Investment Portfolio

I doubt there are any cheaper than TDW. May I ask how much you intend to invest per month?

Most of the advice I read to go for ETFs seems to be coming from the US, but there you can get commission free investing in ETFs, via the likes of Schwab and Vanguard.

Maybe ETFs just aren't that viable an alternative for Irish investors who don't have very large sums to invest?

Having (arguably) better funds than Rabo's is a compromise if it is at the expense of regular investing.

Let's say you have €300/month to invest. Let's just look assume you contribute for one year.

With Rabo (from a post above) you pay 0.75% entry fee = €27 for one year's contributions. You also pay 1.5% pa = €54pa for every year (compounded) thereafter.

With TDW, you pay 12 x €15 = €180 to invest and say 0.5% = €18 every year (compounded)

If you save all your money and then buy an ETF in one hit, your charge is €20 up front to buy and €18/year

I think investing small sums in ETF's is not ideal but depending on the length of time you intend to keep it for, they are worth considering.

If you save all your money and then buy an ETF in one hit, your charge is €20 up front to buy and €18/year

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That will tend to not work out, you’d be buying at a price at the end of a 12 month period, not the average price of the previous 12 months. The end price only needs to be a couple per cent higher than the average price for the 12 months to cost more than the savings made by consolidating the entry fees.

There are significant advantages to regular investing over lump sum investing.

It’s interesting that despite criticism of both the fund choice and service provider, that no one yet has provided an alternative. If you invest through Rabo you can invest 100 euro weekly at 75 cents a go, can any broker available to Irish residents beat that?

I wonder does Rabo 0.75% simply sound more expensive than it is? A broker can advertise having a flat charge of 12-20 euro and some people don’t realize that for modest investments the 0.75% will be much cheaper.

It's true that investing at the end of the year in a lump sum has it's disadvantages although interest earned in a savings account in the meantime would partially offset these.

The length of the investment term is important here. A 1.5% AMC compounded over 10 years is 16% where as 0.5% comes to 5%. There have been many posts here in AAM suggesting that AMC's understate actual costs by 0.5% or more. If this is true, the cost of fund with an AMC of 1.5% is say 2% compounded = 22%

So a Rabo fund is likely to cost somewhere from 16% to 22% while an ETF will cost ~5%.

The figures for a longer investment term favour ETF's more stongly.

Also, assuming disposal is carried out as a lump sum, the disposal charge for the ETF will be much lower.

So to summarise:

Up front costs: Rabo is better for small regular investments
Ongoing costs: ETF's win hands down
Exit costs: ETF's win hands down

I think that ETF's are a very viable alternative to RABO funds when you look at overall costs and not just up front costs.

Thanks all, i've done some basic calculations based on a 2% charge for rabo funds and a min EUR 15 charge for ETFs. Given a 6% gain pa for a 300 per month investment after charges the ETF would return 2539 and the funds would return 3317.

Based on these it seems that Rabo funds would be more suitable for regular investing for the money i'm thinking? is there anything i'm missing here such as the tax implications which i'm not really sure about?

If you are a starter investor the following might be information overload, but you'll know yourself.

My own preferred fund choice is Investment Trusts (in the US they are referred to as Closed-end funds). They are funds quoted on the stock exchange and you buy & sell them just like a share. I do like ETFs but often good quality investment trusts can trade at a discount to the fund value (discount to net asset value) and that can improve returns 'if' the discount narrows.

Two good examples currently are HG Capital and British Empire Securities. The former is a top class private equity fund with a strong track record of growth and excellent investment discipline across the cycle. The latter is a global equity fund with an emphasis towards value investing and a long-term track record of above average growth. Both are trading on 10% discounts to reported NAV (net asset value). When they are fully back in vogue, the discount will narrow to zero providing a modest but useful return boost. Both are covered in detail on my own website.


Rory Gillen
Founder
GillenMarkets.com

Also, check out Interactive Brokers.

You can lodge euros through an Irish bank and maintain a balance in multiple currencies.

Their charges are 4 euro for European trades, 6 pounds for UK trades and 1 dollar for US trades.

There is a minimum monthly commission of $10 (assumming you hold at lease $2,000 worth of shares or ETF's).

If you pick two ETF's traded on the European market, you could do two trades a month giving a total commission of €96 for the year (one trade per month doesn't work out much cheaper due to the minimum monthly commission).

I've had an account with them for years. I have UK bank accounts, Irish bank accounts and an Australian bank account that I can lodge money to and from. The exchange rates for foreign currencies are unbeatable too - just in case you decide to venture into US shares in the future.

After some analysis it seems that i would pay a min of 15% fees to use ETFs due to the small amounts i will be investing. For this reason it looks as though funds are more suitable for my portfolio.

I've gone with a quarterly investment in addition to an initial lump some evenly spread between the following funds

BNP Paribas Plan Target Click Fund 2020 Acc
Robeco Chinese Equities
Henderson Horizon Global Properties Equities
Merrion Growth FundTop Pick
RobecoSAM Smart Energy Fund
Templeton Global Total Return A Acc EUR

Thanks to all for your inciteful comments which have been very useful. I'll let you know how the portfolio is going at the yearly review next march,

best of luck

If you are intent on investing regularly, then perhaps wait until you have accumulated at least €1,000 on each occassion. Then invest and the trading costs should be low enough in relation to your investment so that they don't impair the likely returns, particularly with the online stockbrokers like TD Waterhouse, FXCM Securities and even Davy.

Your expectation of return at 6-10% is a little wide. In the past, at the average values of about 13x earnings, equities in the larger developed markets have delivered 5% per annum over inflation. Today, inflation is circa 2-3% and markets, bar the US, look to be valued along long-term norms suggesting annual returns from here on a 5-10 year view of circa 6-8% before costs. Of course, the businessc cycle is alive and well and will deliver negative returns at times along the way. Your regular investing plan should allow you ride through the inevitable next downturn.

It's been almost two years now..... Any update from the OP as to how things are going?