Should I wait until the economic clouds clear to start DIY investing?

Q I have money in mutual funds but I was reading up on DIY investing with new tech brokerage platforms and was willing to give it a try (while investing the money in my current funds) but lately has been because of the recession Alarm sounded weeks I have doubts. So I’m wondering should I wait until the economic clouds clear before building my own portfolio? Ian, Co. Wicklow

A First off, congratulations on having some savings and investing them in a mutual fund in the first place.

There are a significant number of Irish savers sitting on cash deposits and nervous about investing at all, despite inflation exceeding 7 per cent.

When it comes to investing in markets, I always prefer clients to see invested somewhere rather than not invested at all.

However, to answer your specific question, timing markets accurately is extremely difficult. I encourage you to consider this new investment portfolio as part of your broader plan. So instead of worrying about current market levels and economic conditions, I would instead ask the following questions:

1. What is your required rate of return?. If you need 8 percent a year of your investments, there’s no point investing in lower-risk corporate bonds.

2. How much thought and research are you willing to put in? You must evaluate and decide for yourself each individual investment on its merits. It’s hard to avoid letting emotions and cognitive biases influence your decisions.

3. How will your new investment be taxed? Are you willing to file your own income and CGT (Capital Gains Tax) return each year, or would you rather have your investment provider do it for you? Most online low-cost providers do not provide tax information.

4. Is your new portfolio suitable enough to coexist with your current fund portfolio and are they compatible?

5. Do you have a pension? Mutual funds are taxed quite heavily in Ireland (41 per cent on profits) and direct DIY investments are taxed at 33 per cent CGT on profits and income tax on dividends. In many cases, an annuity is a better long-term investment vehicle for savings because all taxes are deferred. This allows compounding to work its magic.

Finally, in my experience, it’s very difficult to beat a simple global equity index fund. There are reams of research comparing the returns of DIY investors to the returns achieved by the benchmark, and all show lower returns for the DIY investor. I encourage you to review the studies that DALBAR conducts each year or visit Vanguard’s investor education section.

Stay with a Master Trust?

Q I received a letter from my former employer’s office a few weeks ago advising me that my pension insurance with them will be transferred to a Master Trust which seems fairly fair from what I’ve read about them but then I was told by an ex-colleague that it will be more expensive for ex-employees because they will be using a different pricing structure. do i have options Emma-Jane, Co Dublin

A The pension industry has been in a bit of a tailspin in recent weeks as European legislation on master trusts and occupational pension schemes suddenly came into force.

This has led to changes in the way many companies manage and manage their pension funds. You have several options.

First, you can always leave your pension where it is, within the existing system. Most larger occupational pension schemes are fairly inexpensive. I would send a request to the admin asking about the ongoing fees within the new trust.

Your next option is to set up what is known as an annuity bond. This is a standalone pension structure that retains some of the benefits of an occupational scheme, such as: B. Linking to your old salary and service while the existing trustees remove all control. You have more control over the investment options, the annuity provider and the fee structure.

The third option is to transfer your existing benefits to your new employer’s system, if available.

In many cases, I prefer the first two options for some flexibility in retirement. Many advisors recommend consolidating annuities into one place for control and simplicity.

David Quinn is Managing Director of Investwise Should I wait until the economic clouds clear to start DIY investing?

Fry Electronics Team

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