I get asked this a lot, and many clients often wonder how they can get their savings to work harder for themselves.
Over €11 billion has been saved during the Covid 19 crisis, and we currently have over €120 billion saved in deposits. The reason for this has been two fold. The inability to spend due to the continuous restrictions and lockdowns in the country and the ‘Fear Factor’ people are trying to build a cash buffer.
I started saving more aggressively last April when childcare was stopped temporarily, coupled with the fact that my spending on diesel, weekend trips, surf trips, dining out were all curtailed. I had my second child in March, but overall spending dropped considerably.
I decided to take advantage and I invested using two different methods.
- Buy Shares through Degiro
- Increase regular savings through Zurich regular Saver and Invest in the International Equity Fund
I’m not going to lie I find Degiro very user friendly. It’s not a platform I can help set-up so there is no bias here. You can buy and sell shares with a click of a button on their app. It’s really low cost. To buy shares in the U.S.A cost. €.50 per trade and a commission of 0.0004. Equally in Ireland it’s €2.00 per trade and a commission of 0.05% per trade. They are the cheapest online stock broker I’ve come across, and it’s also very easy, nearly too easy to buy and sell. They have an option to buy ETF’s and some are commission free.
This app is great for the do it yourselves investors, who are happy to explore what’s available and have a certain financial literacy level. It’s important to be aware that you’re liable to do your own tax returns here.
When I started investing last March, my portfolio has gone up by 25%. However, I don’t necessarily think it was my ability to pick the right stocks. Most stocks have gone up by a significant amount since. In hindsight the stock market was at a low level then.
Another way to invest your money is through a Fund and after my own research I decided to invest in the International Equity fund through Zurich Life. Performance over 10 years is 11.09% per annum. The fund invests in over 300 companies worldwide and is actively managed. Top holdings include; Microsoft, Google, Apple and Visa. I do like this fund as there is a large team in Zurich managing your money and making the Investment decisions for you within the fund. It’s high risk, however. Since March, this fund is up over 27%. However, note the fees are higher when compared to Degiro. The running cost of this fund is 1.25% per annum. I do like the aspect of investing the money and forgetting about it.
When you’re investing it’s important to consider your risk level and what you’re prepared to lose. However, I’m an optimist and my personal feeling is the stock market will continue to go up over time, especially over the longer term, so I do think it’s wise to get involved.
When comparing these two options it’s important to be aware of the Pros and Cons of investing directly in the Stock Market vs a managed fund through the Insurance companies.
Managed fund in an Insurance Company
Growth is taxed every 8 years or on encashment
Tax rate – 41%
Life Insurance Levy – 1% on Premium paid in
You don’t have to file a Tax Return
Growth being taxed every 8 years is a positive as you benefit from the growth being compounded over time
Buying stocks and shares
Capital Gains tax 33% on any gain
First €1,260 Gain is tax free
You have to file tax returns on gains and Income every year
A benefit is the €1,270 Tax Free Gains exemption every year. Effectively free money on growth of your stock purchases.
In my opinion it’s hard to beat a good performing fund and investing every month into a fund like the International Equity Fund, however I’ve found clients and people in general do like the buzz of buying their own shares. I often recommend doing a bit of both. I always recommend getting professional advice when it comes to investing.
This represents the views of Eoin Wilson and does not constitute financial advice. When you invest money you risk losing all of your money. Pure Finance Ltd is regulated by the Central Bank of Ireland.