Hi Malone, any recommendations for an online trading platform that allows you to create business/corporate accounts? Degiro and Trading 212 don't do this
Thank you Dan. A very good video as always. I must watch again to fully understand it all. One element that would be good to include in a future video would be worked examples including taxes to be applied. Tax on interest payments (annual and interest at maturity) vs no tax on capital gain with bond value if you buy below par. Also you mentioned no tax on capital gains, is that just on Irish bonds as an Irish resident or all government bonds on Trade Republic (Germany, France ones etc)??
Could you please explain this " Irish government bonds are tax free on any capital gains that arise on maturity or disposal for Irish resident investors. Any interest income or coupons are taxed at the investors marginal rate of tax. " If I invest in an Irish bond (as an Irish tax resident) until the end (maturity), do I owe any tax on the interest made ?
So if I buy a bond with a 4% yield for 12 months, my initial investment (minus 1 EUR) will be paid back, but the 4% could change overtime? Is there a chance I will get negative interest or absolutely no interest even when paying at the time it reads 4%? Thanks Dan!
Hello! I have a trade republic account. I opened it mainly for long term ETF investing and because they are pasing the whole ECB interest rate to their customers. I find it to be the best EU platform for non institutional investors. But I do not quite understand the bond vocabulary they use. It is not totaly the same as you were explaining. They have the term "annual return" - is this the same as yield or yield to maturity? And they also use quoatation. For example 89% - is this a discount to par? For now as the ECB interest rate is high I will just leave some money on the cash account, but in future when they fall I would like to be ready to also invest in bonds. Best regards, Vid
So if you buy at discount, do you always earn the percentage discount back as a type of capital appreciation? Ie, trade republic have an irish government bond at a quotation of 90%. Does this mean a 10 tax free capital gain as well as the 3.06% coupon per year?
Yes, if you buy a bond at a discount to par then you’ll realise a capital gain upon maturity. However, two things to note here. Firstly, the bond you’re referring to has a coupon of 1.10%, not 3.06%. The 3.06% is the yield to maturity. Secondly, the bond matures in 2029. So although it may seem like a “free” capital gain, the bonds price reflects the present value of future cash flows. Again, the decision is whether you want your returns primarily coming from capital at maturity or annual income
@@malone_financial Oh I see. Is the annualised return inclusive of that capital appreciation then? PS. Good effort actually checking the bond I was talking about.
@Malone if you’re buying Irish Gov bonds for the CGT exemption don’t you also have an annual CGT exemption to utilise across any assets? Something to consider say if someone has over €50k to deposit and wants to earn interest on the balance above €50k on TR without investing long term with its risks?
Hi Dan, if you buy a zero coupon bond that is highly discounted and hold until maturity, does that mean that the proceeds less the purchase cost is all capital gain and is taxed as CGT? Also once you have bought the bonds and don’t sell, at maturity do you have to do anything or will it all happen automatically on Trade Republic that the bond will turn into cash? Thanks for all your help.
I want to thank you for your effort but the way you explain it is SOOO hard to digest. I mean I can go and read it on google the same way, but I’m looking for someone who can explain it in simple ways
Aren't the coupon rates on bonds inversely related to (CB) interest rates? So, now wouldn't be the best time to invest? Also, historical bonds invested in 2 or 3 years ago would be getting a hammering at the moment?
Thanks Dan, I had to watch it a couple of times to fully understand everything but this video was really helpful. I wasn’t factoring in accrued interest when I first started looking at bonds on TR, particularly short term bonds. I foolishly assumed it was like holding a stock on the ex-div date! A couple of quick questions for you if you can help. You mentioned around 11:50 that in Ireland, capital gains on government bonds are exempt from CGT. Is that just bonds from the Irish govt or any govt bonds? Also, would that gain still need to be reported on the following year’s tax form? Thanks again!
My understanding is it's just Irish bonds (and again only if you are an Irish citizen/tax resident), and only when buying/selling Irish bonds. I think you still need to report on your tax return, but it shouldn't raise a tax liability on your tax return. You still however have to pay income tax on the coupon paid from the Irish bond (regardless of nationality/country of residence). @malone_financial? Is that accurate?
