So There is no need to know about shares

[KOW]

Starting points.

1. I agree that owning individual shares over the long term is most probably the best way to invest.
2. ETFs purchase in Ireland are currently very messy around taxation and record keeping etc.
3. I have held funds with Zurich, New Ireland in the past over the past 15yrs. Shares I picked myself and invested at the same time have performed better than the fund managers.
4. The purchase of shares is best done now days with one of the online brokers.
5. I start to draw down pension next month.
6. I am 60 have the bases covered.


I know nothing about share prices. I take a look at individual shares. I take a look at their historical performance. I look at who and what fund managers own the shares etc.
I am not looking for financial advise. I have around 200k I would like to purchase shares with.
In my own head I would like to have about a portfolio of about 10 shares. Most probably household/international large companies. Holding for most probably 10yrs plus.

1. How should I select such companies. Am I capable of doing this.
2. My current holdings are CRH Ryanair Smurfit Kappa. I fully understand tax situation around these shares.
3. If I start to purchase British, American, European shares with Irish broker what is the story around taxation.

Can or should I sit down with somebody before investing?
If so who or where?

 

[Brendan Burgess]

I agree with most of what you said, but one minor disagreement.

I take a look at their historical performance. I look at who and what fund managers own the shares etc.

This is a waste of time. It will not help you to pick winners. Time and time again, the research shows that only a handful of Warren Buffetts exists.

1. How should I select such companies. Am I capable of doing this.
2. My current holdings are CRH Ryanair Smurfit Kappa. I fully understand tax situation around these shares.

Yes, you are as capable as anyone else.
Look for large companies.
Look for industry diversification. So you have Ryanair, don't go buying Easyjet or any other airline.
Look for geographic diversification - but the companies you already have are already very diversified geographically.

3. If I start to purchase British, American, European shares with Irish broker what is the story around taxation.

This is the most painful part.
I have German shares and have given up trying to reclaim the tax refund. The rules change. The forms change. It's a pain.
UK shares are easier - there is no refund.

I avoid holding American shares directly. I don't know the tax issues and if you hold more than $60k (?) on your death, your estate has to pay American taxes. A solicitor told me recently that if you are the Executor of an estate with American shares, forge the signature when selling them, as otherwise it's a long and difficult process.

Brendan

 

[Zenith63]

ETFs purchase in Ireland are currently very messy around taxation and record keeping etc.

The messiness is overstated in my view, particularly compared to the complexities you’ll embark on buying US/world shares and trying to regularly rebalance your home-rolled World Index ETF and do annual tax returns for it all. For the size of investment you’re talking about you can pay an accountant to deal with the ETF taxes in 8 years time, the extra growth you’ll probably see by getting exposure to the likes of the US market will cover the costs many many times over.

Open an account with say IBKR, buy a single ETF in a small number of tranches over a few months, forget about it for 8 years, at that time spend 20 minutes emailing the transaction export from IBKR to your accountant. Note the lack of stock research, portfolio rebalancing, dividend lodgements and tax filing, double taxation research and forms, worrying about bad news from a stock you chose, SCRIP/DRIP opt-ins, mountains of post about stock splits and rights issues that you don’t really understand in this plan. Still sound messier?

 

[ClubMan]

buy a single ETF in a small number of tranches over a few months

Why this?
Sounds like an attempt at euro cost averaging.
Which I thought had been debunked years ago and shown to offer no advantage?

 

[Zenith63]

Why this?
Sounds like an attempt at euro cost averaging.
Which I thought had been debunked years ago and shown to offer no advantage?

I think it just gives people some comfort that they’re not putting everything in at what might turn out to be a peak. Agreed it is not the best way to maximise returns though, if @KOW can stomach just doing a single transaction it is for the best and will make the tax situation even easier to manage.

 

[Silversurfer]

When buying shares at my stage of life I look at the dividend. My other criteria is DRIP. UK stamp duty on shares is .5% I buy and hold for a long time otherwise the gains can very quickly get eroded by fees. There will be gains and losses. Overall I have gained. Time is the most important denominator.

 

[ClubMan]

When buying shares at my stage of life I look at the dividend. My other criteria is DRIP.

