Thanks for sharing. I did not realize that you can actually have a lower TER by buying multiple ETFs versus buying one ETF.
I did not quite understand your effective fee calc, but I used your TER assumptions & got following numbers for effective yield. I did not account for buy/sell fees.
S&P 500 yield is assumed to be about 1.6% , so i used that for flat credit back. Lower yield will also reduce tax credit
Basically it turns out that SQ = Neon + custody fees (capped at 200 CHF per year)
FP will cost more
| World ETF portfolio | SQ | NEON | FP | |
|---|---|---|---|---|
| (a) | Gross dividend | 2% | 2% | 2% |
| (b) | Witholding tax (12.5% effective) | 0.25% | 0.25% | 0.25% |
| (c) | Net dividend (a - b) | 1.75% | 1.75% | 1.75% |
| (d) | TER | 0.15% | 0.15% | 0.085% |
| (e) | Custody fees + management fee | 0.10% | 0% | 0.39% |
| (f) | US TAX credit (assuming 67% exposure to S&P 500 & Gross dividend yield of 1.6% for US portion) | 0 | 0 | 0.161% |
| (g) | Deduction for 3rd party expenses | 0.30% | 0.30% | 0.30% |
| (h) | Taxable income (c - g + f) | 1.45% | 1.45% | 1.61% |
| Effective yield | ||||
| (i) | Tax @ rate 30% | 0.44% | 0.44% | 0.48% |
| Effective yield (c + f - d - e - i) | 1.07% | 1.17% | 0.95% | |
| (j) | Tax @ rate 40% | 0.58% | 0.58% | 0.64% |
| Effective yield (c +f -d - e- j) | 0.92% | 1.02% | 0.79% |
One time fees -: If i assume 5000 CHF investments at a time, then buy + sell fees for SQ will be 0.4% (assuming 10 CHF ETF leader fee per trade) and Neon will be 0.5% (only at time of sales)
FP I do not know if there is any spread or not. For higher amounts NEON might become expensive at withdrawal but would depend on investment horizon and withdrawal amount tranches.