ETF investment strategy if potentially moving to the UK in the future?

Investing / Portfolios
#1

Hello everybody,

I am new to ETF investment and I would like to start investing around 20k CHF per year using IB, either in VT or VRWL.

Now my questions are related to this specific context: I am a Swiss citizen but consider (50/50) moving to the UK in 3-5 years. From what I’ve read, there are advantages to VT over VRWL, however, only VRWL seems to be available to UK citizens.

So my questions are the following:

  • Knowing that I might, but not necessarily, move to the UK in a few years, should I invest in VRWL only, to keep it simple?
  • My other idea would be to invest in VT for 3-5 years, then sell everything in case of a move abroad and then buy shares in VRWL. I imagine however that there are risks with this approach?
  • Are there any other particular points I should be aware of in terms of ETF investment if moving to the UK?

Apart from that, would a lump sum investment of 20k now, followed by an investment every 3 months or so be a good approach?

Thank you very much in advance for your valuable comments. Happy to hear any suggestions as well if somebody has any better investment strategy for this particular context.

#2

Hello,
the people in the forum try to squeeze the last penny from their dividend and prefer US based found as Switzerland has an agreement with the US and it is possible to get discounted for the US withholding tax.
This is the best choice if you are sure that next year you are still in Switzerland, if you are very clean about your management of the tax declaration, and if you do not die the next 12 month. Otherwise it may well not be the best choice.
I prefer to keep it simple and stupid and buy an Irish ETF like VRWL, which will do the job decently, without bad surprise (taxation on the withhold amount you have never seen) and without hassle for your kids if there is, unfortunately for you, an inheritance to handle.
To me buying US based ETF is penny wise but pound foolish.
But I agree, many here think another way.
For your investment strategy I agree basically with what you say, invest as much as possible now and then be constant with the sum you invest. Never time the market but with the volatility related to the war Russian-Ukranian war there could be some buying opportunities.

#3

I would invest in VWRD (distribution) or VWRA (accumulative) as they are both available on the London Stock Exchange :slight_smile:

If you are looking for simplicity, this is, in my view, the best move.

#4

Another option would be to invest in Irish ETFs but instead of VWRL, invest 90% in VEVE and 10% in VFEM. This combination covers the same companies as VWRL but at an average TER of 0.13% p.a. instead of 0.22%. Adds a bit of complexity but gets you closer to the low fee of VT. Dividend taxation would be identical to VWRL.

Besides spread and other transaction costs, there is a risk of price changes between the two trades. If you trade on a calm day (possibly check ^VIX) with a good broker, I don’t expect the risk/cost to be very large. However, I don’t have a good estimate.

You don’t have to pay taxes on US WHT if you don’t get the DA-1 tax credit. You can deduct US WHT in such a case from your taxable income as wealth management cost. This may still be worse than a corresponding Irish ETF due to US WHT being imposed also on dividends of VT’s non-US holdings.

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#5

Check how UK taxes capital gain (esp. which cost basis is used). Depending on that it might be entirely irrelevant if you’d anyway sell/rebuy before relocating.

Also UK likely has different kind of tax advantaged accounts so you might want to do things differently in any case :slight_smile:

(And finally depending on your remaining ties to Switzerland and if you don’t intend to stay there long term, you might want to go in the opposite direction and stay as far away of UK based investments as possible: Tax on foreign income: 'Non-domiciled' residents - GOV.UK)

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#6

Share ISA account on an online broker such as AJ Bell Youinvest, will be the account to open once you will be working in UK.
There will be 0 taxable gain and same on dividend with a deposit maximum of 20kgbp / year.
So in my opinion, just invest as usual in Switzerland then sell all your assets and convert them to an ISA share to purchase similar etf if available.

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#7

Thank you all for your great advice!

That is a very interesting combination, thanks! I’m surprised it is not been mentioned much on the forum. The only difference is that this would require rebalancing every now and then, right? No other disadvantages?

Great, thanks ! I was familiar with ISA accounts but not with this particular type - really cool , seems like the way to go then :slight_smile: