Exchange Traded Funds (ETFs) are becoming a popular choice for investors looking for a simpler way to access the stock market. Unlike traditional investing, which often involves brokers and complex spreadsheets, ETFs allow individuals to invest in a basket of assets—including stocks, bonds, or commodities—through a single share traded on the market.
Financial advisers say ETFs offer a practical entry point for younger investors using trading apps such as Revolut, Trade Republic, and eToro. Frank Conway, founder of MoneyWhizz, explains that ETFs give investors exposure to multiple companies at once. For example, the STOXX Europe 600 tracks 600 of Europe’s top companies, including Nestlé, LVMH, and Shell, while the S&P 500 reflects 500 of America’s largest firms, such as Microsoft, Apple, and Amazon. “One share of an ETF gives access to the performance of all the companies included in the fund,” Conway said.
Despite their appeal, ETFs in Ireland face challenging tax rules. The exit tax on gains was recently reduced from 41% to 38%, but the “deemed disposal” rule still requires investors to pay tax on any gains every eight years, even if they haven’t sold their holdings. Losses cannot be offset in future years. Conway likened the rule to a “compound killer,” limiting the growth potential of long-term investments.
Ireland’s tax system for ETFs is notably higher than in countries like the U.S., U.K., or India, where investors generally pay around 20% on capital gains. Conway illustrated the impact with a hypothetical scenario: two brothers invest €40,000 for seven years, one in Navan, Ireland, the other in Newark, U.S. Accounting for growth and fees, the U.S. investor could net €25,000–€27,000, while the Irish investor would only keep €16,000–€17,500, even after upcoming tax changes.
Despite the tax hurdles, Conway believes ETFs remain a worthwhile investment, particularly compared with low-interest savings accounts. “Many households keep money in accounts that barely earn anything, even as inflation erodes their value,” he said. ETFs offer a way to grow wealth over time, especially for younger people who face challenges like rising property costs.
Conway advises a long-term approach to ETF investing. “One of the best strategies is to buy and leave. Markets fluctuate, but historically, they tend to rise over time.” For example, the S&P 500 has averaged roughly 9% annual growth since 1926. Understanding market cycles and the way ETFs respond to them is crucial for realizing their potential.
While Irish tax rules complicate investing, ETFs provide a practical tool for diversifying portfolios and building financial security. For many, they offer an accessible way to participate in global markets and potentially earn higher returns than traditional savings.
