Beginning to Invest - All questions go here please

Bob24 wrote: »

Yes sure you don’t have to actually sit down and calculate each month. But what I meant is that if you make a purchase ones a month, at the end of the year (starting on year 8) you will have to make 12 calculations per year based on 12 different cost basis (price on the day that lot was purchased) and 12 different valuations (price on the day it hit its 8th anniversary).

Someone who is buying shares in investment trusts actually doesn’t have any calculations to do if they are not selling, since they are only paying CGT on actual disposals.

Shedite27 wrote: »

I'm not advocating for ETF's BTW, I don't use them outside my pension, but if someone's looking for something that passively tracks an index, it's a better option than an IT. An IT, you're backing the fund manager to beat the index.

I've a weird question about taxes.

When a stock splits e.g. Apple split 4 to 1 last year is the sell of the 1 share and buy of the 4 shares treated as taxable in the year of the split?

The reason I'm asking is that I'm looking at my Degiro report for 2020 and my profits for Apple are more than what I made for Apple. I can't make the sums add up. My sums say I made €527.12 from sales of Apple shares in 2020. Degiros report says I made €620.

I was assuming (probably wrongly) that if I had bought a share for €200 in 2019 and it split 4 to 1 in 2020 I should account for purchasing 4 shares in 2019 at €50 each. Then if I sell the 4 shares in 2021 for €100 each the profit would be calculated at (4X100) - (4X50) in 2021 and the tax on the €200 would be due in 2021.

The maths I'm doing for other years for Apple is fine and for other stocks is fine. I'm just unsure what the correct method is to account for splits.

It will be annoying if that's the case as Nvidia split this year and I've a few grand of profit accumulating on them.

That's what I was assuming. So I reported too much to the taxman last year. At least I know for this year.

The consensus is that Investment Trusts fall within the CGT regime, however my understanding is that Revenue (as usual) have never formally confirmed this.

Note that Scottish Mortgages Trust pays out a dividend which you will need to account for as income on your annual tax return.

When is tax on dividends due? Do I just report them the following year.

Asking as a mat of mine is fairly adamant that they're due as soon as the dividend is received.

Any extra income is included in your normal Form 12 tax return, due by Oct 31st of the following year.

What news is that?

Pros of Investment Trusts in Ireland:

The current consensus is that gains you realise from investing in Investment Trusts are taxed under Capital Gains Tax of 33%, as opposed to 41% Exit Tax. Note that as with all CGT gains, you need to actually realise the gain in order to benefit from the potentially lower tax rate versus Exit Tax or other!

If you do have gains on disposal you can claim to write-off these gains against Capital Losses you may have from past investment losses

You may benefit from the annual CGT allowance of €1,270, or €2,540 combined if you have a joint investment. In essence, each year you can realise Capital Gains across all your relevant investments of up to €1,270 (single) or €2,540 (joint) each year before you start paying tax on realised gains

While they are classed as ‘closed ended’ shares, they are listed on the stock exchange, traded daily and therefore you may be able to buy and sell them with very little if any delay

Some Investment Trusts in Ireland have performed strongly compared to an index approach or retail investment product funds (others less so – see below)

Depending on the values at the time, when you invest in Investment Trusts you may be buying at a discount (cheaper) or premium (dearer) to the Net Asset Value (NAV). Obviously you stand to benefit if you buy at a discount. You will have a heads-up on this when you are considering buying.

On a given day this can vary. The same applies however when you sell so it can be both Pro & Con on entry or exit

The underlying assets can be less diverse and less transparent than an index

You can invest in niche or specific sectors if you wish via separate ITs

Cons of Investment Trusts in Ireland:

As they are actively managed shares the fund fee alone tends to be 1%+ (0.2% on an index fund)

There is a potential illiquidity issue if outflows are higher than inflows, or if you must sell at discount below the NAV

Being actively managed one has no way of knowing which IT will or won’t potentially outperform the market over a period of time

I believe Revenue have never actually confirmed the taxation status of ITs and like anything it is subject to change or challenge in future – so be prepared if the sands begin to shift

If dividends are not reinvested, are paid out to you, you need to report these payments and taxable at your Income Tax + PRSI + USC rates

If domiciled in UK and an investor dies with a holding above the nil-rate band in UK (£325k currently), it can lead to Inheritance Tax payable in UK, and potential double-taxation in extreme circumstances

You would need to sell some holdings to actually realise the gain, in order for you or your accountant to utilise against your previous Capital Losses

UK based equity so FX fees and trading fees apply

If you need to sell and the Investment Trust is selling at a Discount, you would lose potentially big money. This wouldn’t be good because you would be selling at a lower price than the Net Asset Value (NAV)

Total fees can be c1-4% per year (and can be hard to get a definitive on the fees due to the opacity of some of them)

If you read some of the disclosures and Key Investor Documents these companies make it very clear that they are not intended for ‘retail investors’ they are designed for institutional investors

These same KIDs show total yearly fees of over 3.9% (in fund fees alone), when ‘performance fees’ are included

Why are volumes for accumulative ETFs so low on Degiro? These seem like the better option to me over distributative ones.

I want to buy a Nasdaq ETF Acc ETF (Invesco EQQQ NASDAQ-100 UCITS ETF EUR Hdg Acc) but the volumes are so low it's putting me off it. (Acc ~50 whereas Dist ~1000 volume)

That's more like it, thanks!

definitely not a waste of investment. You're only taxed on the profits, so it's making you profits regardless.

A lot of this forum prefer to invest in Investment Trusts. Similar to ETF's in some ways but different tax treatment if you're holding for more than 8 years. There's a thread explaining them here: https://www.boards.ie/discussion/2058183673/investment-trust-watch#latest

Other option would be to go the individual stock route, Learn App by MyWallSt is a good way to get started if you want to learn about that

If you use Trading212, you can create your own investment "pie" which is the same as making your own ETF (but not taxed so heavily). Over the last few years, the majority of gains from the S&P500 came from the top few companies so you could create a pie with the top 10 or something like that and be done with it. SPY is the main S&P500 ETF if you're researching, you can easily check what their top holdings are. Remember that past performance doesn't mean it will necessarily continue, but it can be useful as a starting point. Best of luck with it!

.75% is the standard charge, though every company has different charges to make their money. Some charge a fixed fee €3.50 per month, and there's different charges for different funds, passive (track the index) funds should be cheapest.

Which Learn app is this?

For people investing in individual shares and ETFs are you guys also maxing out pension (with pension in global equity)

Or some people against pensions?

Absolutely. If you pay basically 50% tax on your top income, then your option is €100 to your pension or pay €50 tax and €50 to your investment account. So your investment return has to gain 100% before it gets back level. Then if your employer is contributing or even matching your contributions, it could be €200 to your pension compared with €50 to your investment account. I don't care how good you are at investing, you're not making up 300% on a index ETF.