and credit union but after getting nowhere I'm wanting to try make something. Got a 5k bonus from work so willing to invest and grow it a little.

1. I want to buy a house in the next 2 years so since I want my main big savings accessible and not tied up for 5 years, thats why I'm only investing the bonus as its incremental money.
2. I've been following AskPaul on insta. He promotes the Zurich Dynamic Fund. They charge €150 for a consultation. Surely its cheaper to just go to Zurich direct since it seems to be managed by Zurich fund managers anyways? Is this just Insta PR and would I better going to a local financial advisor in my local town. I don't know what I don't know. It does seem a good proposal I just wonder how they make their money.

What questions to ask. Annual management charge, access to funds etc.

Thanks in advance.

Firstly AskPaul is on commission, take anything you read on that with a big pinch of salt.

I'm always reluctant to give advice on this as I'm just an average Joe!

I'd start by saying it would be a good idea to go to your local financial advisor who probably knows alot more than your average boardsie poster.

So, recently, I looked into Zurich and a few others and main thing to bear in mind all these funds have an annual management fee of 1%+ (regardless of fund performance), now funds should perform well in the long term so probably not too big a deal, I'd be shopping around there is a big difference between some of the providers.

Some of the funds have penalties if you have to withdraw your money early so bear that in mind and finally I think there is a government fee of 1% or something on deposits into funds (Now, I could stand corrected on that figure as I looked this up a number of months ago).

Final point when it comes to you withdrawing the funds let's say your 5k becomes 9k in eight yrs then that 4k profit will be subject to 33% capital gains tax.

I know u have a lump sum but your pension is the best way of investing tax wise, so if possible make sure you try put as much as possible into that, I see your also trying to buy a house, hmm I wonder whether it would make more sense to just pay of the house, again, a proper financial advisor could tell you that.

Personally, I've just started investing on my own for now, given all the management fees pointed out, I'm open to going back to an investment provider in the future though as its alot of effort doing all the research whilst also having a full time job.

To sum up what I've said up in one sentence, get some proper advice and not that ask Paul stuff. Goodluck

Shedite27

bs2014 wrote: »

I don't work in investments but have a vague idea how it works. I've always saved in bank and credit union but after getting nowhere I'm wanting to try make something. Got a 5k bonus from work so willing to invest and grow it a little.

1. I want to buy a house in the next 2 years so since I want my main big savings accessible and not tied up for 5 years, thats why I'm only investing the bonus as its incremental money.
2. I've been following AskPaul on insta. He promotes the Zurich Dynamic Fund. They charge €150 for a consultation. Surely its cheaper to just go to Zurich direct since it seems to be managed by Zurich fund managers anyways? Is this just Insta PR and would I better going to a local financial advisor in my local town. I don't know what I don't know. It does seem a good proposal I just wonder how they make their money.

What questions to ask. Annual management charge, access to funds etc.

Thanks in advance.

Ask Paul is a broker, works for PAX asset management in Dublin. I’ve met him through work and he isn’t the worst chap in the world. His model is to charge people €160 one time set up fee, other brokers would take an amount from what you put in every month. So in the long run it can work out cheaper. He’s really good at explaining anything you need about fund choice, accumulation, fees etc

I’m not 100% on whether Zurich work direct or require you to go through a broker.

Either way, you’re looking to find out
1. Of every €100 you save, how much goes to your fund (government take a levy, broker takes commission etc)
2. What the fund management charge is (how much they’re gonna take each year) - try to keep it low, .5 or .7%

JPup

You’d be better off buying a cheap diversified etf through degiro directly. That Zurich fund is grand but the annual fee means it will underperform a cheap tracker over time.

You should also consider if it makes sense to use this money to top up your pension. More tax efficient but you can’t touch it for a long time.

Buddy Bubs

Paul's advice is very solid. I've same qualifications as him and worked at same job for a few years. Eoin McGee is also very good on rte and on Instagram. That said, there's hundreds and maybe thousands who can do as good a job, the 2 boys have just went down the public route to market themselves, no problem there.

