What is an ETF ?
ETF stands for Exchange Traded Fund . As its full name suggests, an ETF is an investment fund whose shares can be traded on an exchange.
Exchange Traded Funds (ETF) are essentially portfolios of shares managed by an investment professional. Shares in an ETF can be bought and sold through a stockbroker just like shares in any company. Some people refer to them as Index Funds .
Index-tracking ETFs typically have very low fees compared to actively managed funds, which makes them a good tool to diversify your investments quickly, easily and cheaply.
Shares in Exchange Traded Funds or Index Funds are listed on stock exchanges, just like shares in individual companies. ETFs can provide individual investors with an opportunity to buy a varied portfolio of stocks, in the same way as if they were dealing in a single listed share.
Exchange Traded Funds are fairly common retail investment products. While one can select exotic ETFs, tracking cryptocurrency or metals , for most investors, they are a simple low-cost method of investing in the FTSE, S&P 500 indices or similar. In recent years, investors have flocked to ETFs because they are easily tradeable and usually have low management charges.
You may be also interested in our article about Buying Shares in Ireland or this page about Where to Buy Fractional Shares
Diversification with ETFs
ETFs can be an easier and more cost-effective way for investors to achieve returns from say the S&P 500 or the FTSE 100 without having to purchase all the individual stocks. Exchange-Traded Funds offer a convenient alternative to purchasing all of the underlying stocks of a particular index. For most investors, ETFs offer a lot more diversification than you’d ever hope to achieve by building your own portfolio of shares. (Lower fees too usually)
Exchange-Traded Funds are also generally easier and cheaper to manage than a big portfolio of self-selected shares. If you just own a small handful of individual shares, a poor performance from one share will have a much larger impact.
- ETFs typically aim to track a specific stock market or index such as the FTSE 100 , FTSE 250 , ISEQ, S&P 500 etc.
- ETFs have charges built in to cover the fund manager’s operational costs. These charges tend to be very low, often below 0.2% a year.
Of course – as with any stock market based investment there is always a risk of losing money.
Choosing Accumulating or Distributing ETFs
There are two types of ETFs
- Distributing (DIST): they pay the dividends of the holdings to the investors.
- Accumulating (ACC): they reinvest any dividends to buy other stocks.
This has implications for taxation because there is a 41% tax on ETF dividends in Ireland.
More about ETF taxation is further down the page.
Some Popular ETFs
Vanguard S&P 500 : This tracker ETF tracks the performance of the Standard & Poor’s 500 Index that is comprised of the stocks of 500 large US companies.
iShares Core MSCI World SRI (EUR)
The investment objective of this Fund is to provide investors with a total return, taking into account both capital and income returns, which reflects the return of the MSCI World Index.
Vanguard FTSE All World : This ETF seeks to track the performance of the FTSE All-World Index. This is a market-capitalisation-weighted index of stocks of global large and mid-cap companies in developed and emerging countries.
iShares MSCI World Broad exposure to a wide range of global companies within 23 developed countries. Covering 85% of the listed equities in each country.
iShares FTSE 100 : This tracker ETF follows the FTSE 100 index – the 100 largest UK companies trading on the London Stock Exchange.
iShares Euro Stoxx x 50 – This tracker aims to reflect the return of the EURO STOXX50 Index. This is the benchmark index that measures the performance of the 50 largest companies in the Eurozone.
How To Buy ETFs in Ireland ?
In our article about Buying Shares in Ireland – we compare the fees charged by some online stock trading platforms available in Ireland. Most of the online brokers in the comparison will allow you to choose from a selection of European ETFs. (Lightyear, DEGIRO ,Trade Republic, Davy , Etoro, Goodbody, Interactive Brokers )
Some brokers will have a smaller selection of ETFs than others.
Buying Exchange Traded Funds will normally have the same brokerage fees as trading any other shares – but the fees charged by some brokers can be many times greater than the cheapest option.
In our comparison below, the lowest fees for regular purchases of ETFs (in Euros) were available at Lightyear
Fees On ETF Trading Compared
| Buy €1000 worth of an EU ETF each quarter for 5 years then sell for €30000 | Total Share Dealing Fees and Commissions |
|---|---|
| Lightyear | €0 |
| Trade Republic (Savings Plan) | €1 |
| Etoro (Deposit & Withdraw Euro using Etoro Money App) | €4.40 |
| Trade Republic (Non Savings Plan) | €21 |
| DEGIRO (Limited to their Free ETF Selection) | €33.50 |
| DEGIRO (If ETF Not on the Free List) | €75.50 |
| Interactive Brokers | €110 |
| Davy | €949 |
| Goodbody | €1890 |
Where to Buy ETFs in Ireland
Lightyear
Lightyear is one of several new online stock trading platforms to appear on the scene in Ireland and the UK in recent years .
Lightyear first launched its trading app in the UK market in Q3 2021 and expanded into Ireland and most of Europe in the summer of 2022.
Lightyear has an added advantage in that they pay interest on any uninvested cash in EUR, GBP & USD Their current interest rates are shown below.
