Dan Malone
Founder of Honest.ie
Irish deposits are devaluing; long-term investing offers salvation.
Ireland is a nation of savers, with over €170 billion deposited in bank accounts. Of this, 85% is in current and instant access savings accounts, earning an average pre-tax deposit rate of 0.14%. After-tax, it’s 0.09%. Assuming 2% inflation, Irish deposits are devaluing by -1.91% every year.
Invest, we must
The alternative? Long-term stock investing. The average annual return of the global stock market is ~9%, or 3-4% after taxes, inflation and other costs. Significantly better than what’s on offer with deposits. Yet, our investments in listed shares and securities as a percentage of household savings are among the lowest in Europe.
Most shocking is our lack of investments in exchange-traded funds (ETFs), accounting for a fraction of our total net worth. ETFs allow investors to access multiple assets through a single investment. ‘Equity ETFs’ invest in stocks, with many classified as ‘index funds.’ These funds provide investors with the return of an index, a market-measuring tool.
For example, the MSCI World Index measures the stock performance of companies across 23 developed countries. Buying a share in an MSCI World Index ETF allows you to invest in over 1,300 companies!
ETFs allow investors to access multiple assets through a single investment
Why ETFs are a good investment
Exchange-traded equity index funds are among the best investments for the average investor, aside from a pension, for five reasons:
- Returns: Consistently provide better long-term returns than actively selected investments
- Efficiency: Have lower average costs than traditional ‘mutual funds’
- Diversification: Invest in many assets, helping to manage risk and volatility
- Convenience: Requires a fraction of the research time compared to active stock picking
- Accessibility: Can often be invested with as little as €1 using an online broker
But our people aren’t investing in them. Ironic, as Ireland is an ETF-industry leader, with over 70% of European ETF assets attributable to Irish-domiciled ETFs. That’s over €1 trillion. Budget 2027 should encourage retail ETF investment by reducing gains taxation to 33%, removing the eight-year ‘deemed disposal’ rule and allowing ETF losses to be set against other investment gains.
