Help me pick ETF from SwissQuote

Investing / Portfolios
35

Sorry that’s the next level of optimization, maybe don’t worry about it, start with SQ + VWRL, and revisit in a year when you’re more comfortable.

I don’t think that’d be a bad decision, the biggest cost is more likely to keep delaying entering the market.

Now for the (somewhat simplified) details (but really feel free to ignore it):

  • US is >50% of global market cap
  • US has a withholding tax on dividend, in practice that means for an Irish ETF holding US stock, you lose 15% of US dividends. A rough approximation would 2% dividend rate * 50% US stock * 15% = 0.15% per year
  • if instead of using irish domiciled ETF, you have a US domiciled one (e.g. VT), besides having lower TER usually, those 15% will be charged directly to you, instead of to the fund.
  • with the DA-1 form, you can declare those direct withholding to the tax authorities and they give you the money back

So in practice the difference between VWRL vs. VT is TER difference and those ~0.15% you’re losing in taxes.

(it’s actually more complicated, I simplified somewhat, there’s also estate tax which would add paperwork to your heirs, etc.)

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36

In principle you are right but if he decides to stick with a swiss broker he should also try to minimize the number of transactions as for each buy/sell he’s going to “donate” the federal stamp tax amount… :wink:

37

I’d still think you’re better off being invested and optimize later, otherwise it’s too easy to be paralyzed and delay it by months/years.

2 Likes
38

Yes, in my opinion you’re overcomplicating.
I prepared to write a somewhat lengthy reply addressing your individual point, but I won’t.

Take a look at your initial posting. It set out quite clearly what you wanted: An accumulating All-World ETF that you could buy through Swissquote (a Swiss broker). I am going to assume it’s a long-term investment, since you said you’d then continue to contribute and invest 2000 CHF monthly. I am going to repeat it in bullet points for emphasis:

  • accumulating
  • All-World ETF
  • Swiss Broker (Swissquote)

That’s as simple as it can get - and IMO a very reasonable approach to long-term investment.

So why don’t you keep it simple - instead of questioning yourself (and us :wink: ) over the course of this thread, and coming up with complicated loops and jumping through hoops, just to eke out a fraction of a percentage in savings?

The currency conversion on purchase of accumulating ETF shares is a small one-time cost. Maybe it’s percent at Swissquote, vs. a fraction of a percent less at other brokers. You can think of it as a price you pay for your peace of mind of having your assets at a Swiss broker.

But here’s the thing: small, one-off costs do not matter over the long run. They won’t substantially affect your outcome after several years of being invested.

What you may rather want to focus on is minimising recurring costs. With your choice of broker, you’ve surely made a non-cost-optimal choice - but you’ve clearly stated your reason and motivation to do so. Fine. Moving on…

As such, my advice might be to keep it simple: Invest in an accumulating All-World ETF - which is what you wanted in the first place, mind you - and just suck it up (suck up the negligibly higher one-off cost due of converting from CHF to USD, that is).

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39

PS (splitting off the last point from the previous post):

Even when you convert CHF to USD each month to invest your 2000 CHF monthly contribution, it’s not a recurring cost of your (overall) investment - but a one-time on the amount converted.

Revisiting the idea of minimising recurring costs though, maybe, just maybe you indeed want to consider a US-domiciled ETF (as long as they are available to Swiss investors). There’s already lots of information on them on the forum.

41

Currency exchange costs alone are 1% at Swissquote (vs. 0.00xx% at IB). Times 2 when you convert it back = 2%.

Stamp duty is 0.3% = 0.15%*2 (buy+sell)

Tax leakage as someone mentioned above is another 0.15% (to 0.3% for 100% US), recurring per year.

And we haven’t even gotten to transaction costs, which are very expensive like everything in CH just because it’s swiss = carte blanche to charge loaded swiss customers whatever they want. They might not be as greedy as the big banks, but still very expensive compared to foreign brokers

42

As I hinted at previously and again above, I don’t believe comparing TER gives a full picture. That said, I’d probably choose VWRA myself out of the two.

I see your point. If there’s no minimum fee for currency conversion, makes sense to buy the distributing ETF.

43

Guys, I cannot thank you enough! I’m really overwhelmed with the amount of informations and support I’m getting, I learned so much in so little time thanks to you, I really appreciate it!

Now I have a pretty good picture about SwissQuote and what ETF are available there and what are the pros and cons.

