Help me decide between VWRL or SWDA+EIMI

Investing / Portfolios
1

Hey guys,

After a lot of research I am finally making the step (hopefully) towards an early retirement. I am just uncertain about which fund to go for and maybe you guys could give a suggestion? Anything is truly welcomed.

I am considering to put 80% into a fund and leave the other 20% in cash, which I might move into bonds at a much later stage if it makes sense.

My fund choices are:

VWRL: Vanguard FTSE All World UCITS ETF

or

SWDA: iShares Core MSCI World UCITS ETF USD (Acc) (90%)
+
EIMI: iShares Core MSCI Emerging Markets IMI UCITS ETF (10%)

I like VWRL because it is a single fund and contains emerging markets (perfect for the lazy investor). I don’t like that it is a distributing fund.

I prefer SWDA and EIMI since they are accumulating. But then I have two funds to maintain with a slight higher TER than VWRL.

All the funds have ESTV reporting, so my understanding is that tax should not be too much of an issue?

And just a quick background: In my early 30s, healthy pillar 2 and a maxed out pillar 3 with savings accumulating and doing absolutely nothing.

1 Like
2

Are you sure? SWDA has 0.20% and EIMI has 0.18%, while the UCITS version of the Vanguard one that you can get in Europe has 0.25%.

If you want it cheap you have to buy the US one, but there is a 60k limit or so if you don’t want to have problems with inheritance taxes when you die.

I personally have 75% in SWDA and 25% in EIMI.

1 Like
3

They wouldn’t have problems :slight_smile: (their heirs might have more paperwork tho).

4

My bad, for some reason I thought the combined TER for them was 0.28%. I think I will go for SWDA and EIMI. I was also double checking the factsheets last night and I prefer it over VWRL.

5

One thing to consider is the trading currency. VWRL is being traded in CHF while SWDA is traded in USD. If you’re at an expensive broker like me (hopefully changing soon) you will be facing currency-conversion fees of 0.5-1% each trade (one way, same for selling).

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6

For Swiss residents the limit is much higher. I’ve seen numbers between 5.5 million up to 11 million before you get taxed.

7

Thats a very good point. So this then makes VWRL a better option? Purley based on cost.

8

If you are with InteractiveBrokers a currency conversion costs 2.5$ , no matter how much you convert.

9

@Double_A
Correct but this choice of funds hints to not being with IB.

10

@DukkelWurst
That’s hard to say. I haven’t done the math, it’d depend on how much you buy / how big your stash is. Currency-conversion is a one-time fee while TER is a recurring fee. If you have a lot of money already the difference in TER might exceed the fee you will have to pay to buy USD with your CHF.

11

I am planning on starting slowly just to get the hang of things. I’ll most probably invest every quarter. I’ll definitely consider the currency-conversion. Thanks for the heads up.

12

I am a long time reader and decided to sign up, finally.

I am in the same situation. So I compared the cost for a 10k CHF purchase on Degiro and holding it for 1 year.

VWRL in EUR at EAM

  • Commission: 0 CHF (on the free list)
  • FX trade: 10 CHF (0.1% markup)
  • Dividend processing: 10 CHF (1 CHF + 3% assuming 0.5% quarterly dividend payout)
  • Exchange connectivity fee: 2.50 CHF
  • ETF cost: 22 CHF (0.22% TER)
  • Total: 44.50 CHF

VWRL in CHF at SIX

  • Commission: 5 CHF (2 CHF + 0.03%)
  • FX trade: 0 CHF
  • Dividend processing: 10 CHF
  • Exchange connectivity fee: 0 CHF (SIX is free)
  • ETF cost: 22 CHF (0.22% TER)
  • Total: 37 CHF

IWDA in EUR at EAM

  • Commission: 0 CHF (on the free list)
  • FX trade: 10 CHF
  • Dividend processing: 0 CHF (accumulating ETF)
  • Exchange connectivity fee: 2.50 CHF
  • ETF cost: 20 CHF (0.20% TER)
  • Total: 32.50 CHF

SWDA in USD at SIX

  • Commission: 5 CHF
  • FX trade: 10 CHF
  • Dividend processing: 0 CHF
  • Exchange connectivity fee: 0 CHF
  • ETF cost: 20 CHF (0.20% TER)
  • Total: 35 CHF

To sum up, the cheapest option is to go for IWDA in EUR at EAM.