This doesn't make sense to me.
Dividends are assessable for income tax etc. - let's say c. 50%.
Capital gains are assessable for CGT - 33% ignoring allowances/loss offsets.
Choosing a dividend stock and reinvesting the dividends via DRIP is less beneficial than choosing a non dividend stock and letting capital gains do the work more tax efficiently.
Even if you need income it's still more likely to be more tax efficient to just cash in shares as needed.

 

[Brendan Burgess]

This doesn't make sense to me.

Hi ClubMan

Technically, you are correct. And I would prefer if the companies I invest in paid no dividends.

However, I think that there is evidence, that dividend yield is a good predictor of performance. In particular, if a company cuts its dividend, it's a serious warning sign. But if CRH announced tomorrow that they were going to stop paying dividends and were going to pay down their borrowings instead, I would be delighted. But the share price would fall.

By the same token, if a company announces an increase in the dividend, the share price usually increases, although it should have no impact.

Brendan

 

[PMU]

3. I have held funds with Zurich, New Ireland in the past over the past 15yrs. Shares I picked myself and invested at the same time have performed better than the fund managers.

This is to be expected. When you buy a fund some shares will perform better than others; but because of the variation in the correlation between the returns of the individual shares the overall volatility (i.e. risk) of the fund will be lower – so when you invest in a fund you may get a lower return than the return on certain shares and the benefit you get for this is lower risk.
So if you are lucky to pick a winning share its return may be better than the return on the fund, but you have taken on idiosyncratic risk in doing this. It doesn't mean you are a better stock picker than the fund manager. She has to select not only winning shares that meet the fund’s objectives, but also to allocate the fund’s capital (i.e. diversify away the idiosyncratic risk of the individual shares) to maintain the fund's risk risk profile.

 

[bankrupt]

The messiness is overstated in my view, particularly compared to the complexities you’ll embark on buying US/world shares and trying to regularly rebalance your home-rolled World Index ETF and do annual tax returns for it all. For the size of investment you’re talking about you can pay an accountant to deal with the ETF taxes in 8 years time, the extra growth you’ll probably see by getting exposure to the likes of the US market will cover the costs many many times over.

Open an account with say IBKR, buy a single ETF in a small number of tranches over a few months, forget about it for 8 years, at that time spend 20 minutes emailing the transaction export from IBKR to your accountant. Note the lack of stock research, portfolio rebalancing, dividend lodgements and tax filing, double taxation research and forms, worrying about bad news from a stock you chose, SCRIP/DRIP opt-ins, mountains of post about stock splits and rights issues that you don’t really understand in this plan. Still sound messier?

There seemed to be some chance of a change of the terrible tax treatment of ETFs recently, does anyone have any news about that?

Are there any reasonably low cost passive investment options in Ireland that could get close to the cost and flexibility of just buying and forgetting an All-World ETF from an online broker and that would look after all the deemed disposal tax admin headaches? I assume that the OP also needs easy access to this money so a typical fund product is not going to be all that useful as exit charges are exorbitant I guess but maybe someone knows better?

Editing to add: The timing at the moment has to be one of the most difficult decisions - it really does seem that markets are on a knife-edge, impossible to call but there seems to be a real chance of a very large drop and with a shorter duration to invest it would really worry me to put so much into the market right now.

 

[Right Winger]

The messiness is overstated in my view, particularly compared to the complexities you’ll embark on buying US/world shares and trying to regularly rebalance your home-rolled World Index ETF and do annual tax returns for it all. For the size of investment you’re talking about you can pay an accountant to deal with the ETF taxes in 8 years time, the extra growth you’ll probably see by getting exposure to the likes of the US market will cover the costs many many times over.

Open an account with say IBKR, buy a single ETF in a small number of tranches over a few months, forget about it for 8 years, at that time spend 20 minutes emailing the transaction export from IBKR to your accountant. Note the lack of stock research, portfolio rebalancing, dividend lodgements and tax filing, double taxation research and forms, worrying about bad news from a stock you chose, SCRIP/DRIP opt-ins, mountains of post about stock splits and rights issues that you don’t really understand in this plan. Still sound messier?

I hit the LIKE button but I wouldn't agree 100% with you. I get the messiness being overstated, it's not that bad really, if you buy and hold. What you lose with the ETF route is the ability to avoid CGT via the annual allowance, offsetting losses and - ultimately - bequeathing your holdings to your loved ones. These are not trivial issues. One can't help but look north of the border where our fellow Irish citizens in our occupied territories live under the oppressive yoke of the ISA regime, free from all income and capital taxes on their investments.

