I’ve pulled out trusty Google Sheets and tried to model a reasonable simplistic scenario during 20 years consisting of 40K yearly purchases with varying stock prices starting at the current 74.- for VWRL and ending at 120.- in 20 years (with some volatility for a more realistic simulation), and in the end the difference between investing in VWRL:xswx with CornerTrader or VWRD:lse with IB with its lower costs (and no stamp duty) is around 2’000.-, so probably not worth worrying so much.
Disclaimer: didn’t consider inflation, dividends reinvestment, currency fluctuation nor conversion costs. Assumed 1 purchase per year (to keep formula complexity down).
@pombeirp: do you have a reliable source to think the fact VWRD is in CHF doesn’t hurt the returns of the fund (via some currency operation from the underlying USD fund)? Otherwise, how did you build your comparison?
On 4th February i wrote them the following: “Good morning, I would like to know how and which currency conversion rates are applied (against the real time Kurse) when I buy Vanguard ETFs on SIX Swiss Exchange (listed in CHF) whose base currency is USD. For example: FTSE All-World UCITS ETF (VWRL).”
Today (16 days later) I received this answer: “Good afternoon, Thank you for your email. A standard spot currency exchange rate is used when the ETF trades in a currency other than it’s base currency, at the time of trading. Your broker should be able to provide further details on the particular workings of this. Please do let us know if you require any further assistance.”
Which purchase interval did you assume ? 4x year ?
In my case I’m buying 6x year, thus would pay a little bit more (min. 18 CHF/purchase at CornerTrader against ca. 4-5 CHF at IB). The difference in commissions is about 80 CHF/year. Stamp duty (0.15%) would add another 60 CHF.
Not the end of the world…
Can you share a copy of your sheet ?
I assumed perfect conversion, to keep the sheet simple. I think I’ll make it public and share the link, so people can look at it and suggest improvements and point out any errors.
I’ve done a lot of reading on the internet on this subject and so far what I read argued that it doesn’t make a big difference (the fact that the fund in SIX has a much lower volume and hence a bigger spread is more concerning to me). But at this point I don’t have any links I can share. I’ll post them if I come across the info again.
Come to think of it, I don’t think I’m doing the right calculation of how the management fees impact the investment value over time. Not sure how to model that either
As far as management fees impact goes, I’ve reflected that on the actual unit price (it goes down by the respective management fee percentage every year). Hopefully that is a good representation of the reality.
Notes: didn’t consider inflation, dividends reinvestment, currency fluctuation nor conversion costs. Assumed 4 purchases per year (you can clone the sheet and adjust cell B13 to your own preference).
Columns F:H would be better to keep the values multiplied by the “Purchases per year”, so when you sum them (last row) you get the money effectively paid during the period
You should probably also consider the stamp duty if/when you sell (in case you’re not able to live only with the 2% dividend). Assuming for simplicity that you are going to sell everything the last day (exactly after 20 years) it would be about 1’800 CHF.
IB minimum transaction costs are difficult to estimate… I’ve purchased three times since I’ve opened my IB account and paid following transaction costs:
Thanks for the input @weirded ! Fixed point #1. Regarding #2, the stamp duty is already accounted for in cell B36 (referencing cell $B$9). Cell B36 is basically telling you how much you’d be able to get out of the broker if you redeemed everything at that point.
Yeah, I don’t know why the forum didn’t make a reference to the original post, since I clicked in the Reply button there…
In any case, not sure if we can rely on CT’s rates being that good, since the advertised rate is 0.5%. I find it hard too good to believe that conversion costs at IB are just 2-3 USD!
Also, I’m not sure if the transaction rates I’ve put in the sheet for IB are correct. I’d appreciate it if someone who has experiencing trading with them can quickly check it and report any errors.
I didn’t notice that cell B36 had a different formula. Am I wrong or you also changed the formula in the meanwhile (adding O35 instead of the original N35) ? Or am I going crazy ?! I was writing a comment on it based on a saved Worksheet version and suddenly seen other values…
One more thing worth mentioning: international bank transfer costs. With IB you transfer CASH from Switzerland to Great Britain. Until now (tried with PostFinance and Migros Bank) I couldn’t manage to pay less than 5 CHF for a transfer.
According to @MrRIP with UBS you can transfer for free…
Will try to do next transfer with my last option (SwissQuote account) and see what happens…
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“Good afternoon, Thank you for your email. A standard spot currency exchange rate is used when the ETF trades in a currency other than it’s base currency, at the time of trading. Your broker should be able to provide further details on the particular workings of this. Please do let us know if you require any further assistance.”
I was writing a comment on it based on a saved Worksheet version and suddenly seen other values…
