I wouldn't dismiss ETFs altogether especially because active funds offered by Zurich and Irish Life incurs huge fees with the promise of beating the markets which we know is untrue in the long run.
What about the fact that you’re investing entirely in the US?
That's what I understood but when I asked for direction from Revenue as how to file the amounts for year 16, I got a written reply via MyEnquiries stating that the year 16 tax was calculated on the gain since year 81. Yes, at Year 16 and 24 you subtract the tax you already paid at Year 8 and 16. You are not taxed twice on the same gain.
"My point is this: if the money used to buy a house is entirely from your salary then it is a terrible decision, if any part (or better the whole sum) comes from the dividends of an investment then it is a smart move."
Assuming the fund does well, you'd pay about €15 in fees in year 1. I know it compounds but it's starting from a low base. For that, all admin and taxes are taken care of. All you need to do is fill in forms and a direct debit at the beginning. You don't even have to do a tax return.Link to where either of these companies promise to beat the markets?
What's a huge fee for €100pm ?
You do know that there are passive funds on their platforms?
You're addressing my comments from only a small angle. For a start, there is no such thing called zero risk when it comes to a house because all it takes a slow economy or a flood to drag down the value of a house. We recently had one in East Cork and the house prices went a little bit down after that albeit not by much.A completely invalid point as already raised by plenty a lot smarter than I on this thread.
Surely it's irrelevant where the money comes from to purchase a house. Let's leave aside the other benefits of home-ownership, such as the removal of potential evictions for now.
Purely from a financial perspective, and given the two options, one of either the return on investment of owning your own home or the return on investment on the stock-market is going to win out. Surely, your opinion that buying a house through salary is a terrible decision whilst buying with dividends is a smart move can't hold true. If the long term return on investments was such a clear cut winner over the long term return on home-ownership versus renting, surely you'd continue to pump your dividends into these investments versus EVER buying your own home. How many people in Ireland do this - and I'm not talking just your average Joe, I'm talking everyone, include the super-wealthy?
Looking at it from another angle, the average gross yield of a 3-bed property in Ireland is 7.9%. That equates to €23,700 annually to rent a €300,000 house (and has been rising quickly in recent years). The interest only mortgage, if you could get one, on the entire €300,000 balance, would cost €12,450 (€11,250 less) at a rate of 4.15%.
The reality is that you'd only be tying 10% of that €300,000 up in the house to make these significant savings and would mortgage the remainder. In other words, allocating €30,000 to a mortgage deposit results in savings on the rent-v-mortgage costs of €11,250 per annum. If we allocate 1% of the house value, or €3,000, towards expenses incurred as a homeowner versus a renter, that's still €8,250 in savings.
To gain €8,250 in investment income from €30,000 to cover these savings as a higher rate tax payer would require a return of 52% annualised - just to stand still.
I've read Robert Kiyosaki's book myself and, whilst I believe he does raise a lot of valid points, taking his teachings as gospel and applying it to the decision of whether to buy or rent your own home in Ireland will, inevitably, turn out into a bad decision because the only way you can gain 52% annualised via investments is by going WAY, WAY beyond the realms of what would be considered prudent investment.
Your analysis needs to look at the cost differential between buying and renting. Even a look at historical house prices, mortgage rates and rent costs would give a bit of insight into this.You're addressing my comments from only a small angle. For a start, there is no such thing called zero risk when it comes to a house because all it takes a slow economy or a flood to drag down the value of a house. We recently had one in East Cork and the house prices went a little bit down after that albeit not by much.
To buy a 300k house with a fixed interest rate of 4.15% and a 25-year term your monthly repayments are 1447 and your interests at the end will be 164,284. I took into account the 10% deposit that you will be funding yourself. If paying 164k in interests is peanuts to you then good luck with that. I am not even adding the costs involved in maintaining a house, the property tax and related expenses.
You can invest decently 30k and get some decent returns. Claiming otherwise is just ridiculous.
Again Robert Kiyosakiisn't the only one who don't agree with buying houses. They're many others. Dan Malone who is a fully qualified accountant, tax advisor and financial advisor in Ireland on his Youtube account made a whole video with numbers to back up his claim. You should have a look, it is a pity because this platform doesn't allow me to paste external link. Also Ramit Sethi, a well known financial advisor, talks about that in great details on his platform. These people can't just lie and being so successful in their lives. He runs a YouTube channel called I Will Teach You To Be Rich.
Someone here mentioned that we should buy a house, then max out on pension, and increase our AVCs. How is it even possible to increase pension while dealing with a huge debt in a form of a mortgage? If I draw down a mortgage, surely unless I have paid it back it doesn't make sense investing on anything else? The more I drag this mortgage over the more I will have to pay back interests on that.
This thread isn't about mortgages but investing advice on ETFs, if people want to put all their money on a mortgage it is their prerogative, my initial post was about picking some ETFs to invest a monthly amount on them.
To buy a 300k house with a fixed interest rate of 4.15% and a 25-year term your monthly repayments are 1447 and your interests at the end will be 164,284. I took into account the 10% deposit that you will be funding yourself. If paying 164k in interests is peanuts to you then good luck with that. I am not even adding the costs involved in maintaining a house, the property tax and related expenses.
You can invest decently 30k and get some decent returns. Claiming otherwise is just ridiculous.
You're addressing my comments from only a small angle. For a start, there is no such thing called zero risk when it comes to a house because all it takes a slow economy or a flood to drag down the value of a house. We recently had one in East Cork and the house prices went a little bit down after that albeit not by much.