Thank you Dan for this great informative video. So I guess this means, if I invest on a Bond that I plan to keep until maturity, and leaving other factors on the side such as risk of default, I am guaranteed to get a yearly interest equal to current value of yield to maturity, regardless of price fluctuations on the market. Is that correct? Thank you.
Not quite. Your yearly yield will equal: interest payment/market price. Yield to maturity accounts for interest payments + principal repayment over time. The correct way to rephrase your statement is, if you keep the bond until maturity (and no default happens) your net annualised yield (i.e. annualised total interest + capital payment at the end of the period) will equal the yield to maturity at the date of purchase.
@@malone_financial Thank you for your answer. Please one more further question. Regarding the interest that is shown in Trade Republic, is it the yield to maturity, or is it the current anual interest (coupon / current market value)? Thank you.
I am really struggle to understand. Let´s imagine I buy one bond. Market value 496 euros. Face value 493 euros. Duration 3 months. Annual return 4,84%. If I bring the bond to maturity, how much money will I get before taxes?
@2:41 They could also hammer out inefficiencies in the HSE & civil service, get welfare lifers working, make indirect and direct taxes such as USC, LPT more targeted at the ultra-wealthy in a pro-rata manner...but I digress...
Excellent video! I think it would be good to have a video comparing a given stock against a bond in the context of interest rates and inflation similar to whats covered in Benjamin Grahams the intelligent investor.
Invest in bonds using Trade Republic: trade.re/Dan
Hi Malone, any recommendations for an online trading platform that allows you to create business/corporate accounts? Degiro and Trading 212 don't do this
If James buys a Bond, his bond will be called, James Bond
actually, if James issues a bond,..
Thank you Dan. A very good video as always. I must watch again to fully understand it all. One element that would be good to include in a future video would be worked examples including taxes to be applied. Tax on interest payments (annual and interest at maturity) vs no tax on capital gain with bond value if you buy below par. Also you mentioned no tax on capital gains, is that just on Irish bonds as an Irish resident or all government bonds on Trade Republic (Germany, France ones etc)??
Would be interested in that too
Could you please explain this " Irish government bonds are tax free on any capital gains that arise on maturity or disposal for Irish resident investors. Any interest income or coupons are taxed at the investors marginal rate of tax. " If I invest in an Irish bond (as an Irish tax resident) until the end (maturity), do I owe any tax on the interest made ?
So if I buy a bond with a 4% yield for 12 months, my initial investment (minus 1 EUR) will be paid back, but the 4% could change overtime? Is there a chance I will get negative interest or absolutely no interest even when paying at the time it reads 4%? Thanks Dan!
Hello! I have a trade republic account. I opened it mainly for long term ETF investing and because they are pasing the whole ECB interest rate to their customers. I find it to be the best EU platform for non institutional investors. But I do not quite understand the bond vocabulary they use. It is not totaly the same as you were explaining. They have the term "annual return" - is this the same as yield or yield to maturity? And they also use quoatation. For example 89% - is this a discount to par? For now as the ECB interest rate is high I will just leave some money on the cash account, but in future when they fall I would like to be ready to also invest in bonds. Best regards, Vid
What the difference between bonds and EFT’s?
So if you buy at discount, do you always earn the percentage discount back as a type of capital appreciation? Ie, trade republic have an irish government bond at a quotation of 90%. Does this mean a 10 tax free capital gain as well as the 3.06% coupon per year?
Yes, if you buy a bond at a discount to par then you’ll realise a capital gain upon maturity. However, two things to note here. Firstly, the bond you’re referring to has a coupon of 1.10%, not 3.06%. The 3.06% is the yield to maturity. Secondly, the bond matures in 2029. So although it may seem like a “free” capital gain, the bonds price reflects the present value of future cash flows. Again, the decision is whether you want your returns primarily coming from capital at maturity or annual income
@@malone_financial
Oh I see. Is the annualised return inclusive of that capital appreciation then?
PS. Good effort actually checking the bond I was talking about.
