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Child Item

Beginning to Invest - All questions go here please

iMax

Guys,

Looking for a little bit of info from those more knowledgeable than me.

My five year old daughter has the above sum in her college fund. We've really skimped for it over the years (started before she was born).

Times are getting harder for us economically & it looks like we won't be able to contribute to it like we were (or at all) for the foreseeable future, but I want to keep it growing if at all possible.

It's currently in an AIB kids account where it ears a meager interest rate.

We were thinking of maybe the state solidarity thing or prizebonds (someone's gotta win, right???). IS there anything else we should look at ? No risk is much preferred (as much as anything can be no risk). I know you don't get as high a return, but it's my daughter's future I'm dealing with.

We don't mind it being locked away (probably a good idea in the long run). Also we'd like to be able to capitalise by being able to add to it if possible.

Looking forward to the replies

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Layne

Quick question on selling shares.
I am on T212 and attempted to sell some this morning.
Before the final step it mentioned that the stock is an AIM listed stock and low liquidity may mean that it may take some time to execute the sale. There is not a huge amount of money involved I might add.
Is this normal?? Has this happened to anybody else??
I have sold US stocks in the past and sales have always executed immediately.
Any wisdom or clarity on this would be greatly appreciated.

pioneerpro

Layne wrote: »

Quick question on selling shares.
I am on T212 and attempted to sell some this morning.
Before the final step it mentioned that the stock is an AIM listed stock and low liquidity may mean that it may take some time to execute the sale. There is not a huge amount of money involved I might add.
Is this normal?? Has this happened to anybody else??
I have sold US stocks in the past and sales have always executed immediately.
Any wisdom or clarity on this would be greatly appreciated.

Perfectly normal - all transactions are two-sided so it depends on volume. If no one wants to buy it in necessary volume, then you won't fill (and vice-versa). That's the problem with low interest/volume stocks. I'd imagine the bid/ask spread is probably a bit higher as well. LON is bad enough for it sometimes, AIM will obviously be worse.

HLagri

Bob Harris wrote: »

Keep track of what you buy and when and when you sell it and when. DeGiro will help you do that in the transactions tab.

Lets say today you buy 4 companies:

A 100 shares @ 10€
B 50 shares @ 20€
C 100 shares @ 5€
D 50 shares @ 10€

In July you sell A for 20€ Total gain 1000€

In September you sell B for 40€ Total gain 1000€

In October you sell C for 3€ losing 200€

For the period Jan to November you provisionally have to pay the CGT due.
You have total gains of 2000€ and a loss of 200€ Net position +1800€
Your first 1270€ are exempt.
You will pay (1800-1270) 530x33% = 174.90
You'll have to pay this by the 15th December in the year the gain is realised.

In December you sell D for 20€ realising a gain of 500€
As you have already used your 1270€ exemption you'll pay 500€ x 33% = 165. For the gains made on disposals in December you pay by the 31st Jan the following year.

By the 31st of October 2022 you have to make the declaration for your gains/losses in 2020. It is advised to make a return whether you have gains or losses. The form is CG1. Get set up for CGT on myrevenue.ie to facilitate the payments and with a bit of luck you'll have to pay lots of the stuff to Paschal and the boys.

If you don't sell you don't pay CGT.
If you have more losses than gains, you can carry the leftover losses to the next year to offset gains. (you can do this for up to four years if I'm not mistaken)
Take into account the buying and selling costs.
If the shares cost you 1000 and the fees are 20€ €1020 your total cost.
If you sell for 2000€ with 20€ fees then €1980 is your total proceeds.

If you're investments are in ETFs rather than individual stocks, are these taxed at 41% under CGT?

TalleyRand83

Just on the whole ETF cost, why would anyone every bother going down ETF route? Is it just convenience of passive investing on baskets of shares rather than managing each yourself? I don't know if I missing something

Bob Harris

HLagri wrote: »

If you're investments are in ETFs rather than individual stocks, are these taxed at 41% under CGT?

https://informeddecisions.ie/blog42/

namloc1980

TalleyRand83 wrote: »

Just on the whole ETF cost, why would anyone every bother going down ETF route? Is it just convenience of passive investing on baskets of shares rather than managing each yourself? I don't know if I missing something

You track a fund/index. Accumulating ETFs are amazing for the first 8 years, tax free roll up, tax free divided reinvestment. It's all winning

And that's when the dreaded deemed disposal kicks in which is a pain in the ass and certainly harms compounding. However other benefits are you don't pay USC or PRSI on distributing ETF dividends, just a flat income tax of 41%. For shares/trusts dividends you must pay tax, PRSI and USC. Your marginal rate will mean how much that impacts you. Also management fees are generally very low.

