A few years ago, investing meant spreadsheets, brokers, and jargon that made most people’s eyes glaze over. Today, it’s as easy as tapping a button on your phone – and that’s exactly why Exchange Traded Funds, or ETFs, are gaining popularity.
An ETF is like a basket of investments that can hold stocks, bonds, or commodities, and trades on the stock market just like a single share. Instead of betting on one company, you’re investing in an entire slice of the market.
For young investors, especially those using apps like Revolut, Trade Republic, or eToro, ETFs can be an attractive entry point.
We’ve asked Frank Conway, Qualified Financial Adviser and Founder of MoneyWhizz to talk us through the ins and outs.
What are some popular ETFs?
You’ve probably heard of a couple of the biggest ETFs out there – the STOXX Europe 600 and the S&P 500.
The STOXX Europe 600 brings together 600 of Europe’s top public companies from 17 different countries. Think household names like Nestlé, LVMH, and Shell, along with leaders in industries from healthcare to finance.
Across the Atlantic, the S&P 500 does something similar for the US market. It tracks around 500 of America’s biggest companies, including tech powerhouses like Microsoft, Apple, Nvidia, Amazon, and Alphabet.
“So instead of buying shares in each of the companies included in the ETF, one can buy a share of the ETF which gives them access to the share value performance underpinned by all of the companies included in the ETF,” Mr Conway explained.
How are ETFs taxed here?
There’s been plenty of criticism around how ETFs are taxed in Ireland.
As Mr Conway points out, the current system for everyday investors is pretty harsh. Until recently, the exit tax on ETFs was a steep 41%, though it was slightly reduced to 38% in October’s Budget.
On top of that, investors only get a €1,270 tax-free allowance, and there’s the added headache of the so-called “deemed disposal” rule – which means you might owe tax even if you haven’t actually sold your investment.
As Mr. Conway put it, “While Albert Einstein called compound interest the eighth wonder of the world, the deemed disposal rule in Ireland acts as a compound killer.”
What he means is that Irish investors are required to declare and, if necessary, pay tax on any gains every eight years after first buying an ETF – even if they haven’t sold it or actually made a profit in real terms. This “deemed disposal” rule keeps repeating every eighth year.
To make matters worse, losses can’t be claimed back later.
Mr Conway gives an example, “Let’s say your ETF has doubled in value after eight years. You’d need to declare those gains and pay the tax due.
“But if that same ETF crashed the following year and lost all its value, there’s currently no tax mechanism that allows you to offset that loss.”
On the flip side, Ireland is actually very attractive for ETF providers thanks to its favourable tax setup, which is why so many of them are based here.
But, as Mr Conway from MoneyWhizz points out, there’s a clear disconnect: while the country is a hub for ETF companies, the benefits don’t always trickle down to everyday investors buying these funds.
How do our rules compare to other countries?
When it comes to ETF taxes, Ireland is on the higher side compared to other countries.
For example, investors in the US, UK, and India generally pay around 20% on their gains.
“There are different rules for short-term and long-term investing, but when I talk to people from these countries, the higher end is usually around 20%,” said Mr Conway.
He adds that other countries also tend to offer much more generous tax-free allowances. “The UK, for instance, gives you almost two-and-a-half times the tax-free threshold that’s available here in Ireland,” he notes.
Mr Conway illustrated the impact of taxes with a simple example of two brothers – one living in Navan, County Meath, and the other in Newark, New Jersey.
If both invested €40,000 for seven years, assuming a 9% growth rate and accounting for management fees (40 basis points in the US and between 50–100 in Ireland), the results after tax are striking.
The brother in Newark would end up with roughly €25,300 to €26,900, depending on his tax situation. Meanwhile, the brother in Navan would net just €16,100 to €17,400, factoring in the 41% Irish tax after the tiny €1,270 tax-free threshold and whether he used an online platform or full-service broker. Even with the upcoming 2026 exit tax changes, his outcome only improves marginally.
“In other words,” Mr Conway points out, “the brother in Navan earns significantly less, even though both are taking on the exact same investment risk.”
Are ETFs worth investing in?
Many people shy away from ETFs once they learn about the rules affecting everyday investors.
Things like the deemed disposal rule and the low tax-free threshold can have a big impact on returns, and that can feel intimidating.
Still, Mr Conway believes ETFs generally offer better potential returns than leaving money sitting in a low or no interest savings account.
“There’s a huge amount of household savings just sitting in accounts that barely earn anything,” he explains.
“Often, families tell me they’d rather keep their money there, even though inflation is eating away at it, than get involved with an investment like an ETF that requires paying tax on gains via the deemed disposal rule – even if no real profits have been realised yet.”
That said, Mr Conway believes ETFs can be a smart way to build financial security.
He feels they’re particularly appealing to younger investors, especially at a time when getting on the property ladder can take much longer than in the past.
“A lot of people looking for alternative ways to build security are watching this space closely and asking why promised reforms keep getting pushed down the line,” he says.
But he also cautions that ETFs require patience.
“One of the best strategies I’ve come across is just to ‘buy and leave,’” he explains.
“Markets go up and down, but over the long term, they tend to rise.”
For example, the S&P 500 has grown by an average of about 9% a year since 1926.
That said, there are times when markets can take a hit and valuations drop sharply.
“Understanding those market ups and downs – and how ETFs react to them – is key to really appreciating the value and potential of ETFs,” he adds.