@Malone if you’re buying Irish Gov bonds for the CGT exemption don’t you also have an annual CGT exemption to utilise across any assets? Something to consider say if someone has over €50k to deposit and wants to earn interest on the balance above €50k on TR without investing long term with its risks?
Can we place limit order for bonds… given bid and ask are very wide
Hi Dan, if you buy a zero coupon bond that is highly discounted and hold until maturity, does that mean that the proceeds less the purchase cost is all capital gain and is taxed as CGT? Also once you have bought the bonds and don’t sell, at maturity do you have to do anything or will it all happen automatically on Trade Republic that the bond will turn into cash?
Thanks for all your help.
I want to thank you for your effort but the way you explain it is SOOO hard to digest.
I mean I can go and read it on google the same way, but I’m looking for someone who can explain it in simple ways
Are bonds safe to invest in? How do you look for safe bonds?
Aren't the coupon rates on bonds inversely related to (CB) interest rates? So, now wouldn't be the best time to invest? Also, historical bonds invested in 2 or 3 years ago would be getting a hammering at the moment?
Or I could just wait until 7:39...
Great video Dan! Can I ask you if you can share another way or more convenient way to buy Irish Government bonds other than Trade Republic?
IMO this is the most convenient and accessible way to
@@malone_financial thanks Dan, but I meant if one can purchase directly from the Irish stock market, and avoid some fees?
How are my bonds at trade republic (Your position - Total) valued?
So Bonds behave similar to dividend Stocks? You can trade them, buy low and sell high, and you get a little Bonus, these 2-4%... Do I got it right?
What do you think about Money Market Funds to get low risk returns?
Thanks Dan, I had to watch it a couple of times to fully understand everything but this video was really helpful. I wasn’t factoring in accrued interest when I first started looking at bonds on TR, particularly short term bonds. I foolishly assumed it was like holding a stock on the ex-div date!
A couple of quick questions for you if you can help. You mentioned around 11:50 that in Ireland, capital gains on government bonds are exempt from CGT. Is that just bonds from the Irish govt or any govt bonds? Also, would that gain still need to be reported on the following year’s tax form? Thanks again!
My understanding is it's just Irish bonds (and again only if you are an Irish citizen/tax resident), and only when buying/selling Irish bonds. I think you still need to report on your tax return, but it shouldn't raise a tax liability on your tax return. You still however have to pay income tax on the coupon paid from the Irish bond (regardless of nationality/country of residence). @malone_financial? Is that accurate?
Thank you Dan for this great informative video. So I guess this means, if I invest on a Bond that I plan to keep until maturity, and leaving other factors on the side such as risk of default, I am guaranteed to get a yearly interest equal to current value of yield to maturity, regardless of price fluctuations on the market. Is that correct? Thank you.
Not quite. Your yearly yield will equal: interest payment/market price. Yield to maturity accounts for interest payments + principal repayment over time. The correct way to rephrase your statement is, if you keep the bond until maturity (and no default happens) your net annualised yield (i.e. annualised total interest + capital payment at the end of the period) will equal the yield to maturity at the date of purchase.
@@malone_financial Thank you for your answer. Please one more further question. Regarding the interest that is shown in Trade Republic, is it the yield to maturity, or is it the current anual interest (coupon / current market value)? Thank you.
I like dans videos, his advice in vanguard etf euro equivalent was very helpful.
But why bother with bonds when trade republic pays 4% anyway
Because the 4% interest is subject to change. With bonds, you’re locking in the interest rate for a specified period of time.
I am really struggle to understand. Let´s imagine I buy one bond. Market value 496 euros. Face value 493 euros. Duration 3 months. Annual return 4,84%. If I bring the bond to maturity, how much money will I get before taxes?
Thanks Dan 👍👍.
@2:41 They could also hammer out inefficiencies in the HSE & civil service, get welfare lifers working, make indirect and direct taxes such as USC, LPT more targeted at the ultra-wealthy in a pro-rata manner...but I digress...
Excellent video! I think it would be good to have a video comparing a given stock against a bond in the context of interest rates and inflation similar to whats covered in Benjamin Grahams the intelligent investor.