As a swiss resident, what can be more costlier? Currency exposure to the USD or higher fees in CHF?

Investing / Portfolios
1

I have found similar posts to mine, but honestly I had a hard time understanding what I want to know from them.

On my swiss IB acount, if I aim to buy ETFs for some well known indexes, in general which is the cheaper option in the long term?

  • Vanguard ETF in USD with low TER
  • some other ETF for the same index, traded in CHF, with higher TER

I can see how the CHF/USD price changed over the long term, but it is hard to compare that to a TER % difference (or is it? can it be compared to the currency change in %?). Assuming CHF/USD price trend is similar to previous years/decades, is it known that one aspect is more important to swiss residents than other the over the long term?

2

Trading currency doesn’t matter, the composition of the index does.

6 Likes
3

Think about it like buying an iPhone. Would it matter if you have bought it in US or Zurich or Shanghai? In the end it’s an iPhone

Similarly when you buy an index fund or ETF, you are buying shares in same group of companies. Only thing that changes is how much you paid for it and how much you pay to continue owning them

So focus on costs

  • trading costs
  • Currency exchange costs at time of buying or selling
  • Custody fees (if any)
  • Other costs of transacting
  • TER%

Example -: if you have an etf with 0.15% TER (traded in CHF) vs 0.07% TER (traded in USD). If you need to pay 2% to convert CHF to USD to buy ETF traded in USD then it would take some time to break even in terms of costs paid every year via TER. But if you can convert the money for cheap like on IBKR then break even time is much smaller

Assumption -: trading costs and custody costs are similar for the above example

1 Like
4

Replying to both of you at the same time. So what I understand from your answers, is that the currency exchange rate would also be present in the CHF based ETF’s price, right? If the CHF got stronger againts the USD over time, I would get less CHF if I were to sell my CHF based holding, because the companies in the ETF do not get (most of) their revenue in CHF.

Meaning I can feel good about my Vanguard ETF holdings with the lowest TERs :smiley:

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5

Assuming you mean VT. Then yes , you can chill :slight_smile:

Not everything you said is correct though. But let’s focus on conclusion

6

VT and VOO split evenly and a small fraction of RSP.

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In your example @Abs_max , would the break even point happen after 2/0.08=25 years, meaning you would be in the green with the USD based ETF after 25 years?

8

That’s only true if the ETF is not growing. But if ETF grows every year the breakeven will be earlier.

Perhaps best to draw a chart and it would be clear