Degiro discussion

Investing / Brokers
64

Just wanted to open this thread again. I see most discussion is about IBKR. But are people here also having an account at Degiro?

I know IBKR is cheapest and most effective as it also allows US ETFs. But my love for US ETFs is slowly dwindling as we have solid UCITS versions. So I am thinking to further diversify my international broker selection. Only one that comes to my mind is Degiro

Somehow NL feels near and US feels far :slight_smile: but wanted to understand some basics. As far as I understand. If I wish to have account in Degiro, following applies

  • account will be in base currency (=CHF)
  • This means any amount (coming from deposits or dividend or stock sales) in other currencies would automatically be switched to CHF with 0.25% charge
  • No stamp duty or custody fees
  • If I only trade on SIX and use CHF denominated ETFs like (ACWI, SSAC, VEVE, VWRL, FWRA, CHSPI, IWDC) then it’s quite straightforward. This should be good enough for most people. Access to SIX will be free.
  • But if I want to also trade on XETRA , I would need to pay additional fee for access to XETRA and everytime fees will be charged to change currency because by design all ETFs would be available in non-CHF but the actual money in account would always be in CHF. Same would apply if I try to buy WEBG or IMID on SIX as it is traded in USD.

Is my understanding correct?

The last point is a bit annoying because this creates multiple currency exchange transactions even if I happen to have USD or Euro to start with.

Anything else to be aware of which is sneaky or complicated for CH investors? Is degiro reliable and trustworthy?

65

Always be wary to check for the base currency of the fund, which can be different from the currency in which the share class is traded. Dividends will be distributed in the base currency even if the share is traded in CHF. Accumulating funds avoid this problem by not having dividends distributed.

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66

Yeah VEVE and VWRL will have that issue

67

You could do what I do and basically use the dividends in USD to buy stuff traded in USD.

On topic, in my opinion once one gets over the mental/emotional hurdle of putting their money on any of the online brokers they might as well go with IBKR.

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68

You can’t because degiro will automatically convert the dividends into CHF. Isn’t it?

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69

No idea, I use PostFinance.

70

With Degiro, you can choose to have Manual FX for USD, EUR and GBP, in which case there is no automatic conversion of USD dividends.

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71

Please note that manual FX will cost €10 + 0.25 % per trade: page 6, https://www.degiro.ch/data/pdf/ch-de/DE-CH_Preis_und_Leistungsverzeichnis.pdf

For smaller portfolios, this is very expensive.

72

Agreed. Thanks for sharing this 10 CHF per trade charge. Specially for dividends , not very useful

73

It is useful if you receive dividends in USD and want to reinvest them in a USD-denominated asset.

1 Like
74

Thanks. I was not thinking straight.

Imagine investor has portfolio where they invest in ETFs either denominated in CHF &USD

  • You deposit X CHF because that is the only way (X1 + X2 = X )
  • Invest X2 CHF in CHF denominated ETF. It would not matter if dividend was in CHF or USD. Lets say CHSPI or VEVE
  • You convert X1 CHF to Y USD by paying 10 CHF + 0.25%. Lets assume you do such transactions N times a year.
  • Now invest Y USD in USD denominated ETF like WEBG
  • when dividends are paid (amounting to D USD per year), reinvest them in WEBG. D includes USD dividends across all ETFs

Another option would be to switch ON auto FX and then Dividends D would incur (0.25% fees) and you can either invest in CHF denominated ETF or USD denominated ETF by converting again and paying 0.25% extra.

Above with Auto FX switched off would make sense in following scenarios
N <= (Dx0.5%)/10 if investor reinvests in USD denominated funds
N<= (Dx0.25%)/10 if investor reinvests in CHF denominated funds

For example N = 0 would satisfy this condition. Which means you only buy VEVE using deposits but buy WEBG using dividends
For N =1, D needs to be large enough

Am i right?

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75

If the dividends arrive in USD and you have Manual FX for USD activated, no conversion has to be performed at all. Therefore the fees of AutoFX are irrelevant for this case.

If you don’t activate Manual FX, you pay 0.5 % when you receive dividends and 0.5 % when you reinvest them in a foreign currency. So, you may lose 0.5-1 % using AutoFX.

General calculation for investing in a foreign currency on DeGiro
If you want to know if you should activate Manual FX in DeGiro for any kind of investment, the formula goes like this:

Break-even point for AutoFX vs Manual FX:
0.5% * x = 0.25% * x + 10 €

If you do the maths, you get 4000 € (price is in € in DeGiro’s price list).

So, you’d need roughly 4000 Euro worth per transaction in a foreign currency (i.e. a currency different from your account’s base currency) to make activating manual FX worthwhile.

Caveats:

  1. You can open a DeGiro account in a different base currency than CHF, but I don’t know how if it’s possible to transfer USD or EUR in.
  2. Make sure you take in consideration the spreads and trading cost when investing in a different currency. Investing in an ETF on SWX in CHF may save you the currency conversion, but depending on the spread it might still not be worthwhile to do so.
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76

Thanks

I already have IBKR. I am just trying to understand mechanics of Degiro.

For me , if I use Degiro, most likely I would go for accumulating CHF denominated ETFs and call it a day. Easy , simple , cheap

SPDR ACWI for example.

77

For completeness’ sake:
Manual FX makes sense if have at 4000€ to invest. Dividends or not.

78

Isn’t the point that you bypass conversion with activating manual FX? The USD dividends stay USD and get invested in USD denominated funds. No conversion fees.

At liquidation time, you just activate auto FX again.

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79

You’re right, of course. Total thinking error on my part. I’ve corrected my answer. If you have manual FX activated for the currencies you receive dividends in and if you invest in those currencies, you don’t have to do any conversions.

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