Lightyear Savings| Lightyear Interest Rates | |
|---|---|
| Currency | Interest Rate |
| Euro | 2.5% |
| GBP | 4% |
| USD | 3.75% |
| Correct as of Nov 11th 2024 | |
There are over 200 ETFs available at Lightyear. (Early 2024) .These are mainly ETFs from Vanguard and IShares , but new ones appear to be added relatively often. (They cannot be bought fractionally.)
Some of the popular ETFs available on Lightyear include :
Vanguard S&P 500 , Vanguard FTSE All World, Vanguard FTSE 100
Lightyear ETF Trading Fees
- There are no fees for buying or selling ETFs on Lightyear. (other fees may apply)
- Lightyear does not charge any inactivity fees, there are no one-off or monthly charges to open an account or to deposit, hold and withdraw funds.
The provider of investment services is Lightyear Europe AS. Lightyear Europe AS is authorised and regulated as an investment firm by the Estonian Financial Supervision Authority. Read more about Lightyear Here
When you invest, your capital is at risk.
Trade Republic
Trade Republic is based in Berlin and has gained more than 1 million customers since launching its investment app in 2015 They launched in Ireland October 2022.
As of early 2024 there were almost 2000 ETFs available to buy through savings plans on Trade Republic. These included popular ETFs from Amundi, Ishares, Xtracker, Wisdom Tree and many more.
There is a flat fee of €1 per trade.
More about Trade Republic Here.
All Stock and ETF orders of Trade Republic customers are routed through Lang & Schwarz Exchange, an electronic trading system operated at Hamburg Stock Exchange.
Trade Republic are supervised by the Federal Bank of Germany and BaFin (Federal Financial Supervisory Authority)
You can apply to open an account at Trade Republic
Investing in the stock markets carries risk: the value of investments can go up as well as down and you may receive back less than your original investment.
DEGIRO
DEGIRO charges a commission of €2 plus a €1 handling fee per ETF trade. (Total €3)
However – they usually offer lower fees on their “core” selection of about 200 European ETFs. – (€1 handling fee will still apply). Terms and Conditions apply – See Here .
The Vanguard S&P 500 and all the popular ETFs listed above were in the DEGIRO core selection at the time of writing. (Early 2024).
Every calendar month, the first trade executed in an ETF on the DEGIRO “ETF Core Selection” will be free of commission. Any trades made in that same ETF during the same calendar month will also have no commission as long as:
- The trade is in the same direction (i.e. buy/sell) as the first trade made that month in that ETF
- AND
- The order value is at least €1000 EUR
Be aware that on DEGIRO – some ETFs may be listed on multiple exchanges and that it is only the exchange -listed that is commission-free.
DEGIRO also charge a €2.50 annual fee per stock exchange used. – So a good tip is to try and buy all your ETFs on DEGIRO from just one exchange (Amsterdam / Paris etc) to avoid paying multiple annual exchange fees of €2.50 .
Please note that Investing involves risk of loss.
More about DEGIRO here.
Buying Exchange Traded Funds on Etoro
EToro has a selection of about 300 ETFs that can be traded . Most of them seem to be US ETFS but there is a handful of EU and UK ETFs available.
It is possible to buy fractional ETFs on Etoro (from as little as $10)
Some examples of EU/UK ETFs that are available on Etoro include:
iShares Core MSCI World UCITS ETF
iShares MSCI Europe ETF
iSharesEmerging Markets MSCI ETF
iShares Core FTSE 100 UCITS ETF
iShares Core MSCI Europe UCITS ETF
iShares S&P 500 UCITS ETF
X-trackers Stoxx Europe 600 UCITS ETF
Xtrackers Nikkei 225 UCITS ETF
(These could changeover time)
When you buy one of the above EU ETF’s – it is just the same as buying shares in a company.
Etoro doesn’t charge a commission , just a $5 withdrawal fee when withdrawing USD.
Since mid 2024 – it is now possible to use Euros to buy Euro denominated shares/ETFs. This means you can avoid any worries about conversion fees or currency fluctuation. Prior to mid 2024 – all trades on Etoro were carried out in USD
Irish customers can use the Etoro Money App to send Euros to Etoro.
Read More About Using Etoro in Ireland
(Your capital is at risk. Other fees apply. For more information, visit etoro.com/trading/fees)
CFDs on Etoro
It’s important to note all non-EU ETF trades opened on Etoro by residents of the EU or UK are only available as CFDs.
With a CFD (Contract for Difference) – you don’t own the ETF, instead, you are basically agreeing to a contract with the broker to replicate market conditions and settle the difference (profit or loss) when the CFD is closed.
In order to replicate a simple BUY of an ETF – make sure you set the leverage to 1. Any higher than that will increase the risk of losses.