Overall I think ETFs do have a place in a well diversified portfolio as they are very much passive (until deemed disposal that is).

Shedite27

namloc1980 wrote: »

You track a fund/index. Accumulating ETFs are amazing for the first 8 years, tax free roll up, tax free divided reinvestment. It's all winning And that's when the dreaded deemed disposal kicks in which is a pain in the ass and certainly harms compounding. However other benefits are you don't pay USC or PRSI on distributing ETF dividends, just a flat income tax of 41%. For shares/trusts dividends you must pay tax, PRSI and USC. Your marginal rate will mean how much that impacts you. Also management fees are generally very low.

Overall I think ETFs do have a place in a well diversified portfolio as they are very much passive (until deemed disposal that is).

Also, a lot of teh money in ETF's are through Pensions, which would be exempt from the 42% tax and deemed disposal.

[Deleted User]

namloc1980 wrote: »

You track a fund/index. Accumulating ETFs are amazing for the first 8 years, tax free roll up, tax free divided reinvestment. It's all winning And that's when the dreaded deemed disposal kicks in which is a pain in the ass and certainly harms compounding. However other benefits are you don't pay USC or PRSI on distributing ETF dividends, just a flat income tax of 41%. For shares/trusts dividends you must pay tax, PRSI and USC. Your marginal rate will mean how much that impacts you. Also management fees are generally very low.

Overall I think ETFs do have a place in a well diversified portfolio as they are very much passive (until deemed disposal that is).

I've a (probably dumb) question about investment trusts that a lot of people seem to think are better for Irish people. Aren't these products actively managed? Doesn't that make them likely to underperform in the long run?

Bob24

Heraclius wrote: »

I've a (probably dumb) question about investment trusts that a lot of people seem to think are better for Irish people. Aren't these products actively managed? Doesn't that make them likely to underperform in the long run?

Yes they are actively managed.

The answer to your second question really depends on what you are looking for and is a matter of personal opinion. I.e. which trust are you looking at and what would be you competing option in terms of indexed fund, and why do you think the trust is likely to underperform?

[Deleted User]

Bob24 wrote: »

Yes they are actively managed.

The answer to your second question really depends on what you are looking for and is a matter of personal opinion. I.e. which trust are you looking at and what would be you competing option in terms of indexed fund, and why do you think the trust is likely to underperform?

Thanks for your reply. I am not currently looking at any trust in particular - I should invest but I'm a bit unnerved by high valuations and afraid of making any mistake with taxes. My question about investment trusts was just motivated by a concern that I'd be essentially trusting the manager of that trust to pick wisely then. Something about the neutrality of a passive fund appeals more.

[Deleted User]

Bob24 wrote: »

Yes they are actively managed.

The answer to your second question really depends on what you are looking for and is a matter of personal opinion. I.e. which trust are you looking at and what would be you competing option in terms of indexed fund, and why do you think the trust is likely to underperform?

Basically I've been stuck in the dithering phase for months.

Table Top Joe

Bob Harris wrote: »

https://informeddecisions.ie/blog42/

Very helpful (and depressing) article thanks......how on earth does anyone make decent money after the management fees, the 41% tax and the extra bull**** tax after 8 years even if you don't sell?

Im presuming people must.....but Id imagine it takes an awful lot of money to make any money back?

Supercell

Table Top Joe wrote: »

Very helpful (and depressing) article thanks......how on earth does anyone make decent money after the management fees, the 41% tax and the extra bull**** tax after 8 years even if you don't sell?

Im presuming people must.....but Id imagine it takes an awful lot of money to make any money back?

For Ireland look at investment trusts (CEF's), similar in some ways to ETFs but taxed as stocks.

Shedite27

Table Top Joe wrote: »

Very helpful (and depressing) article thanks......how on earth does anyone make decent money after the management fees, the 41% tax and the extra bull**** tax after 8 years even if you don't sell?

Im presuming people must.....but Id imagine it takes an awful lot of money to make any money back?

Well remember that the deductions you mention are from PROFIT, so you need to be making money to have some of it deducted. With 0% interest in deposit accounts, anyone paying tax on profits, are making profits

Table Top Joe

Shedite27 wrote: »

Well remember that the deductions you mention are from PROFIT, so you need to be making money to have some of it deducted. With 0% interest in deposit accounts, anyone paying tax on profits, are making profits

I get that about profit, but I'm just not convinced there's enough profit to be had. I mean if I make say 5k after tax.....great, but how much would I have needed to put in day one to get that back? and how long would it take? how risky is the investment?....

