Current setup [CT & IE-based funds] vs. moving to Vanguard-US & IB

@hedgehog
ahh true, it must have been a little late yesterday. thanks for reminding me. now looks like

So “only” a yearly cost decrease by 0.4%, and an additional 1% per position opened.

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Ah, so it is recommended to us the UK based IB branch? Not the US one?

In fact you don’t have a choice :wink:
European investors are registered automatically in the UK branch. When you create your account at IB and you read the contract, you’ll realize that you are dealing with the UK entity.

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so, applying these on-time 1% to a randomly chosen FI stash of 2’000’000, this earns me half a year of no work. wow!

and 0.4% annualy results in 8% loss over 20 years, 12% over 30 and 15% over 35 years. I guess i should make plans to swich…

however any more input on this? I made a big point once for the swiss juristiction. what effect could this possibly have?

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What was the point for staying in swiss jurisdiction?

It was a purely non-quantitative argument. It can’t be put into numbers. It feels good.

That’s why I’m planning - once I’ll reach FI - to move some of my investments into Europe-based ETFs and move that stuff from IB to CT. It somewhat feels safer in CH (or even better I’ll move that investments to Liechtenstein).

Are you considering tracking error, like which index has a better history of tracking error? Is not something you can control, but is worth a thought.

And world ETF in US may not have tax treaties with some countries so you can’t presume you are getting all the dividends. You can only do that with 100% us equities ETF.
You should research with which countries IE has tax treaties, and the same for US.
US will still be ahead since are 55% of world indexes, but you can’t generalise it if you want to be rigorous

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If going for a one fund portfolio, it’d make sense to optimize for US. Not only does it make up more than a half of the holdings in any world fund, but its withholding rate (15%) is also higher than the world average of 10% or so, judging from https://www.bogleheads.org/wiki/Nonresident_alien_with_no_US_tax_treaty_%26_Irish_ETFs#Estimating_Level_I_tax_withholding_paid_by_US-domiciled_funds

I don’t really think IE is better than US with respect to tax treaties, but I haven’t seen this summarized anywhere so far, and it’s somewhat hard to find hard data on this without having to dig through a ton of fund reports

One interesting advantage of ex-US IE funds for taxed-at-source-only swiss investors could be the lack of withholding taxes on distributions from IE. Assuming 10% fund-level withholding taxes for ex-US, that’d be all a taxed-at-source-only investor would pay (through the fund). Whereas for the same stocks in a US ETF, you’ll pay 15% extra of US withholding taxes on receiving a payout from the fund, making it 25% in total. But if you go through ordinary swiss taxation or otherwise have to pay tax on your dividends in Switzerland, it doesn’t make a difference as swiss marginal income tax rates are higher than 15% for most folks and so 15% of US taxes will be just absorbed by your swiss taxes.

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I just found out that CornerTrader at this time does not support the W8-BEN handling. hm… one more for IB (they do, right?)

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Do I read the cost page of IB correctly:

for buying US-domiciled vanguard ETFs (such as VT, VTXUS, VTI,…) i’d pay

0.0035$ per share, min 0.35$ comission plus some minor (like tenfold smaller) other charges?

applying this for purchasing $1000 worth of VT @ 68$/share (ignoring currency exchange), this is 15 shares, resulting in 15*0.0035<0.35, so I’d pay 0.35$ for this purchase? seriously?^^ what am I missing?^^

this aims at finding the minimum fee% i have for not so big transactions: with CT, it is ~CHF 20, that is 0.4% for a CHF 5000 purchase. if this is significantly lower with IB, I’d be free to add funds more regulary in smaller chunks, and hence distribute them more evenly over my asset allocation.

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With currency exchange (mid-spot+0.5%) the difference is even bigger - actually much bigger (e.g. for exchanging your 5000, they will take CHF25).

Since IB charges you $10-commisions monthly if you don’t have 100k invested, I also switched from quarterly to monthly investments. It’s a bit pain in the butt beacuse it takes time. On the other hand, as you mentioned, I get better distribution over time.

haha gives great incentitive to quickly save the remaining 30k :smiley:

but yes, its it seriously that cheap? minimum is 0.35$, up to 100 shares?

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Yes it’s that cheap in the US. You’re missing exchange’s fees which will vary depending on exactly how the order gets executed, but they are a similarly small amount, sometimes even negative, e.g. BATS pays you for removing liquidity. And 2-3 bucks per currency conversion

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in case i move to IB soon, i made myself a stock portfolio selector to cope with the freedom of purchasing low cost vanguard funds.

Its main purpose is to find a portfolio that suits my idea of

  • 100% stocks
  • as many individual stocks as worldwide available (diversification)
  • ideally equally distributed over any sufficiently liquid company stocks, but since this is utopic:
  • market capitalization weighted, with small & value pronounced
  • maybe small CHF home bias

go ahead an make yourself a copy of the sheet :slight_smile:
the current numbers are only my first guess, i might refin it later. comments & ideas for extension welcome :slight_smile:

flaws:

  • the fund properties are very guess-ish, apart from the regional distribution
  • could be extended for further properties
  • leads to many-fund-portfolios
  • not reflected: south america, africa, meddle east
  • overlaps between funds exist
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Why go into so much trouble with a dozen of funds? Simplicity is best. I’d focus the rest of energy on asset allocation for other asset classes - equity is not everything, or maybe stock picking for higher return or polishing defensive characteristics of portfolio

I’m perfectly happy at the moment with just two funds for global passively indexed equity: VTI for US and VEA for exUS developed. You can throw in VWO into the mix for EM if you really want (or just go with VT as a one fund solution). Low cost, a bit even cheaper than VT, and highly liquid. You can swap into IE based funds for ex-US portion anytime if you find a reason to do it (such as maybe due to being strictly taxed at sourced only).

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Totally agree. Simplicity + diversification = VT.

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because i can. i dont regard it as trouble. simplicity is good but no hard reason in this regard.

The IE vs. US domicilation is something i need to get into, indeed. or stuff like VEU vs VXUS. or VWO. if i find the time i will write a guide about it and post it here… which i again recommend to anybody contributing to this forum in the past months. all that valuable information posted is pretty much lost to later users unless systematically summarized, as hardly anybody will crawl old threads.

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I’m also planning to diversify more against more ETF funds (and more asset classes) - but not during accumulation phase of my life, but rather later - during preservation of capital phase of my life. I don’t want to slow down my race to FI.

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i did, and the resul is this post
summarizing: funds containing mostly US domiciled assets are better bough in their US domiciled version (vanguard…) and funds with more ex-US assets (EM-funds, exUS funds) in their IE domiciled version. at least from taxation point of view, wich should always be only one out of several aspects to guide decision.

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