Great post. I just started looking at some ETFs after 4 years focusing on individual stocks. I noticed those accumulating ETFs you shared are present in several european countries, some of them with very different prices. If I were to buy those ETFs, I have no idea which to choose... or if it really matters.
Hi Diogo, I'm no expert but from what I can tell in terms of the different prices it may just be that some funds were formed earlier than others and have had more time to grow to a higher value. The best tip I can give is to look at the fact sheets to understand what the funds are invested in to see if it aligns with your risk tolerance and goals. The fact sheets will tell you the fees, dividends, historical performance, the allocation of stocks in different sectors, and locations and the top 10 companies the fund is invested in and so on. Getting familiar with reading these can help you to gain comfort with what you are investing in by buying that particular ETF. Hope that helps
I don't understand your logic of not having any pension at all when people are often living well into their eighties. It's by far the most tax efficient investment vehicle in Ireland. The only reason to not have a pension is if you know you have a limited life expectancy due a medical condition.
Hi there, I agree pensions are tax-efficient, no argument there but that's only 1 piece of the puzzle. My experience reviewing pensions for others as well as from research done by the department of social welfare, has been that pensions have very convoluted and hidden fees that often weigh down the end result. The average real rate of return I saw for my clients was 3.54%. My research has shown that you need a real rate of return of at least 5.95% in pension to outweigh investing in ETFs outside a pension. There is also a deemed disposal in pensions once you reach 61 and 71. You need to pay income taxes as if you'd withdrawn 4% of your entire pot from age 61 and 5% from age 71. High and hidden fees, lower performance, changing goal posts and levies and access age are all reasons I am not opting for a pension. I agree my net worth could be higher by investing in a pension but this is not my concern. By keeping my expenses low and my savings high I plan to be financially free in 10 years or so by the time I'm 45 (all going well of course). I do not plan on stopping work at that point either so I will still be earning money well beyond the point that I need it which will more than cover my cost of living well into old age. Studies have also shown that retiring early and withdrawing 3-4% of your portfolio actually lasts longer than if you start accessing later due to the compounding over a longer period of time. Of course my situation is not the norm and will not suit everyone. It's important to note that personal finance is just that, personal. Everyone will have different goals they are trying to attain and different investment vehicles will suit those goals better than others. Mine just happens to be ETFs.
Hi, thanks for reading. This article was written from the perspective of Mrs Money Hacker so I can’t speak on her behalf.
I personally have a pension and a personal portfolio of stocks. I utilise the pension for the tax benefits but the obvious draw back is being unable to access it until you legally retire which could be 30 to 40 years. Many people want to be able to retire a lot earlier
Great post. I just started looking at some ETFs after 4 years focusing on individual stocks. I noticed those accumulating ETFs you shared are present in several european countries, some of them with very different prices. If I were to buy those ETFs, I have no idea which to choose... or if it really matters.
Hi Diogo, I'm no expert but from what I can tell in terms of the different prices it may just be that some funds were formed earlier than others and have had more time to grow to a higher value. The best tip I can give is to look at the fact sheets to understand what the funds are invested in to see if it aligns with your risk tolerance and goals. The fact sheets will tell you the fees, dividends, historical performance, the allocation of stocks in different sectors, and locations and the top 10 companies the fund is invested in and so on. Getting familiar with reading these can help you to gain comfort with what you are investing in by buying that particular ETF. Hope that helps
Thank you very much! ;)
I don't understand your logic of not having any pension at all when people are often living well into their eighties. It's by far the most tax efficient investment vehicle in Ireland. The only reason to not have a pension is if you know you have a limited life expectancy due a medical condition.
Hi there, I agree pensions are tax-efficient, no argument there but that's only 1 piece of the puzzle. My experience reviewing pensions for others as well as from research done by the department of social welfare, has been that pensions have very convoluted and hidden fees that often weigh down the end result. The average real rate of return I saw for my clients was 3.54%. My research has shown that you need a real rate of return of at least 5.95% in pension to outweigh investing in ETFs outside a pension. There is also a deemed disposal in pensions once you reach 61 and 71. You need to pay income taxes as if you'd withdrawn 4% of your entire pot from age 61 and 5% from age 71. High and hidden fees, lower performance, changing goal posts and levies and access age are all reasons I am not opting for a pension. I agree my net worth could be higher by investing in a pension but this is not my concern. By keeping my expenses low and my savings high I plan to be financially free in 10 years or so by the time I'm 45 (all going well of course). I do not plan on stopping work at that point either so I will still be earning money well beyond the point that I need it which will more than cover my cost of living well into old age. Studies have also shown that retiring early and withdrawing 3-4% of your portfolio actually lasts longer than if you start accessing later due to the compounding over a longer period of time. Of course my situation is not the norm and will not suit everyone. It's important to note that personal finance is just that, personal. Everyone will have different goals they are trying to attain and different investment vehicles will suit those goals better than others. Mine just happens to be ETFs.
Hi, thanks for reading. This article was written from the perspective of Mrs Money Hacker so I can’t speak on her behalf.
I personally have a pension and a personal portfolio of stocks. I utilise the pension for the tax benefits but the obvious draw back is being unable to access it until you legally retire which could be 30 to 40 years. Many people want to be able to retire a lot earlier