I'm looking for the best way to invest in a diversified portfolio of equities (outside of a pension).
Ideally something similar to a world index like the MSCI World Index.
My situation:
I've looked into:
Are there other ways to get into a low cost broad based equity fund or is the investment trust the way to go?
If so any information on IT's that you have would be helpful.
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Below is my research on places I could invest.
Passive equity index ETFs (taxation is too high)
Ideally something similar to a world index like the MSCI World Index.
My situation:
- Emergency fund is maxed out.
- Pension contributions are maxed out.
- Don't want a mortgage for the foreseeable future (won't be in one location for more than 2/3 years for the next decade or two).
- Don't want bonds for 20 years (E.g. state prize bonds).
I've looked into:
- Passive index tracking ETF's.
- Picking individual stocks (mirroring the top of an index).
- Buying into an investment trust (treated liked stocks as far as I know).
Are there other ways to get into a low cost broad based equity fund or is the investment trust the way to go?
If so any information on IT's that you have would be helpful.
____________________________________________________________________
Below is my research on places I could invest.
Passive equity index ETFs (taxation is too high)
- ETF's are not tax efficient.
- They are taxed with exit tax on gains every 8 years.
- I did a very rough calculation, and compared with the way stocks are taxed you end up with around 36% less money post tax after 32 years (so ETFs really don't seem like the way to go).
- You could create your own portfolio which tracks the top 20/30 stocks in the MSCI World Index Tracker, and rebalance twice per year.
- You could rebalance only on buys to avoid too many taxable events.
- This is a lot of work and you're still only diversified among 20/30 stocks.
- You don't get the tax benefit of an accumulating fund with this strategy.
- This strategy takes time and is risky, but you do get the benefit of only getting taxed at the CGT rate when you sell.
- Investment trusts seem to be treated as stocks rather than unit linked funds (meaning you get taxed with CGT rather than Exit Tax, and no deemed disposal).
- There are IT's out there that are diversified and have a low expense ratio (such as FCIT (F&C Investment Trust)).
- Downsides are that:
- There don't seem to be accumulating trusts available.
- There don't seem to be as many IT's available compared to ETF's.
- A consideration to keep in mind is that Revenue could decide down the line that IT's are classified as unit linked funds.
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