Id only have about 3k a year to put in, for that much maybe its not worth the risk for a (presumably) small reward that would take years to get

Im very ignorant on the whole thing so maybe I just don't get it but thats what I'm reading from what the little I do know

Table Top Joe

Supercell wrote: »

For Ireland look at investment trusts (CEF's), similar in some ways to ETFs but taxed as stocks.

Will do, thanks

TalleyRand83

Potentially a dumb question, but how do other posters arrive at opinions such as "I think airbnb will go to $100 a share" when its at say $150, what's the basis for forming that view?

Is it from deep dives in financial reports? I mostly pick stocks from mywallst, motley fool stock advisor as well good ol' see with my own eyes type stuff but never would I be able to ascertain myself what each share price should be, I might flick over PE ratio or even P/S ratio in case either was exorbitantly high but really I'm reliant upon the above mentioned two services and articles I can have a glance over.

Anyways that my tracker mortgage question for the day!

Shedite27

Table Top Joe wrote: »

I get that about profit, but I'm just not convinced there's enough profit to be had. I mean if I make say 5k after tax.....great, but how much would I have needed to put in day one to get that back? and how long would it take? how risky is the investment?....

Id only have about 3k a year to put in, for that much maybe its not worth the risk for a (presumably) small reward that would take years to get

Im very ignorant on the whole thing so maybe I just don't get it but thats what I'm reading from what the little I do know

Well I guess the key to any wealth is compound interest. So while the numbers might only net out to 5-10% per annum, yes you might only get back €300 from your €3000 this year, it adds up if you let it work.

Then everyone needs to do their own thought on how much risk they are willing to accept. The first time you see your favourite stock down 50% is scary, but it makes it all the sweeter when it gets back to all time high. I the 50% drop is too scary, maybe bonds, tracker funds, or deposits are more suitable.

[Deleted User]

Table Top Joe wrote: »

I get that about profit, but I'm just not convinced there's enough profit to be had. I mean if I make say 5k after tax.....great, but how much would I have needed to put in day one to get that back? and how long would it take? how risky is the investment?....

Id only have about 3k a year to put in, for that much maybe its not worth the risk for a (presumably) small reward that would take years to get

Im very ignorant on the whole thing so maybe I just don't get it but thats what I'm reading from what the little I do know

See here, rough sums: https://www.thecalculatorsite.com/compound?a=3000&p=8&pp=yearly&y=30&m=0&rd=250&rp=monthly&rt=deposit&rm=end&ci=yearly&ip=&c=2&di=

Initial 3k, 250 a month, 8% interest, 30 years:

Future investment value
€382,325.62

Total interest earned
€289,325.62
Initial balance
€3,000.00

Total monthly deposits
€90,000.00

Effective Annual Rate (APY)
8%

Consider investment trusts rather than open ended funds.

Play around with the interest rate. Could be more (historically it has been) than 8% or lower. Even a fraction of a % makes a massive difference.

Taylor365

Table Top Joe wrote: »

I mean if I make say 5k after tax.....great, but how much would I have needed to put in day one to get that back?

You get about 5k (after tax) in dividends off the back of 350,000 - 400,000.

If you're patient in the market and selling over 4 years + claiming your CGT allowance of 1270, you'll get back 5k off the back of 15-30k in the current climate.

Table Top Joe

Thanks for taking the time to answer folks, really appreciate it......have a lot of homework to do on this stuff

Geuze

I have a question about regular purchases of shares in ETFs, for example via DeGiro, and the tax implications.

Let's say I buy 125+125 = 250 pm in two ETFs, month after month.

At the eight years deemed disposal, what actually happens?

I presume DeGiro don't do anything.

Is it complete self-assessment?

As in, I declare all values at 8 years in my tax return?

[Deleted User]

Geuze wrote: »

I have a question about regular purchases of shares in ETFs, for example via DeGiro, and the tax implications.

Let's say I buy 125+125 = 250 pm in two ETFs, month after month.

At the eight years deemed disposal, what actually happens?

I presume DeGiro don't do anything.

Is it complete self-assessment?

As in, I declare all values at 8 years in my tax return?

You are responsible for your tax. Basically you have to pay 41% on "gains" 'as if' you have realised them.

Geuze

I have a second question.

Let's say I want to do regular monthly saving, into 100% equities, over a ten year period.

