Investment alternatives to ETFs

inov47 · 15-01-2021 2:35pm #1

I have been using DEGIRO for years to invest in Vanguard Total World Stock ETF with some reasonable returns. Crazy Irish tax changes have since put ETFs off the radar of any rational self-investor.

I am trying to find alternative option such as an S&P 500 index fund (on DEGIRO ideally) that is not an ETF and have had little success in doing so.

Anyone have any experience or advice in this matter?

JackieChang · 15-01-2021 4:33pm

Have a look at investment trusts. The are sort of like ETFs, but taxed as shares. None of that 8 year deemed disposal BULLSHYT.

One of the most popular ones is "Scottish Mortgage Investment Trust". If you buy into this you get exposure to high tech stocks like Tesla, Nio and they even have a small holding in SpaceX. High growth, but high risk.

A less risky one is "Bankers Investment Trust".

Have a google around and see what you like, there are millions of these trusts.

Orobhsa · 15-01-2021 6:47pm

Some ITs (including SMT and Bankers) cannot be bought on Degiro currently.

Not sure if it has to do with Brexit (e.g. PRIIPs Regulation) or an internal Degiro decision to block.

If it's the former then ITs might go the way of US domiciled ETFs.

JackieChang · 15-01-2021 11:30pm

Orobhsa wrote: »

Some ITs (including SMT and Bankers) cannot be bought on Degiro currently.

Not sure if it has to do with Brexit (e.g. PRIIPs Regulation) or an internal Degiro decision to block.

If it's the former then ITs might go the way of US domiciled ETFs.

I own a good bit of SMT. Using trading 212. Decent selection of investment trusts there.

How can a UK fund go the way of a US ETF? What does that mean? They need one of those special documents?.

inov47 · 16-01-2021 6:41pm

Since 2018 regulations (PRIIPs) US domiciled ETFs are off limits for EU investors - perhaps ITs will follow this in time?!
Irish/EU domiciled ETFs are subject to 8 year deemed disposals and are unable to offset gains and losses making them a no go for any reasonable investor.
Unfortunately SMT and similar do appear to be blocked on Degiro. Seems like manually investing in multiple individual stocks is the only real option using Degiro!

JackieChang · 16-01-2021 11:45pm

inov47 wrote: »

SinceUS domiciled ETFs are off limits for EU investors - perhaps ITs will follow this in time?!

Where the hell is everybody getting their info from. Two people in this thread have now said Investment Trusts might be getting banned in EU, just because one broker doesn't sell it. .

Utter nonsense. Unless you have an article or something to prove this.

pavb2 · 17-01-2021 1:01pm

inov47 wrote: »

I have been using DEGIRO for years to invest in Vanguard Total World Stock ETF with some reasonable returns. Crazy Irish tax changes have since put ETFs off the radar of any rational self-investor.
?

Apologies as I’m new to investing but what are the specific problems with respect to the 8 years and Irish tax. For example If a person was living and taxed in the UK would they have the same problems.

inov47 · 17-01-2021 2:26pm

JackieChang wrote: »

Where the hell is everybody getting their info from. Two people in this thread have now said Investment Trusts might be getting banned in EU, just because one broker doesn't sell it. .

Utter nonsense. Unless you have an article or something to prove this.

Not at all my feeling on this and I have no knowledge of this being the case. Was merely replying to your question "How can a UK fund go the way of a US ETF? What does that mean?" from earlier. It seems unlikely and doesn't make much sense however, the overall stance of Irish taxation laws on ETFs seems completely irrational so who knows!

inov47 · 17-01-2021 2:29pm

pavb2 wrote: »

Apologies as I’m new to investing but what are the specific problems with respect to the 8 years and Irish tax. For example If a person was living and taxed in the UK would they have the same problems.

8 year deemed disposal requires investors to calculate the gain/loss on every transaction 8 years from point of purchase regardless of if a sale as made. Logistically that means an investor putting money in monthly in 2018 will be required to calculate taxes every single month from 2026 onwards - Not something I feel is reasonable to ask of the non-professional investor.
This is the situation for an Irish investor anyway, I am not aware of the situation in the UK.