 

[GSheehy]

Are there any reasonably low cost passive investment options in Ireland that could get close to the cost and flexibility of just buying and forgetting an All-World ETF from an online broker and that would look after all the deemed disposal tax admin headaches? I assume that the OP also needs easy access to this money so a typical fund product is not going to be all that useful as exit charges are exorbitant I guess but maybe someone knows better?

Reasonable, as defined by the regular investor in ETFs - No

Reasonable - as defined by a product provider - 0.66% TER (Min €5K, Indexed Global Equity (Blackrock), early exits 3/2/1% in years 1/2/3, Govt. Levy offset by 101% allocation, one-off payments only ie. you can't 'top it up' or add more SPs to it)


Gerard

www.bond.ie

 

[Silversurfer]

This doesn't make sense to me.
Dividends are assessable for income tax etc. - let's say c. 50%.
Capital gains are assessable for CGT - 33% ignoring allowances/loss offsets.
Choosing a dividend stock and reinvesting the dividends via DRIP is less beneficial than choosing a non dividend stock and letting capital gains do the work more tax efficiently.
Even if you need income it's still more likely to be more tax efficient to just cash in shares as needed.

Value v growth has been debated for a long time.

 

[basilbrush]

Since cost averaging was brought up again: while I don't doubt that there are studies showing that on average lump sum investments have a better return, to me that feels like choosing between a game where you have a 1/9000 chance of €10m while everyone else gets nothing, or a game where everyone gets €1k. The expected return of the former is higher, but for many people the latter is preferable. We only live once, so "expected returns" alone are not enough. Cost averaging your life savings into an investment over several years might reduce the gain, but it also reduces the chance of investing it all at a high that is not reached again for several decades.

 

[Zenith63]

Since cost averaging was brought up again: while I don't doubt that there are studies showing that on average lump sum investments have a better return, to me that feels like choosing between a game where you have a 1/9000 chance of €10m while everyone else gets nothing, or a game where everyone gets €1k. The expected return of the former is higher, but for many people the latter is preferable. We only live once, so "expected returns" alone are not enough. Cost averaging your life savings into an investment over several years might reduce the gain, but it also reduces the chance of investing it all at a high that is not reached again for several decades.

The latest Econtalk episode discusses ergodicity in economics/investing, worth a listen. Relevant to cost averaging and also relying on a small basket of shares that will return a fairly decent average for most people, but maybe not for you, which matters when it’s your life savings.

‎EconTalk: Luca Dellanna on Risk, Ruin, and Ergodicity on Apple Podcasts

‎Show EconTalk, Ep Luca Dellanna on Risk, Ruin, and Ergodicity - 29 May 2023

podcasts.apple.com

 

[SlugBreath]

I bought some UK shares recently through Davy, knowing that the share would be going ex dividend within 3 weeks. My intention was to hold the shares and wait for the dividend chasers to push the price up. As I expected the share price started moving upward and gained momentum within about 4 days of the ex dividend date. I sold about 3 days before the ex date and made a decent profit. I noticed that the share price continued on up the next day. I would have made more by holding on for one more day, but I was happy with my profit.

As per usual, when the share went Ex, the share price dropped considerably more than the dividend amount and stayed down for about a week but has since recovered back to it's pre ex price.

I find that a strong share will often do this.

In my case I could have held on and got both the price increase and dividend. However, I prefer not to hold shares around the Ex dividend dates and usually avoid buying or selling them or even owning them.

I usually follow about a dozen UK shares only. Decent strong companies. I buy when the price dips due to outside factors and sell when the general market recovers.

I keep it simple. I am making as much money for Davy Stockbrokers per trade as I am making for myself but it is steady and pays for the holidays etc.

 

[AJAM]

3. If I start to purchase British, American, European shares with Irish broker what is the story around taxation.

The story around taxation is (assuming your not dead) basically the same, in that you will pay 33% CGT to Irish revenue on any gains made when you sell.

There are some slight differences e.g. you currently pay 1% stamp duty on all Irish stock purchases, but you'll only pay 0.5% for UK purchases and 0% on US. For dividends The US and UK will withhold some of your dividends as taxes too, but they do this automatically, you don't have to worry about it.

The gains for diversifying your portfolio away from Irish stock massively outweigh the small cons.