I currently use Swissquote and I’m also looking for another provider.
The one at the top of my list are:
Schwab, interactive brokers and Degiro
I still waiting for some answer to have the best one.
Honestly, it quite hard to understand and take into account all fees to do cost simulations. Forex fees are often hidden.
In the meantime some fellow Mustachian bought this on SIX just before close (30 + 23 units @ask price 72.09 after the whole day still…).
Total of the day is 553 exchanges. Compared to other markets (Euronext 3’468 in EUR and LSE 29’067 in GBP / 2’467 in USD), on SIX it’s really illiquid…
Do you Mustachians buy this on SIX ? With which strategy (wait 'til midday and then place a limit near the lower ask ?)
Hi all,
I post this here 'cause it’s linked to the topic.
I’m with SwissQuote now and was thinking about beginning buying distributing Vanguard ETFs.
As we discovered, dividends for these ETFs are in USD -> If I buy on SIX I’d have to convert them back in CHF in order to buy new shares.
I called SwissQuote support center to ask about currency conversion spreads. They told me that moving money from the USD “account” to the CHF one has a cost of 0.95% (which seems to me quite high…).
Can someone confirm this based on his experience ? This might be another reason to consider buying on LSE (which on SwissQuote, considering the range 2-10k, seems to cost 25 Pounds instead of the 9 CHF on SIX). With the current exchange rate USDCHF, moving say 6k @0.95% would cost ca. 57 CHF…
Thoughts ?
Thanks a lot for this info. I was not aware that the % was so high and nothing is stated under fee on their website. I have called Swisquote and told me that CHF<->USD was 1%. I will check what other brokerage firm apply.
As we discovered, dividends for these ETFs are in USD If I buy on SIX I’d have to convert them back in CHF in order to buy new shares -> I can confirm that
For a real life example of conversion with cornertrader, the dividend received on the 30th of december 2016 were converted at a rate of 1.01817 CHF/USD.
Regarding the trading volumes, one option is to buy/sell 50’000 shares or more each time so you can negotiate directly with an AP 
http://www.etf.com/etf-education-center/21033-understanding-spreads-and-volume.html
For smaller “traditional” transaction my understanding is that whether you buy on SIX or LSE, the fund VWRL is the same (if you look for instance there https://www.vanguardinvestments.se/portal/instl/se/en/product.html#/fundDetail/etf/portId=9505/assetCode=equity/?overview, the fund is described as being available in four currencies). And I suppose that SIX is able to buy to LSE when you want to purchase some. (Or that a high frequency trader see the cost difference opportunity and does it for them) So I guess that the spread shall not be influenced too much by the volume of the market on which we buy. But that’s pure guesswork.
The CornerTrader conversion seem quite good. Even if we take the daily max (1.0231) it’s 0.48%. With the close price (1.0183) it would be only 0.13%.
Would be worth it to open a specific post about this currency conversion theme !
The good questions would be:
What it the exchange rate apply by Vanguard on ETF traded on SIX ?
ETFs are not stock, does it really matter to have a liquid market ?
I suppose the exchange rate from Vanguard is better than the broker.
I think it’s a bad idea to fund your account in CHF, buy a fund in EUR or GBP which has USD has index currency.
Moreover, trade ETF on SIX is cheaper on Swiss broker than on other exchanges.
@wapiti: I agree, buying in EUR or GBP, with CHF, for a USD-underlying fund sounds the worst ever. I would stay away from that. My question was between:
I don’t understand your remark re. liquidity: how is it not important for it to be liquid? I need to be able to actually buy the fund, and if possible with the biggest volume the fund offers, which will then mean that the spread is small (even if the correlation between volume and spread is not a law of nature, I agree).
Isn’t an ETF a… fund? Meaning that if you buy/sell the ETF, your counterparty is the fund itself? In that case, I would not say liquidity is an issue…
an ETF is managed by a “market maker” that ensure that every time you want to sell (at the right price or with a market order) you will have a buyer
There is for sure a market making (the “ET” part of an ETF) but at the end of the day it is still a fund. Which should mean that your share of the fund is equal to the Net Asset Value per share of the ETF.