Supercell · 17-01-2021 2:56pm

My IT's are doing great, MNKS is on Degiro but for some inexplicable reasons SMT isn't which is a pity as its performed better, my Davy PRSA account has SMT though and thats my biggest holding there. USA is another nice IT but not on Degiro either.
Other IT's I own are IEM and HGT both of which are on Degiro.
Have a look at this website for more on IT's, I find it very helpful, registration is free - https://citywire.co.uk/investment-trust-insider/news

As you can see from my performance on the stock picking contest, i'm horrible at it, better to leave it in the hands of wiser IT managers is my feeling!

spuddy · 17-01-2021 3:00pm

JackieChang wrote: »

Where the hell is everybody getting their info from. Two people in this thread have now said Investment Trusts might be getting banned in EU, just because one broker doesn't sell it. .

Utter nonsense. Unless you have an article or something to prove this.

The question is whether ITs will continue to be subject to the UCITS IV directive, we'll know more once the equivalence regime is confirmed in March.

inov47 · 17-01-2021 8:31pm

Supercell wrote: »

My IT's are doing great, MNKS is on Degiro but for some inexplicable reasons SMT isn't which is a pity as its performed better, my Davy PRSA account has SMT though and thats my biggest holding there. USA is another nice IT but not on Degiro either.
Other IT's I own are IEM and HGT both of which are on Degiro.
Have a look at this website for more on IT's, I find it very helpful, registration is free -

As you can see from my performance on the stock picking contest, i'm horrible at it, better to leave it in the hands of wiser IT managers is my feeling!

That is extremely helpful thank you.

one quick question (I will of course do my own research too): Are you up to date on the Irish tax treatment of Investment Trusts? From some quick reading it appears CGT taxation applies? Is this your understanding?

Thanks again

Supercell · 17-01-2021 9:03pm

inov47 wrote: »

That is extremely helpful thank you.

one quick question (I will of course do my own research too): Are you up to date on the Irish tax treatment of Investment Trusts? From some quick reading it appears CGT taxation applies? Is this your understanding?

Thanks again

Yep IT are treated as normal shares, ie normal CGT rules apply. I did submit a query to the revenue in this and they confirmed same.

Robson99 · 21-01-2021 10:04pm

inov47 wrote: »

8 year deemed disposal requires investors to calculate the gain/loss on every transaction 8 years from point of purchase regardless of if a sale as made. Logistically that means an investor putting money in monthly in 2018 will be required to calculate taxes every single month from 2026 onwards - Not something I feel is reasonable to ask of the non-professional investor.
This is the situation for an Irish investor anyway, I am not aware of the situation in the UK.

Apologies but new to this Craic as well. If say started regular saving and or lump sums but cashed out in say year 7 does one still have to do yearly calculations ?

inov47 · 22-01-2021 10:09am

Robson99 wrote: »

Apologies but new to this Craic as well. If say started regular saving and or lump sums but cashed out in say year 7 does one still have to do yearly calculations ?

If investing in Irish Domiciled ETFs one will pay approx 41% tax on dividends & will pay 41% on overall gains. You will have to pay any tax due on growth every 8 years (even if not selling them). This inhibits on the potential compounding.

links below worth reading for more

https://www.informeddecisions.ie/blog42/

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

Supercell · 22-01-2021 10:15am

inov47 wrote: »

If investing in Irish Domiciled ETFs one will pay approx 41% tax on dividends & will pay 41% on overall gains. You will have to pay any tax due on growth every 8 years (even if not selling them). This inhibits on the potential compounding.

links below worth reading for more

https://www.informeddecisions.ie/blog42/

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

The exception to this is if you are buying ETF's through a PRSA, no 8 year rule within those or CGT or anything else until retirement, your money is tied up until then though.

Investment alternatives to ETFs

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