Beginner’s Guide to Investing – Irish domiciled

Investing should be a long-term Strategy

  • Long term investing, not short-term speculation
  • Investment brokers available
  • Guide on how to use online investment broker
  • Unfortunately, we need to explain the taxes on some investments
  • How to research investments

People often ask me if they should wait for the market to drop before they invest or if they should buy this particular stock because they believe it is going to rise. I always tell them the same thing, investing is a long-term strategy, what you are doing is speculation. Very few people lose money when investing long term but many have lost money through speculation. The #1 rule is do not lose your money; it is hard to come by.

There is always talk of another recession just around the corner or another market collapse just like that one we are experiencing now. While the person is waiting for the market to drop they have lost out on growth of their investment. When the stock markets do start dropping, when do you start buying? How do you know where the bottom is? Only 15% of fund managers have been able to outsmart the market and those are trained experienced investors. What chance do we have of timing the market or buying the right stock before it explodes?

Investing is having a strategy and sticking to it; speculation is trying to time the markets or buying shares in a company because you heard they were going to increase. Time in the markets is better than trying to time the markets.

In order to invest, we need to understand a few things about equities, bonds, index funds, ETFs, and brokers.

Equities, shares in a company. You can buy and sell them at any time, they increase and decrease in value based on demand and supply.   

Indexes. Indexes are large baskets of Equities that normally represent a certain sector or industry. Example, S&P 500, Nasdaq.    

ETF. Exchange Traded Fund holds equities, commodities, or bonds in order to closely emulate an index fund or industry.  ETF’s are very similar to mutual funds except ETFs can be bought and sold throughout the trading day just like equities.

Bonds. Government and Corporate loans that are paid back with interest.

What investor broker should I use?

Most people in Ireland that I have spoken with uses Degiro or Interactive Brokers as an investment platform but there are also others that can be used like Davy’s. Degiro and Interactive Brokers do have the best fees and provides all the necessary services and access to the stocks, bonds, and funds that one would need. They are fees involved for buying and selling but they are small compared to other brokers. Degiro charge €2.00 plus a small percentage when purchasing or selling equities and ETFs, while Interactive Brokers charge €1.50 plus a small percentage

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Using this referral link will not cost you any additional fees.

How to use an online investment broker

Most online investment brokers will have the same features; the ability to search for companies or bonds, ability to view your portfolio and account, ability to buy or sell shares or bonds. There are other more advanced features that we won’t go into here; such as commodity or FX trading, or option trading.

I will show you some features of Degiro as that is the platform that I use. Once you setup your account and verify it, you will then need to transfer money into the account.

Transfering money into your Broker: You can manually transfer funds from your bank to your broker. This is usually true for most brokers. They will provide bank details such as IBAN and BIC to aid you with this process, It can take 3-4 days for the funds to transfer. You do need to register your bank account with the broker first; the system will walk you through that process.

Buying / Selling

When you click on the search field, a list of option are presented. Select the option that you would like to invest in. You can also type in an equity name, ISIN, or symbol.

search ISIN or Symbol
search ISIN or Symbol

Selecting Trackers (ETFs) for example would give you a list of all Tracker ETF, use the filters at the top of the page to filter the list down to your desired listing. In this case, I am looking for free ETFs from Vanguard.

You can select buy (B) or sell (S) next to the desired ETF to buy or sell the ETF.

Search trackers (ETFs)
Search trackers (ETFs)

Selecting buy (B) button, you will see the following panel.

placing buy order on ETF
placing buy order

Bid: 69.23. This is how much buyers are prepared to pay to purchase one share
Ask: 69.34. This is how much a seller is prepared to sell one share of this ETF
Limit Dropdown field: I usually use Limit unless I want to buy immediately then I would use Market. Using Limit allows you to set the price that you are willing to pay in order to purchase a share. I normally set this to half-way point between Bid and Ask. In this example I would place the limit at 69.28

screen capture of setting a limit buy of a share

Number Field: You can specify the exact number of shares you want here
Amount Field: You can specify the exact amount you want to spend to purchase the share here
In this case, I am going to specify the amount, the Number field is automatically calculated for me. If I filled in the number field, the amount would have been automatically calculated.

screen capture of setting max purchase amount when buying shares

Day Order Dropdown Field: There are two options in this field; Day Order or GTC. Day order means that if the order is not filled by the end of the trading day then the order will cancel automatically. Good to Cancel (GTC), means that the order stays in queue until it is cancelled by you or it is filled ( purchased ).

