CHDVD vs CHSPI for home bias

In order to do put some home-bias in my portfolio, I had started buying CHDVD. The reasoning behind that is that as I already own the big swiss companies in VWRL I wanted an ETF allowing me to cover other stocks.
At the same time I don’t feel too comfortable with regards to SMIM both for the higher TER and volatility. I’m not sure it makes sense to have >10% of my portfolio in Mid-Cap Swiss companies.

I then realized that of course having dividend oriented ETFs is tax inefficient so I began reconsidering my decision. Looking for the most liquid, lowest TER, diversified ETFs basically left me with CHSPI. Now, I know it still contains the big companies, but it is (?) better diversified than SLI.
I was ready to move my allocation to CHSPI when I realized, looking at the performance charts on JustETF that - if we exclude dividends - CHDVD and CHSPI have basically the same performance.
Am I missing something here? If this is true it would just make sense to keep CHDVD and pay taxes on higher dividends that I wouldn’t get with CHSPI, right?

I would obviously appreciate any other ETF/general suggestion that I didn’t take into account for my home bias (and I know I should include my 3a pillar in it but it’s not enough right now).

CHDVD has Novartis (16.24%) and Roche (15.74%) as main holding. As long as Nestlé doesn’t differ too much from those two, CHDVD and CHSPI will have the same performance.

Buy CHSPI. It is more diversified and has a lower TER. Taxes probably makes a difference too, but remember some dividends are tax-free anyway. If you pay more than 20% taxes it should make a difference I guess.

What would those be?

The companies sometimes use the agios from capital increase to give tax-free dividends. CHSPI and CHDVD put all of them in one of the fund dividend each year. The biggest CHDVD holdings doesn’t look like they did that in 2019 so the fund only distributed 0.06 CHF tax-free in 2019.

1 Like

My point, regarding performance, is that the capital gains, from 2014 to now would have been almost the same. CHDVD is now at +17%, and reached a max of +45%, while CHSPI is now at +21% and reached a max of +41%.

This plot only includes the value of the ETFs.
But if we look at their return after reinvesting their dividends at every payment you can see that over the same time span they both reached +41% but CHDVD made it to a max of +71% against +63% for CHSPI

What I simply find surprising is that the capital gain would have been the same, so even including taxes on dividends (which are probably not taken into account in the justetf plots), having a higher dividend would make CHDVD more profitable than CHSPI no matter the taxation!

No, because to have the same +41% performance you had reinvested ALL your dividends.

LafargeHolcim, for example.

They also have a scrip dividend, consisting of discounted shares.

What about traditional index funds instead of ETF?

Credit Suisse has some that are cheap and accumulating.

Also, since SMI consists mostly of NESN, NOVN and ROG, you could buy an index fund on SMI or SPI and then overweigh mid and small caps using another index fund on SPI Extra?

How much of a ch bias you want and why? Long term you might overweight ch anyway with 2. and 3. pilars, but as long as ch <40% portfolio (i would be unhappy with >20% already), i guess it is still ok. I suggest you read the vanguard’s study about home bias, you will realize it is most of the time a psychological bias.

I would pick chspi over chdvd bc better diversified. I do not think it is worth it to separate Smi + Smim. I do not think you are able to have spi extra from cs outside of 3a.

If i were you i would start with viac and vwrl / vt (or any world etf you prefer) and after a few years look at your allocations (incl 2. Pilar) and you will realize you do not need to buy ch out of 3a.

I personally started investing in CHDVD, but I would invest in CHSPI. In Switzerland, there is no point chasing dividends. And CHSPI is slightly more diversified.

1 Like