If you’re a share trader or an investor in Ireland, find out how much capital gains tax you’ll pay on the profits.Read more…
Most investors in Ireland know that stock trading is used to build wealth, but few truly understand how it works. When you trade stocks, you’re buying and selling a portion of a company on the stock market (or stock exchange).
Each stock has a price. The price of a stock is determined by the supply and demand of a company’s stocks in the market and the company’s present or predicted future performance.
Usually, when a company is performing well, more investors will want to buy its stocks and its stock price goes up. Conversely, if a company is underperforming and failing to deliver good profits, shareholders may decide to sell their stocks.
You can make money from stock trading by selling stocks for a higher price than you purchased them for or when a company pays dividends.
What is the stock market?
Also called a stock exchange, a stock market is where investors trade stocks in companies. Stocks from the biggest companies in Ireland are traded on the Euronext Dublin, but there are three other lesser-known exchanges as well. These are the Euronext Growth, the Atlantic Securities Market (ASM) and the Global Exchange Market (GEM).
Some of the biggest overseas exchanges include the London Stock Exchange, the NASDAQ, the New York Stock Exchange (NYSE), the Japan Exchange Group and the Shanghai Stock Exchange. These can be accessed from Ireland by using an international stockbroker.
How does online stock trading work?
Although there are physical stock exchanges, stocks are purchased and sold online. To trade stocks, you need a stockbroker to act as an intermediary to the stock exchange.
A broker can be a full-service broker or an online broker. As well as place trades on your behalf, a full-service broker can give you advice about which stock to trade. An online broker is an online software platform that lets you execute trades yourself.
Online brokers are a low-cost option compared to full-service brokers. If you don’t want to go down the path of using a full-service broker, you can use stock trading software to help you learn about which stocks to trade, in addition to an online stock trading platform to make trades.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
How can you make a profit from stock trading?
There are 3 ways to make money from stock trading in Ireland: capital growth, dividends and tax concessions.
This is the most common way to make money from stock trading. This is simply where you sell stocks for more than you paid and get a profit. A capital loss occurs when you sell stocks for less than you paid and suffer a loss.
This is when the directors of a company choose to pay company profits to shareholders. Dividend payments are based on the number of stocks you own. These types of stocks are called dividend (or income) stocks. Not all companies pay dividends, and directors can reinvest profits to grow the company rather than pay a dividend. These types of stocks are called growth stocks.
In Ireland, you’ll typically be charged a Capital Gains Tax (CGT) of 33% and a Dividend Withholding Tax (DWT) of 25% for Irish companies. However, the first €1,270 of capital gains are exempted from any taxation and any gains from investing in government securities are tax-exempt as well.
What are the different types of stocks?
You can trade these types of investments using online stock trading platforms or through a broker in Ireland.
This type of stock is publicly listed on one of Ireland’s stock exchanges. The biggest of these is the Euronext Dublin, which only accounts for 0.2% of the global stock market capitalisation or “market cap” (referring to the total value of all the stocks traded on the exchange).
You can also trade on overseas markets. You can trade stocks in some of the biggest companies in the world including Europe, Asia, the US and the United Kingdom.
Managed funds and exchange-traded funds or “ETFs” are investment tools you can use to access multiple assets, including stocks, property, commodities and derivatives.
What are the benefits of stock trading?
Stock trading can make you money in the short term and the long term, plus they present tax benefits for investors in Ireland.
- Liquidity. Stocks are a “liquid” investment. You get your money soon after making a trade.
- Capital growth. Stocks have proven to be a solid investment for long-term capital growth.
- Shareholder rights. When you become a shareholder, you can vote on company decisions and attend annual shareholder meetings.
What are the risks of stock trading?
Stock trading is a way to make money. Generally speaking, the greater the potential gains, the greater the risk – stock prices can rise and fall quickly.
- Volatility risk. Stocks can be volatile assets. The price can rise and fall quickly depending on a number of things such as good or bad company performance, company announcements and performance of the market.
- Timing risk. The stock market moves in cycles. Buying stocks in a bull market is no guarantee of future performance.
- Government risk. Laws can change and this can impact your stock price and investment strategy.
- Overseas risk. Investing in international stocks exposes you to risk from currency fluctuations and foreign governments.
Stock trading jargon lookup
- Blue-chip. Companies that have a proven record of growth, for example, Bank of Ireland, Draper Esprit, Applegreen, PepsiCo and Diageo are called “blue-chip companies” that sell “blue-chip stocks.”
- IPO. An initial public offering is when a company starts selling stocks to the public for the first time.
- Income stock. Companies that pay a dividend to shareholders.
- Growth stock. Companies that reinvest profits for long-term growth.
- Capital gain (or growth). When an asset increases in value over time.
- Rights offering (or issue). When a company makes stocks available to existing shareholders for a specific price to be purchased within a specific time frame. Existing shareholders are not obligated to purchase stocks under a rights option and are usually allowed to sell this right if they want to.
- Settlement date. The date when the person who has made a trade purchasing stocks must make a payment.
- Sectors. A sector is a group of similar companies. For example, the resources sector is made up of mining and commodities stocks.
- Bull market. When the value of the entire stock market is growing.
- Bear market. When the value of the stock market is falling.
- Day trading. A stock-trading strategy where stocks are purchased and sold on the same day for short-term capital gains.
- Market capitalisation (or market cap). The number of stocks a company has issued is multiplied by the price. This is a way of calculating the size of a publicly-listed company.
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