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?
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…
Interesting. Thank you for sharing @Grog.
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.
World Accumulating ETF will be traded in USD. You will need to convert CHF to USD which cost between 0.1% to 2% depending on the broker.
Thanks for the answer @Grog. My concern is that while in accumulation phase where dividends will be small, it will take a while to have enough to reinvest while avoiding minimum commissions, but at the same time, I should be putting in more money from savings anyway, right?
Do you happen to know any literature that explains tracking error in an easy way?
Cash Drag is what I was referring; that’s why I don’t believe ACC vs DIS ETF makes such a difference.
And yes you should definitely invest your savings with the dividends I’ve actually found out that having a 3-month schedule, a tic-tock determined by dividends helps my discipline immensely.
Btw investing in CHF on the SIX has another advantage: it’s way easier to determine the return rate. If you are investing in USD you always have to retransform eveything in CHF to understand your real rate of growth. So it may be more expensive, but investing in CHF has some “transparency” advantages.
Right now, although I’d much rather invest in SIX/CHF, I see two drawbacks:
- the daily volume is very low, even for a big fund such as VWRL, leading to a wider spread.
- the added buy/sell costs due to the stamp duty.
I really don’t feel like switching from CornèrTrader since I already have the funds there, but at the same time, better do it now since I don’t currently hold any positions, rather than later.
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).
Another question regarding volume: does anyone have prior experience purchasing
VWRL in the Swiss Exchange? How long did you have to wait?
@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?
limit order to the bid price or market order are always immediately confirmed and the stock purchased.
In your calculation did you included the cost of converting your chf into USD to buy it on the LSE? Or did you assume perfect conversion?
I can confirm Grog’s statement, although I have only made one purchase as a market order and it was immediately full-filled (Early January 2017).
Regarding Vanguard USD -> CHF currency conversion
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.”
Nothing new under the sun…
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.