Is my calculation reasonable?
Is it better to buy SWDA directly in USD to avoid the (small) exchange fee of the ETF vendor?

I know that VWRL and SWDA do not cover the same markets. Later I would buy EIMI.

13

Aren’t you always charged on dividends (accumulating ETFs as well?)

14

Don’t forget the stamp tax at SIX, which is 0.15% for foreign securities when bought through Swiss brokers.

Dividends are always taxed, see the ESTV list.

15

Stamp duty is for Swiss brokers, not for Swiss Stock Exchange. Please do not spread misinformation. Is Degiro a Swiss broker?

3 Likes
16

You’re comparing these costs over a holding period of merely a year. Holding such funds over just a year is more short-term speculation than investment. And there are probably better products for short-term speculation.

For a longer-term investment though, is is virtually like comparing one-time initial fees. But honestly, is it worth worrying about the cost equivalent of two cups of beer :beers: on a 5-figure (10k) investment?

Since the ETF doesn’t issue a dividend, Degiro shouldn’t charge a dividend processing fee on it.

2 Likes
17

If you’re only buying developed world (SWDA) for the time being, why wouldn’t you compare to


VEVE in CHF at SIX

  • Commission: 2€ + 0.03% ≈ 5.12 CHF (2 EUR according to fee schedule)
  • FX trade: 0 (account currency)
  • Dividend processing: 10 CHF (assuming your calculation)
  • Exchange connectivity fee: 0 (none on the “home” market)
  • ETF cost: 12 CHF (0.12% TER)

VHVE in EUR

  • Commission: 2€ + 0.03% ≈ 5.12 CHF
  • FX trade: 10 CHF (0.1 markup)
  • Dividend processing: 0 (accumulating ETF)
  • Exchange connectivity fee: 2.50€ (in EUR according to fee schedule)
  • ETF cost: 12 CHF (0.12% TER)

(Note though that the definition of developed and emerging markets can still slightly vary between FTSE and MSCI indices)

2 Likes
18

Thanks for writing what I had in mind! People obsess too much about saving a penny on lower TER, but they stick with Degiro over IB. Calculating for 1 year makes indeed no sense.

19

You are absolutely right that the long-term cost should be compared. My investment horizon is 10+ years and I aim for a portfolio covering the world market. I apologize that I did not mention this in my initial post. I decided for Degiro, as I don’t think that my investment reaches 100k soon. I know that the actual break-even is lower due to withholding tax reason.

I updated my calculation for 1, 5 and 10 years and included VEVE and VHVE as well. Those look attractive, but especially the latter has a very low fund size (24M CHF).

ETF cost comparison
ETF cost comparison949×184 48.8 KB

Remark: A onetime purchase of 10k is probably not a realistic scenario.

20

That’s cause it was introduced only last year.

If you plan to, you could opt for VWRL/VWRA from the get-go (unless you want to under-/overweight EM compared to the all-world funds).

If you plan to make more regular smaller transactions, I would consider open up an account with one the German online banks / brokers.

  • 0.4% to move your money over to EUR (TransferWise, exchangemarket)
  • simple pricing, no upkeep/custody fees on the brokerage account
  • regular smaller investments in ETFs are cheap or free on savings plans (possibly beware of spread / execution prices, but won’t really matter for small amounts)
  • account handled by well-reputed banks
  • free securities transfer to other banks/brokers within Germany

Is it the absolute cheapest option? Maybe not. But I’d very much prefer that simplicity and stability over DEGIRO. Who, by the way, are linking to two differing fee schedules on their Swiss website, depending on the language (If you switch their website’s language to English, while still showing Switzerland as the country, the linked pricing PDF shows German markets as the home market). They’re just giving me a bad vibe, somehow.

EDIT: I do speak German, forget about (most) German brokers if you don’t.