Any profits from Contracts for Difference (CFD) are liable to Capital Gains Tax in Ireland. (Same as profits from shares) . They are not liable for income tax or any other tax like ETFs
More about CGT and Investments here
There is an overnight fee to hold a CFD on Etoro. It works out at about 0.023 % of the value a night – but that would soon end up at around 8% a year. The fee varies in line with LIBOR. This fee probably makes it not worth holding CFDs for the long term.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
{etoroCFDrisk}% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
See more here on CFDs
Interactive Brokers
Interactive Brokers is a worldwide company and in Ireland, they are regulated by the Central Bank of Ireland . Online share trading can be carried out on a desktop or also on the IB app. Funds can be held in several currencies including USD, EUR and GBP.
Their fixed fee for Euro ETFs is 0.1% per trade – Minimum charge €4
ETF Fee Comparison on Monthly Purchases
| Buy €1000 of an EU listed ETF once a month for 5 years. Sell for €90000 | Total Share Dealing Fees and Commissions including Stamp Duty |
|---|---|
| Lightyear | Free |
| Etoro (Deposit & wthdraw USD) | €4.40 |
| DEGIRO (If on the Free ETF Selection) | €12.50 |
| DEGIRO (Not on the Free List) | €165 |
| Etoro (Deposit & withdraw Euro) | €180 |
| Interactive Brokers | €260 |
| Davy | €2550 |
| Goodbody | €2315 |
What is UCITS ?
Many ETFs will have the letters UCITS mentioned in their name.
UCITS stands for “Undertakings for the Collective Investment in Transferable Securities”. This refers to a regulatory framework that allows for the sale of cross-Europe mutual funds.
UCITS funds are perceived as safe and well-regulated investments and are popular among many investors looking to invest across Europe.
Taxation of ETFs in Ireland
One thing that can put people off Investing in ETFs in Ireland is the taxation.
With “normal” shares , you pay income tax on the income from dividends and when you sell the shares you will also be liable for Capital Gains Tax (33%) on any profit above €1,270 .
More here on Tax on Dividends
More here on CGT on Shares
But with ETFs it’s different. You can end up paying 41% tax on any profits and dividends . Also – every 8 years you are “deemed” to have sold your EFTs and are liable for tax on the “deemed” profits.
Read more here about The Taxation of ETFs in Ireland
Investment Trusts Vs ETFs
Investment Trusts can be seen as an alternative to EFTs.
Some people prefer them because the tax treatment of Investment Trusts in Ireland is preferable to ETFs.
An investment trust or investment fund is made up of a collection of underlying stocks or other financial instruments. However, an investment trust/fund , unlike most ETFs , will be actively managed by a fund manager. This means that the contents of the fund are often reviewed and can change over time. The charges for an actively managed fund will be higher than that of a passively managed tracker/ ETF .
Charges on an investment trust tend to range between 0.5% – 2.00%. These costs will usually be included in the price of the product.
Investment trusts are funds that are publicly listed as companies on a Stock Exchange, and so can be traded like any other company shares. By buying shares in an Investment Trust you are getting exposure to several different assets with just one investment. (In a similar way to Exchange Traded Funds) .
EFTs will typically track an Index (FTSE 100 , S&P500 etc) – but Investment Trusts are typically invested in a smaller, handpicked selection of companies or other assets/bonds/gold etc. As with all shares – their value can decrease as well as increase and you are at risk of loss.
More here about Investment Trusts Vs ETfs in Ireland
Taxation of Investment Trusts
If you buy shares in Investment Trusts – there are no specific guidelines from Revenue on how they are taxed in Ireland. But we understand that they are treated like any other share in a company and that any dividend income will be taxed at your marginal rate of income tax and any gains will be taxed at the CGT tax rate of 33%. (First €1270 of gain a year is exempt).
Investment Trusts are NOT treated the same way as ETFs for tax purposes.
(This is our opinion – and not financial advice)
Taxation of Stocks and Shares in Ireland
What if I am a resident of Portugal and still want to buy Irish Accumulating ETFs? Do I still have to pay 41% tax or provide deemed disposal?
The tax rules of Portugal (not Ireland) will apply to you if you are a resident there.
Great info above. Can I buy ETFs with De Giro and transfer them to my PRSA or my PRSA AVC with a life insurance/stockbroker provider of these AVCs.
Hi KTM. Transfer of ETF to a PRSA or AVC would not be possible as far as I am aware.
Hi, Could you tell me – if I buy ETF’s in a joint account and one of the joint account holders dies, does this death trigger deemed disposal tax?
Hello Lisa – It would probably be best to get confirmation from Revenue about that. Let us know what they say.
It is likely it would trigger tax on 50% of the gains – but do check with Revenue, we are not tax experts.
In the case of a joint account with a spouse or civil partner – It would be very surprising if the death of one triggered any exit tax because the transfer of funds between spouses does not trigger exit tax.
Know much about UK Income Funds? Can’t figure out if ETF or Investment Trusts rules should apply. It is definitely managed by fund managers so I though Investment Trust, but I’m not sure.
Example: fundcentres.legalandgeneral.com/srp/lit/XO6xKR/Fact-sheet_Legal-General-UK-Equity-Income-Fund_30-11-2022_UK-ADV_UK-PRIV.pdf
Thanks.