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ETF Protection Limits

Index tracking funds and ETFs
OLTB
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ETF Protection Limits

#26858

Postby OLTB » January 28th, 2017, 8:06 am

Am I being a bit of a worry-wart? I think I"m correct in stating that if an ETF is located in Ireland (I think many of them are) that the maximum protection limit is €20,000. Is this really something I should be concerned about if I am choosing ETF's operated by Vanguard/BlackRock etc.? I know no company is invincible and was just after some reassurance!

Cheers, OLTB.

OLTB
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Re: ETF Protection Limits

#26875

Postby OLTB » January 28th, 2017, 9:54 am

Thanks 1nv35t

The investment would be wrapped inside a SIPP so hopefully the tax issues you mention will not be a concern.

As you say, it's the lack of provider diversification that is the main concern but if Vanguard are set up more as a 'mutual' company as you suggest then perhaps it's not too much of a risk.

Cheers, OLTB.

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Re: ETF Protection Limits

#26964

Postby Lootman » January 28th, 2017, 3:09 pm

OLTB wrote:Thanks 1nv35tit's the lack of provider diversification that is the main concern but if Vanguard are set up more as a 'mutual' company as you suggest then perhaps it's not too much of a risk.

At least in the case of Vanguard, I'd assess the risk as minute. Vanguard is one of the three biggest asset managers in the world, is conservatively run and has an impeccable reputation. Frankly, if the Vanguard Group fails then the market will be in such a catastrophic state that you will have bigger things to worry about.

That said, I would personally only invest in the three biggest ETF providers - Vanguard, Blackrock iShares and State Street SPDRs, which give you all the choices of fund that you could wsh for anyway,. Not that I am claiming the other providers are higher risk - just that I know less about them, and that they are smaller.

But don't take my word for the fact that ETFs are very safe. This article covers the risks in a non-paranoid way. It was written in 2009 when the financial crisis was at its height, and there was a lot of concern about the viability of financial entities. Even so it's conclusion should reassure you:

"ETFs are still attracting substantial asset inflows from other areas of the financial market precisely because they offer investors cheap access to a variety of markets with transparency, liquidity and collateral backing. Furthermore, many of the potential risks that we have highlighted here are not specific to ETFs - they concern other managed fund structures as well. Nevertheless, with concerns over the security of financial institutions still very much alive, it's certainly worthwhile examining what might go wrong. While none of the risks here should be enough to put investors off, ETF buyers should be aware of them all when evaluating which fund to buy."

http://www.etf.com/sections/features/54 ... nopaging=1

OLTB
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Re: ETF Protection Limits

#27012

Postby OLTB » January 28th, 2017, 6:02 pm

Thanks Lootman - that is reassuring and I'll be thinking about the 'average Joe' ETFs rather than any overly geared single regional ETFs.

Cheers, OLTB.


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