There seems to be a huge aversion to financial advisors making money from you and it leads to people doing nothing. Sad really, but people with advisors definitely do better. I agree you do have to trust them.

Jimbobjoeyman

JPup wrote: »

You’d be better off buying a cheap diversified etf through degiro directly. That Zurich fund is grand but the annual fee means it will underperform a cheap tracker over time.

You should also consider if it makes sense to use this money to top up your pension. More tax efficient but you can’t touch it for a long time.

In theory, there's a pretty reasonable argument in favour of what you said but unfortunately, that doesn't stack up in Ireland.

ETF's aren't very cheap in Ireland.
50+% tax rate and 8 year deemed disposal makes them essentially unworkable and prohibitively expensive in Ireland.

But a good financial advisor would already know this and would have steered you away.
For the tax advice alone I think a financial planner is worthwhile.

Clodz6

Hi,

In a similar position myself re Ask Paul club. I've just started my first job, have set up a pension and have enough savings to see me through the short term. I thought the club was just a handy way of investing on a monthly basis without having to think about anything, but I'm now seeing it may not be the best option.

Can I just go to Zurich directly and set up a DD with them? Or, if I do get a financial planner locally, how can I find one that's independent and not trying to sell a product?

I was also looking at investing through AIB in the Irish Life MAPS, is this another no no?

peacock20

Jimbobjoeyman wrote: »

In theory, there's a pretty reasonable argument in favour of what you said but unfortunately, that doesn't stack up in Ireland.

ETF's aren't very cheap in Ireland.
50+% tax rate and 8 year deemed disposal makes them essentially unworkable and prohibitively expensive in Ireland.

But a good financial advisor would already know this and would have steered you away.
For the tax advice alone I think a financial planner is worthwhile.

50+%? This is for dividend payments, yes?
Accumulated ETFs, no income tax, 33% CGT. That's my understanding. Still 8 year deemed disposal nonsense

Jimbobjoeyman

peacock20 wrote: »

50+%? This is for dividend payments, yes?
Accumulated ETFs, no income tax, 33% CGT. That's my understanding. Still 8 year deemed disposal nonsense

ETF's are liable for income tax and not capital gains in Ireland.
So depending on your specific tax situation you could be paying north of 50%

jams100

peacock20 wrote: »

50+%? This is for dividend payments, yes?
Accumulated ETFs, no income tax, 33% CGT. That's my understanding. Still 8 year deemed disposal nonsense

Irish and EU Efts don't come under CGT. So you'll be paying 41%.
There are different rates if your eft is outside the eu (but u cannot buy US domiciled etfs so its very likely to be an eu one that will be taxed at 41%. All of the above is my understanding anyway

Jimbobjoeyman

I've often wondered if there was much demand for a fund that took a more tax advantageous ETF and overlayed it with an fx hedge to Euro which would allow retail investors to invest at CGT rates.
Differing from an index-tracking fund by passing on the advantage of the ETF regarding management fee with only a small management fee for fx hedging.

Doubt Ireland would be a big enough market to make it worthwhile though as the assets would have to be massive to make it worthwhile; assuming its even possible.

Shedite27

Clodz6 wrote: »

Hi,

In a similar position myself re Ask Paul club. I've just started my first job, have set up a pension and have enough savings to see me through the short term. I thought the club was just a handy way of investing on a monthly basis without having to think about anything, but I'm now seeing it may not be the best option.

Can I just go to Zurich directly and set up a DD with them? Or, if I do get a financial planner locally, how can I find one that's independent and not trying to sell a product?

I was also looking at investing through AIB in the Irish Life MAPS, is this another no no?

Sorry, replied to you in another thread too, wherever you go
1. How much of my money goes to funds?
2. How much do you deduct each eyar in fees?

Shop around, no harm to try a few brokers/direct and get quotes from all

bish76

2 years is relatively short period for investment in equity (for starters) or even Life funds. For a fund of 5K, professional fees will eat up most of the return you might make. On plus side, these lessons stay with you for rest of your life so stuck in. A simpler option is prize bonds that allows easy access and you might be the lucky one with bumper prize.

thomasm

jams100 wrote: »

Firstly AskPaul is on commission, take anything you read on that with a big pinch of salt.