Assume that I want passive tracking of major indices, and low costs.

Are my options as follows:

(1) ETFs - I know what these are, but there are complications: EU vs non-EU, and the taxation of these in Ireland seems to mean this is a bad idea?

(2) Investment Trusts - I am aware that this means buying shares in a quoted company, that itself owns shares in many quoted companies

I am aware of CGT advantages of IT over ETF
However, are there IT that track large indices? I don't think so? They are all actively managed?

(3) Managed funds from a life insurer

[Deleted User]

Geuze wrote: »

I have a second question.

Let's say I want to do regular monthly saving, into 100% equities, over a ten year period.

Assume that I want passive tracking of major indices, and low costs.

Are my options as follows:

(1) ETFs - I know what these are, but there are complications: EU vs non-EU, and the taxation of these in Ireland seems to mean this is a bad idea?

(2) Investment Trusts - I am aware that this means buying shares in a quoted company, that itself owns shares in many quoted companies

I am aware of CGT advantages of IT over ETF
However, are there IT that track large indices? I don't think so? They are all actively managed?

(3) Managed funds from a life insurer

1. Personally, I don't like ETFs because of the tax. But likely it would still work out better than if you started just directly buying whatever companies take your fancy or are popular.

2. All ITs are actively managed. Please note that criticism of poor performance of active managers refers to "mutual funds", that is open ended funds. Open ended funds have a lot of disadvantages compared to closed end Investment trusts. Basically, ITs can use leverage and have permanent capital. With an open ended fund the pot of money increases and decreases as people buy. With ITs it stays the same. This favours active management because with open funds managers are usually forced to sell holdings (that could pay off in long run) as people panic sell if something goes wrong in market. So basically with actively managed open ended funds managers are forced to buy at the worst time (people pile in when markets are high) and sell at the worst time too. IT managers can wait it out and decide for themselves when to buy or sell.

No ITs "track" indexes like passive open ended funds do. I think there were a few that did in the past, but to be honest over the long term lots of ITs have beat their benchmark so consistently that there was no real demand for "tracking" ITs and they died out.

So with ITs you would probably look to see what ones have the benchmarks you want and go from there. But ITs are not as straightforward as passive index funds and they take more managing and monitoring.

3. This really depends. Probably more expensive than doing it yourself.

Bob24

Lilian Plain Ponytail wrote: »

You are responsible for your tax. Basically you have to pay 41% on "gains" 'as if' you have realised them.

Also note that this is at the 8th anniversary of each individual purchase transactions.

So if as the original exemple you are buying 250 worth of shares each month, in 8 years time every month you will have to calculate the unrealised gains for one of these 250 batches (the one witch just tuned 8 years old) and pay tax on it.

[Deleted User]

Bob24 wrote: »

Also note that this is at the 8th anniversary of each individual purchase transactions.

So if as the original exemple you are buying 250 worth of shares each month, in 8 years time every month you will have to calculate the unrealised gains for one of these 250 batches (the one witch just tuned 8 years old) and pay tax on it.

What an absolute pain!

Geuze

Bob24 wrote: »

Also note that this is at the 8th anniversary of each individual purchase transactions.

So if as the original exemple you are buying 250 worth of shares each month, in 8 years time every month you will have to calculate the unrealised gains for one of these 250 batches (the one witch just tuned 8 years old) and pay tax on it.

If I save 250 pm every month for five years (250*60 months), this seems to suggest I will need to do 60 profit and loss calculations, over the five years staring in year 8?

Bob24

Geuze wrote: »

If I save 250 pm every month for five years (250*60 months), this seems to suggest I will need to do 60 profit and loss calculations, over the five years staring in year 8?

Yes correct. And then if you haven’t sold by then you will have to do it again starting at year 16 (while remembering what you had already declared and paid in the previous cycle for each batch, so that you only declare and pay for the balance).

Also you might be aware already but another disadvantage of ETFs in terms of taxation is that you cannot offset losses on one ETF against gains made on another ETF, on company shares, or on other assets.

Bob Harris

Geuze wrote: »

If I save 250 pm every month for five years (250*60 months), this seems to suggest I will need to do 60 profit and loss calculations, over the five years staring in year 8?

I believe for practical purposes Revenue will charge tax on the invested amount 8 years after the initial investment and include all of the contributions made in the interim. Ie the 250€ you pay in year 7 month 12 will be subject to this just the same as what you oaid in year 1 month one. I have read this but don'[t have a source so I'd look into it further. Otherwise, and excuse my language, it's retarded.