To buy a 300k house with a fixed interest rate of 4.15% and a 25-year term your monthly repayments are 1447 and your interests at the end will be 164,284. I took into account the 10% deposit that you will be funding yourself. If paying 164k in interests is peanuts to you then good luck with that. I am not even adding the costs involved in maintaining a house, the property tax and related expenses.
You can invest decently 30k and get some decent returns. Claiming otherwise is just ridiculous.
Again Robert Kiyosaki isn't the only one who don't agree with buying houses. They're many others. Dan Malone who is a fully qualified accountant, tax advisor and financial advisor in Ireland on his Youtube account made a whole video with numbers to back up his claim. You should have a look, it is a pity because this platform doesn't allow me to paste external link. Also Ramit Sethi, a well known financial advisor, talks about that in great details on his platform. These people can't just lie and being so successful in their lives. He runs a YouTube channel called I Will Teach You To Be Rich.
Someone here mentioned that we should buy a house, then max out on pension, and increase our AVCs. How is it even possible to increase pension while dealing with a huge debt in a form of a mortgage? If I draw down a mortgage, surely unless I have paid it back it doesn't make sense investing on anything else? The more I drag this mortgage over the more I will have to pay back interests on that.
This thread isn't about mortgages but investing advice on ETFs, if people want to put all their money on a mortgage it is their prerogative, my initial post was about picking some ETFs to invest a monthly amount on them.
How do you work out these fees? In reality, they are way higher than that. But there is another major issue when it comes to investing with the like Zurich or IrishLife: the way they handle the deemed disposal tax. They deduct it from the fund and don't offer any other facility to pay it even with cash. This has the consequence of cancelling out any compounding.Assuming the fund does well, you'd pay about €15 in fees in year 1. I know it compounds but it's starting from a low base. For that, all admin and taxes are taken care of. All you need to do is fill in forms and a direct debit at the beginning. You don't even have to do a tax return.
If people want to spend hours of their time doing admin to save a few quid, that's up to them. But the charges aren't that big and frees you up to do other, more productive things than admin.
* regular investment plans are more expensive than pensions because they have shorter investment lives. If you think that you are going to invest in one of these plans for 20-30 years, the statistics from the life companies don't back that up.
As said by @DublinHead54, where a country has it's HQ is not so important as where it operates. The top US companies are all global multinationals. The truth is that the US has the largest market capitalisation, so if you want to follow the "world" then you must naturally have a tilt towards the US.The MSCI World or the All Country index is very tilted towards US which is why I am leaning towards several ETFs as none of them seemed global enough.
S&P500, Developed World, All Country... these are all perfectly good, diversified indexes. S&P500 ETFs have a lower TER since they invest in fewer companies. The extra diversification of World ETFs comes at a cost as well. I personally prefer FTSE All-World but I don't think S&P500 is a "wrong" choice, especially for someone starting out like the OP with €100 to invest.Again if I worried too much about getting the perfect diversification I'd probably not invest.
As already pointed out to you, money is fungible.But there is another major issue when it comes to investing with the like Zurich or IrishLife: the way they handle the deemed disposal tax. They deduct it from the fund and don't offer any other facility to pay it even with cash. This has the consequence of cancelling out any compounding.
Fees are based on 1% amc.How do you work out these fees? In reality, they are way higher than that. But there is another major issue when it comes to investing with the like Zurich or IrishLife: the way they handle the deemed disposal tax. They deduct it from the fund and don't offer any other facility to pay it even with cash. This has the consequence of cancelling out any compounding.
Let me illustrate my point with a few number if you don't mind please. Investing 400 euros a month over 8 years with 8-9% returns will be close to 12k 'profit' of what 5k is payable in tax. If I sell part of the fund (which is worth 52k) to finance that then the compounding gets reduced next to nothing as the sale is taxable at 41% (9k of the fund needed to sell to cover the 5k). So the only way to avoid that is to finance ti from somewhere else or in the next 8 year period one would 'lose' about 17k from the final return (130k vs 147k). The tax credit, if given in this case, doesn't offset that compounding loss.
In terms of fees for IrishLife Pinnacle fund for instance, if you invest 250 euro per month with a starting balance of 5k, the charge works out almost 1.5% a year which is a lot! You get some ETFs charging between 0.12 and 0.4 %. Assuming a mere return of 3.55%, the charges from year 1 to 5 will be: 418, 678, 689, 624, 699 which is equal to 3108 euros in total. If that is not a lot then good luck to you. The real question is what are they offering for that? Well not much, we know that in the long term they can't beat an index like the S&P 500. If I invest the same amount of money in an accumulating S&P 500 index I will get more for my money. Working out an exit tax can't be that hard as I only need to fork out 41% on any gain that I made during the selling of the assets.
Finally, I have a screenshot of an actual Pinnacle account which highlights these costs but the platform is preventing me from publishing it just in case you're challenging the numbers.
As said by @DublinHead54, where a country has it's HQ is not so important as where it operates. The top US companies are all global multinationals. The truth is that the US has the largest market capitalisation, so if you want to follow the "world" then you must naturally have a tilt towards the US.
S&P500, Developed World, All Country... these are all perfectly good, diversified indexes. S&P500 ETFs have a lower TER since they invest in fewer companies. The extra diversification of World ETFs comes at a cost as well. I personally prefer FTSE All-World but I don't think S&P500 is a "wrong" choice, especially for someone starting out like the OP with €100 to invest.
It's not clear that is the opinion of "most on the thread".I'm in agreement with most on the thread - no ETF is worth investing €100 a month
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