So, recently, I looked into Zurich and a few others and main thing to bear in mind all these funds have an annual management fee of 1%+ (regardless of fund performance), now funds should perform well in the long term so probably not too big a deal, I'd be shopping around there is a big difference between some of the providers.

Some of the funds have penalties if you have to withdraw your money early so bear that in mind and finally I think there is a government fee of 1% or something on deposits into funds (Now, I could stand corrected on that figure as I looked this up a number of months ago).

Final point when it comes to you withdrawing the funds let's say your 5k becomes 9k in eight yrs then that 4k profit will be subject to 33% capital gains tax.

Goodluck

The tax on a Zurich or any life company fund for a personal investor is 41%. Short term savings for non pension is tough as you need at least 5 years to smooth out volatility in equity markets. Then you have the following stacked against you


1% Stamp Duty Fee on entry to the fund
1 to 2% annual fee plus undisclosed fees

Inflation at say 2%
Tax at 41%



so you need a fund to do potentially 5-6% consistently per annum to make a small gain and with equities at record valuations is now the time especially if you need it in 2 years

namloc1980

peacock20 wrote: »

50+%? This is for dividend payments, yes?
Accumulated ETFs, no income tax, 33% CGT. That's my understanding. Still 8 year deemed disposal nonsense

No. ETFs are liable to 41% tax across the board:
- Accumulating ETF: 41% tax on any gain at 8 year deemed disposal anniversary and/or on actual disposal. Any dividends are reinvested tax free.
- Distributing ETF: 41% flat tax on any dividends and then 41% tax on any gain at 8 year deemed disposal anniversary and/or on actual disposal.

Jimbobjoeyman wrote: »

ETF's are liable for income tax and not capital gains in Ireland.
So depending on your specific tax situation you could be paying north of 50%

This is not correct. ETFs are liable to 41% flat tax and they are not subject to PRSI or USC. From the Revenue:

The relevant legislation, therefore, places the onus on the investor to make a selfassessment tax return of the income and gains, including gains arising under the deemed disposal provisions, and to account for income tax at the rate of 41% on all such Irish domiciled ETF related income and gains. Such income and gains do not attract Pay Related Social Insurance (PRSI) or Universal Social Charge (USC) liabilities.

https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-27/27-01a-03.pdf

jams100

thomasm wrote: »

The tax on a Zurich or any life company fund for a personal investor is 41%. Short term savings for non pension is tough as you need at least 5 years to smooth out volatility in equity markets. Then you have the following stacked against you


1% Stamp Duty Fee on entry to the fund
1 to 2% annual fee plus undisclosed fees

Inflation at say 2%
Tax at 41%



so you need a fund to do potentially 5-6% consistently per annum to make a small gain and with equities at record valuations is now the time especially if you need it in 2 years

Brain freeze! I meant to say 41%, clearly still asleep when I posted that

bish76

41% tax is on Irish domicile ETFs. You can buy US based ETF or Investment Trusts in UK as stock that comes under normal CGT and income tax rules.

cooperguy

Jimbobjoeyman wrote: »

In theory, there's a pretty reasonable argument in favour of what you said but unfortunately, that doesn't stack up in Ireland.

ETF's aren't very cheap in Ireland.
50+% tax rate and 8 year deemed disposal makes them essentially unworkable and prohibitively expensive in Ireland.

But a good financial advisor would already know this and would have steered you away.
For the tax advice alone I think a financial planner is worthwhile.

The tax rate is 41%, is it really unworkable to do a tax return after 8 years? No stamp duty on the way in and fees of .2% instead of 1.5%+

Shedite27

cooperguy wrote: »

The tax rate is 41%, is it really unworkable to do a tax return after 8 years? No stamp duty on the way in and fees of .2% instead of 1.5%+

The problem is if you're putting money into the ETF every year, then you need to do the tax return every year.
Money in 2021 - tax return 2029
Money in 2022 - tax return 2030

It's far from unworkable, just requires a bit of work getting used to how to calcualte it