Experienced property investor, but virgin stock market trader.

L

landlord

Registered User
Messages
1,043
I am over exposed in Irish property and wish for advice on diversification. I have €100,000 to invest.

Brief history….I have 7 properties in Dublin, 6 of which are rentals. All are in negative equity, however they are very profitable on a cash flow basis, albeit being on interest only with 17 year terms left.

I have no experience of the stock market and have been told that keeping the costs down is as important as picking the right shares. I would be a low to medium risk investor and am considering investing €25,000 in each of the following.

FTSE 100 TRACKER

Legal & General UK 100 Index - 0.10 per cent (0.06 per cent through Hargreaves Lansdown)

FTSE All SHARE TRACKER

Fidelity Index UK - 0.09 per cent (The charge is 0.07 if purchased through Fidelity.)

EMERGING MARKET TRACKER

Fidelity Index Emerging Markets - 0.25 per cent (0.23 per cent if purchased through Fidelity)

GLOBAL SHARES

Legal & General International Index Trust - 0.14 per cent (0.09 per cent on Hargreaves Lansdown)

My information has come from the following article….

http://www.thisismoney.co.uk/money/...915/A-guide-cheapest-index-tracker-funds.html

Any advice appreciated.
 
They are all funds that you've listed. From your initial post I understood that you were interested in buying actual stocks which is a different thing and also has different (better) tax and cost implications
 
Ok sorry I guess the trackers are means of indirectly investing in stocks?
Would these trackers be safer than directly investing in stocks, considering I have no experience. I thought these costs seem quite low, just the CGT to pay on top?
 
landlord said:
Ok sorry I guess the trackers are means of indirectly investing in stocks?
Would these trackers be safer than directly investing in stocks, considering I have no experience. I thought these costs seem quite low, just the CGT to pay on top?
Click to expand...

ETFs wouldn't be as tax efficient as shares (when selling) but there are people far more qualified than me on this forum to advise you on those issues. WRT shares, costs become in issue when buying in smaller amounts as the commissions/stamp duty as a percentage is higher with respect to small investments. TD charge €20 per trade so you can see the percentage cost difference in investing €100 versus €10,000

I'd advise a bit more research before you start investing that sort of money, there is a very good book by a regular poster here Rory Gillen (3 steps to investment success), well worth a read.
 
Last edited:
There is an awful lot of over lap in those funds: FTSE All Shares includes the FTSE 100 and no doubt the Global Shares will also include some or all of the FTSE 100...

And even though you live in Euroland you have almost totally ignored it...
 
Jim2007 said:
There is an awful lot of over lap in those funds: FTSE All Shares includes the FTSE 100 and no doubt the Global Shares will also include some or all of the FTSE 100...

And even though you live in Euroland you have almost totally ignored it...
Click to expand...

Any suggestions then for greater diversification.

How about adding/replacing some of the above with....

European trackers
Those people looking for a fund that tracks the European indexes could consider the http://ad.doubleclick.net/clk;268771374;94869120;x (Fidelity Index Europe excluding UK) which costs 0.12%, but you can cut that to 0.1% if you buy via Cavendish Online or http://ad.doubleclick.net/clk;268771374;94869120;x (Fidelity). It tracks the MSCI Europe excluding UK Index.

and

US trackers
The cheapest US tracker fund is the http://ad.doubleclick.net/clk;268771374;94869120;x (Fidelity Index US), which has ongoing charges of 0.1%, although you can reduce that to 0.08% if you buy the fund through http://ad.doubleclick.net/clk;268771374;94869120;x (Fidelity) or Cavendish Online.
 
Last edited:
landlord said:
Any suggestions then for greater diversification.

How about adding/replacing some of the above with....

European trackers
Those people looking for a fund that tracks the European indexes could consider the http://ad.doubleclick.net/clk;268771374;94869120;x (Fidelity Index Europe excluding UK) which costs 0.12%, but you can cut that to 0.1% if you buy via Cavendish Online or http://ad.doubleclick.net/clk;268771374;94869120;x (Fidelity). It tracks the MSCI Europe excluding UK Index.

and

US trackers
The cheapest US tracker fund is the http://ad.doubleclick.net/clk;268771374;94869120;x (Fidelity Index US), which has ongoing charges of 0.1%, although you can reduce that to 0.08% if you buy the fund through http://ad.doubleclick.net/clk;268771374;94869120;x (Fidelity) or Cavendish Online.
Click to expand...
Buy ten stocks of companies in different industry sectors at €10k each, you will be very well diversified then. Any of the above funds will give you diversification anyway however there are tax issues with selling funds that don't apply to shares/stocks. ETF's don't seem to be a very good idea if you are tax resident in Ireland however shares will only attract capital gains tax when sold. DYOR.
 
Last edited:
It's strange since so many people recommend stocks and shares over property as an investment. Yet the complexities associated with purchasing stocks shares funds etc....seem overwhelming.
Picking 10 individual stocks in different sectors would be impossible for me as I wouldn't have a clue what to pick. That's why I'm more interested in a fund and preferably passive to keep the cost down. What are the tax implications of buying into funds and can you even buy into funds when domiciled in Ireland.
I'm starting to feel that investing back into property is the way to go for me.
 