What Taxes do I pay on investments?

ETF investing is not tax-efficient in Ireland, there is a flat exit tax of 41% for EU domiciled ETFs. Unfortunately, it is not possible to offset the sale of a losing ETF with the sale of a profitable ETF. There is also a demand tax every eight years called deemed disposal. Even if the ETF has not been sold, you must pay tax on any profit that has been made up to that point.

However, as an investment strategy it’s important to diversify in order to decrease the volatility of the market. Buying shares directly is more tax efficient but one would need to buy a lot of different companies and constantly buy and sell shares in order to match an ETF.

Related: Implement the action, track, and adjust

Investment Strategy

I know investing can be scary, we have all heard of the people who bought a certain Irish utility’s stock only to get stung. But that was not investing, that was speculation (gambling). I would recommend starting slow; start investing small amounts on a regular basis until you are more comfortable with it. Keep it safe by buying index ETFs. I use JustETF  to find the ETF to purchase.

Select ETF Search > ETF Screener

ETF Screener
How to screen ETFs

On the left side, under the Matching Indices, I selected MSCI All World

Filter ETFs
Filter ETFs

Select ‘Columns’ tab from the top of the page.

Set ETF columns
set columns for easier screener

Fund CCY: the currency of the fund. I would recommend that you go for EURO only as the other currencies carry risk. If you are ready to sell your ETF but the currency has dropped against the Euro then you would end up losing some of your profits.

Fund Size: nice to know, usually, the smaller the fund size the newer the product.

TER in % p.a. Total expense ratio in percent per year. This is how much it is costing you per year for the ETF. Most All-World are between 0.4% to 0.6% per year, which is very good.

Distribution Policy. This is important to know. It will either be dividend paying or accumulation. For tax reasons, it is probably better to go with the accumulation ETF. We pay high taxes on dividends here in Ireland, so the way I see it, it would be better to reinvest those dividends back into the fund (accumulation) and then pay taxes after eight years. 

5Y in %. This is the growth the fund has had over the last five years. The All-Worlds had an average of 56% growth that would be a little over 10% growth per year.

Do your own research, this is not financial advice.

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5 thoughts on “Beginner’s Guide to Investing – Irish domiciled

  1. I’m a huge fan of the FIRE movement and I’m delighted to have found someone in Ireland spreading the word!! I will be sure to subscribe to your blog! Keep up the good work!

    1. The S&P500 is very heavy weighted on U.S. stocks that is fine as long as the U.S. economy is doing fine. But I prefer the more distributed investment. The All World ETF invests in stocks around the world, so I am investing in the world economy instead of just one country’s economy.

  2. Hey, helpful article thanks. Any idea what platform provides access to the Ark etf funds as a EU resident? Specifically the Fintech fund, ARKF? I can’t seem to find it anywhere!

    However from what you say about taxes, it might be more tax efficient to buy the stocks directly?


    1. ARK ETFs are not available in Europe as they don’t have a KIID document. The closest I could find for disruptive technology is the ‘Lyxor MSCI Disruptive Technology‘ Keep in mind, that the ARK ETFs do have a high fees compared to the likes of Vanguards; .75% vs .02%

      When it comes to taxes, it is more tax efficient to buy stocks directly as you don’t get charge deemed disposal, you can offset losing trades with winning trades, and you get taxed as CGT. However, don’t let the tax-tail wag the dog. In order to get a good distribution of your funds, you would need to purchase 100’s of stocks and re-balance them on a regular basis. I prefer the easy life; I will stick with my all-world ETFs and pay the taxman when I need to.

      There is a fine-line between speculation and investing. Trying to time the market or purchase a fund at a cheaper price is speculation whereas investing is maintaining a strong distribution of funds across segments and geographies, while keeping management fees and transaction fees lows.

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