Generally these funds (especially the ETFs) are obligated by the market authorities to publish daily the current NAV of the fund. So for a potential buyer/seller there is little interpretation to what should be the right price of the fund share.
People can exchange between them their shares of the ETF but, in the end, what goes in/out of the fund is the sum of all the buyings minus all the selling.
So in the hypothetical case where you could not find any other third party who would be willing to buy/sell your share in the ETF, I don’t see why the fund itself should refuse the subscription/redemption.
The good thing about ETFs is that because they are listed on the market, they have more public penetration which leads to less fess thanks to economies of scale (plus, passive decision about what to invest in). But at the end of the day they are still a fund, right?
I have to give in that so far I could never imagine a case where nobody would want to buy/sell their share of an ETF. I’d be interested if someone has more material. One of my former clients was Lyxor, a big french ETF issuer, and I thought that I had a pretty good idea of what is an ETF. But I have to concede that I never thought about what happens when you have no counterparty for an ETF order.
Hi @night,
I had (have ?) the same concern about liquidity. Anyhow, given our Mustachian approach (buy to keep and sell in xx years to finance our FI) and the number of shares we are going to buy each time, also considering the fund total volume (1’100 Mio USD) I’m not sure if the current number of exchanges per day will really be an issue or not.
In the meanwhile (since the beginning of the discussion) I’ve opened an account at Interactive Brokers and bought some VWRD on LSE (until mow three times, each time 15-20k). Each time I’ve been executed in one or two hours…
Hope this helps.
Thanks @weirded!
I agree with you on liquidity, and I’m 100% buy and hold, it was just from the point of view of optimizing what can be. And my orders usually execute fast - so far I’m also buying VWRD @LSE.
Do you convert some CHF to USD before buying (if yes, where and how?) or do you have some USD lying around?
Hi @night,
I convert on IB my CHFs to USD.
I opened the account there mainly 'cause you can convert money buying/selling on forex just paying a fix commission (like 2-3 USD) instead of the big spreads you usually have to take into account through the banks.
This money exchange thing would be worth opening a separate topic… still thinking about it !
“While any market participant may meet the best
bid or best offer at a given time, a market maker
ensures that there is always a bid and offer quote
at which to trade.”
very well explained by this brochure from Vanguard:
This document is indeed very nice. I was not aware of the primary market mechanism, between the fund and the final investor…
Just last week I was set on investing 60K on VWRL (CHF) on SIX through CornèrTrader, but then I found a couple of threads debating whether investing on VWRD (USD) is better than VWRL (CHF), and then this article (http://www.alvinpoh.com/the-best-index-fund-portfolio-mix-for-non-us-investors/), which argues that accumulating is better than distributing because it avoids receiving dividends that will need to wait before you decide to reinvest them. It’s pretty complicated…
Also, it is mentioned in the article than if you invest in London, you don’t pay stamp duty. Can someone confirm this?
This ETF caught my attention last week too, with a low TER of 0.19%. Unfortunately CT doesn’t sell the SIX-listed version, only the Frankfurt one: https://www.justetf.com/servlet/download?isin=IE00BJ0KDQ92&documentType=MR&country=CH&lang=en
I don’t think it makes any difference at all. Every company pays out dividend when it wants; that means that the fund has always cash on the side, even if accumulating. You can read it on the reports. So if you receive dividends and reinvest them a couple of days after receiving it shouldn’t change anything. I mean vanguard just wait three months and gives you the cash equivalent of all dividends paid out in the 3 months, but this comes from the cash reserve. So I think it’s difficult to see if there are true advantages to accumulating.
Please remember that TER is only one thing. You should look at tracking error and security lending too. For instance I think in 2016 some Vanguard fund were even positive (they made you money instead of costing you) because of securities lending. So it is always helpful to look at the tracking error and see if the ETF is doing even better than the underlying index.