I do so quarterly a couple of days after dividend is paid. I just avoid a couple of CHF in tax every time
Judging form 55% of market cap still belonging to US companies, would it make sense to also distribute the currency allocation that way?
I wouldn’t agree with the historically. E.g. first time when I visited Switzerland in 2008 it currency rate was 1€ = 1.60 CHF. Prices were still shocking to me back then, but at least you got something for your Euro.
Regarding the historical risk: I talked to my previous landlord two years ago (still in Germany), and she said that they were doing grocery shopping in Switzerland when she was younger (she was 50 at that time, so maybe around 1985-1995).
At the moment, I don’t see the risk that the Franc could devaluate. But who knows…
I wasn’t thinking about avoiding currency exchange, but more about easing the way of asset allocation. If I first have to transfer Swiss Francs to IB, then change it, and then buy stocks if they are low, the barrier is much higher to really do this. Also, like Dec 2018, you might miss out on chances when stock markets crash. But I know it’s kind of market timing, and also you would need to have a plan which can be executed (e.g. buy more ETF when stock market crashed by 20%).
Thanks for your insights! I invest on a monthly basis, where I have a fixed date when to buy ETFs at latest. If they are on “cheap sale” before (e.g. cheaper than my previous average costs basis), I’m buying before the fixed date. In the long run it shouldn’t matter, but you just feel better when you bought shares which are not 5% higher than before.
So the 35% part is mainly pillar 2 and some cash, right? Do you have a separate bank account for the cash money which can be used for rebalancing? I’m asking because I still have a good amount of cash as well, which also provides me a nice fallback if things are not going well with my company (I’m self-employed).
Trying to understand if this makes sense. Aren’t you avoiding the compounding interest with that approach?
The stocks lose value after they pay out the dividents. If you buy after you don’t get the dividents, but you can buy more stocks.
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On the subject of currency risk in the long-term, this is quite interesting:
Essentially, the currency strength ranking over the past 100 years goes: 1) Swiss Franc, 2) Dutch Guilder (now Euro), 3) US Dollar, 4) Canadian Dollar, 5) Danish Krone.
Holding cash is definitely a losing strategy long-term, but if you’re going to hold cash, CHF is probably a pretty good choice.
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I can also immediately reinvest the dividend. I guess I get more compounding interest if that term is accurate in the case of stock ETFs at all.
I was alluding to the fact that the Swiss Franc has historically appreciated against most currencies (mid- to long-term), see chca’s link. That’s a good thing, as long as you have steady income and prices in Switzerland. The change in the exchange rate of course shows that there might be greater movements - it could go the other way, one day.
For cash - or stocks?
Oh, I always have some CHF cash on IB, I don’t have to transfer.
I was thinking about the cash part. But forget this idea, because it depends on the company. Even if it’s an US-based company, if they are making 50% in Euro you have currency risk there as well.
So I recomputed, for my allocation I need 26% of bond in liquid form for a 40% stock drop.
In case you have different allocation, the formula seems to be: 0.4 * stock allocation (which is 0.65 for me)