I've done lots of research it is complicated to me anyway my conclusions where (they may not be right!, but)
I don't think 10 stocks is enough to get the diversification I needed anyway

Buying an all world ETF that reinvests dividends is the best bet , the problem with funds is you can't offset the losers against the winners before paying tax so I think it's best to just buy one all world tracker this has at least a thousand stocks in it (not got numbers to hand) when you sell it or you are assumed to sell it at 8 years you pay exit tax at 41% instead of shares at 33% , I would rather pay the extra % for the diversification , also if dividend are reinvested you are not paying tax on them when recieved but get the accumulating effect on these up to 8 years this has to be worth some value I just haven't calculated it properly yet.
 
  • Like
Reactions: jim
Doesn't that make dollar cost averaging for ETFs really awkward I.e. If you buy in once a month you'll have 8 * 12 = 96 distinct tax chargeable events after eight years?

Im looking at somehow investing in US, EEA or OECD ETFs since they are taxed at CGT rather than exit tax and AFAIK the eight year rule doesn't apply. The problem is finding one or more that are accumulating.
 
For someone with so many properties in negative equity, the advantage of shares over funds is even greater.

For example, if you end up with a €100,000 chargeable gain in shares, you could decide to sell a property that has gone down in value by €100,000 since it's original purchase. When done on the same year, or before, this would remove the €33,000 tax liability completely.

For the above reason, you're best to avoid high-dividend shares, where dividends will be taxed as income at your marginal rate. Instead, you should go for low/no dividend shares that you expect to grow in value more.

One example of a share that doesn't pay a dividend is BRK (Berkshire Hathaway). One could argue that this particular share, by itself, is well diversified. This is because it owns, or holds a large share of, companies across many different sectors. Have a look at the link below and you'll realise that BRK could be considered a fund in itself, except treated the same as a share from a tax perspective.

Talking about the expected performance of individual shares isn't allowed on the forum but I believe talking about the advantageous tax-treatment of BRK in comparison to a fund, potentially holding a similar selection of assets, is permitted.

I wouldn't hold BRK alone in a portfolio though - although I would have no problem holding a higher allocation to it that to a typical individual share. For example, you could consider 30% BRK and 10% to a selection of seven other shares across a variety of different sectors.


http://en.wikipedia.org/wiki/List_of_assets_owned_by_Berkshire_Hathaway
 
To be honest I don't intend to sell any of the properties for a long time. As they are generating a v good nett income.

I think I'm getting confused with the word "stock" and "share". Is BRK a stock, which effectively is a company in this case which invests in other stocks. Is that not the same as a fund?
If I have an account with TD Waterhouse (opening soon) can I invest in BRK and profits would only be subject to CGT?
What other stocks would be similar to this in terms of medium to low risk, no dividend and diversified?
 
ALL STOCKS COME WITH RISK!! A couple of food based companies on the iseq have seen there share price double in the past year and a current oil producing share I own is up 30% in a month but this can swing the other way. Again I highly recommend that you read up a little bit on it, it isn't that difficult as you are investing long term I presume rather than trading which is a different kettle of fish completely. If you concentrate on ftse100 companies or even iseq there are number of companies in food/energy/financial/manufacturing etc that would give you a good spread. Look up price to earning ratios on these companies and make a decision. One could argue that there may be value in certain bank shares at the moment, others would not. it is essential that you do your own research. As I said before, spending ten or twenty euro on a couple of books will give you a much better understanding.
 
A massively leveraged portfolio of seven properties and ten stocks - what could possibly go wrong?

2006 called and it wants its investment plan back...
 
hikicker said:
I assume the 100k isn't borrowed money
Click to expand...

I'm sure it isn't but buying equities while you are carrying debt is essentially the same as buying equities on margin.

That might be justified in the context of making contributions to a tax-deferred retirement account (as there is annual limit on such contributions) but there is no getting away from the fact that investing on margin (i.e. using other people's money) is a highly aggressive strategy that can go horribly wrong. Just look at some of the former titans of Irish industry that have come undone in recent years by pursuing this strategy.
 
Fair point, he is obviously on very low rates if he is making cash on these properties yet is in negative equity.
 
...and interest-only mortgages at that.

Investing in equities while in that position is essentially doubling down on what is already a highly risky speculative bet on asset prices. A sharp interest rate increase could bring down the whole house of cards.
 
Sarenco said:
...and interest-only mortgages at that.

Investing in equities while in that position is essentially doubling down on what is already a highly risky speculative bet on asset prices. A sharp interest rate increase could bring down the whole house of cards.
Click to expand...

I didnt' realise they were interest only. Yep, playing with fire indeed....
 
100k not borrowed.

I have Cash reserves too.

Yes over exposed in property.
Although I have no mortgage on one of the properties, bought last year, hoping to avail of the seven-year no capital gains tax deal.

All the rest are approximately achieving 4-5 times the rent compared to the ECB +0.75 interest only mortgages. Extra rental income has been saved not squandered.

Will start reading up on the markets as suggested.
 
You must log in or register to reply here.
Back
Top