One thing that is not fully clear, why shouldnt I choose ACWI over VWRA as it is on SIX, it is in CHF, for “only” 0.18% higher TER, while the other is in USD and on the LTE?
Is that just about preference with Vanguard for most people?

Finally, I’m seriously looking into Interactive Brokers as well,
first question would be, what is the right link for it? when I google it, I see IB europe, IB.com and IB.ch?

Finally, as San_Francisco pointed with his bullet points, what I am looking as first investment, is an All-World ETF that is possibly accumulating, so for SQ my options are clear, but for IB, what would be the best choice with those parameters? An US-Domiciled ETF?

So when I understand what are the options there, I will go and make some calculations and check for myself in a 5 year scenario, what would be the real cost difference and see if it is worth for my peace of mind or not!

Thank you again guys, you are amazing!

44

US ETFs are always distributing, but that’s not really an issue.

Vanguard Total World Stock ETF (VT): https://investor.vanguard.com/etf/profile/overview/vt

8400 stocks, covering 99% of the worlds market capitalization with a 0.08% TER. 15% of the dividends that usually get lost with IE-domiciled funds are recoverable with the DA-1 form. So that increases (apart from the lower TER) your expected return by 0.3%/year.

45

Can’t resist repeating myself until it’s been hammered into everyone’s head… :stuck_out_tongue_winking_eye:

The 15% lost figure is true for U.S. dividends (from U.S. corporations) “only”.
Whereas U.S. should only make up about half of VT/VWRL/VWRA.

So it’s probably more like a 7-8% figure on basis of the whole fund - notwithstanding that the Irish fund could be more tax-efficient on other countries’ dividends.

Of course, with a 55+ percent share U.S. securities in an All-world ETF, the taxation of U.S. dividends should effectively decisive factor in determining the most tax-efficient fund domicile.

4 Likes
46

So guys, after reading over and over everything I decided for now to stay on SwissQuote, as at the end, going on IB would save me some money for sure, but no that much money to justify going with them.

I’m still torn between: ETF in USD or in CHF, on SIX or LTE.

So I’m down to 3 ETF to choose from:

EIMI (IE00BKM4GZ66, accumulating, USD on SIX, 0.18 TER)
+
SWDA (IE00B4L5Y983, accumulating, USD on SIX, 0.2 TER)

VWRA (IE00BK5BQT80, accumulating, USD on LTE, 0.22 TER)

ACWI (IE00B44Z5B48, accumulating, CHF on SIX, 0.40 TER)

So it will be one of these, and I will probably put directly 150k in it, or as lump sum, or as 75k first and 75k over the next 3-4 months.

I would also need to figure out, in case I pick USD, what is the best way to exchange CHF to USD (too much money for revolut).

What are your final thoughts? If you were me, which one would you pick?

Thank you all one more time!

47

Let’s assume you invest 150k now and 2k/month for the next 20 years.

Chosing SwissQuote with a IE-domiciled fund over IBKR and VT will cost you at least 0.10% in TER difference and 0.20% in non-recoverable dividends. So a total of 0.30% performance drag per year (ignoring the much higher fees with SQ).

So let’s assume 6.0% for IBKR and 5.7% for SwissQuote. After 20 years you are looking at 1388k and 1330k, so a difference of CHF 60’000 (+ fees).

If that isn’t a lot of money saved I don’t what it is.

48

Pick that one now, and in one or two year, you’ll probably switch to IB and VT :slight_smile:

edit: my personal experience is that it took me a few years to get things where they are now (at this point it’s fairly stable having changed allocation for years). Get invested optimize later, also easier to make mistake at the start, they’re less costly.

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49

When exchanging larger amounts at Sq make use of the fact that for amounts >50k the forex fee drops a lot.

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50

So paying 250.- for 50k while IBKR charges 2.-?

51

I would take VWRL in CHF on SIX and invest the interests payments in USD on VWRA

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52

Yep, but better than paying CHF 465 to exchange CHF 49k.
Or above 100k the % comes down a bit more.
I also personally use & recommend IB, but for someone fixed on Sq I find it useful info, and difficult to find.

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53

Get VWRL in CHF.

  • No forex fee
  • the most “complete” ETF with low fee
  • Tax is really easy, just write vwrl, total amount, and total dividend of the year.
    ,2 minutes and 1 attachment. If you do something wrong the Tax-Man will correct it. ( yes, it’s true)
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54

I’ll second this.

Also, I concur with djbabasil’s argument above that VWRL might be preferable over VWRA, cause there’s less currency conversion involved - as long as Swissquote does not charge a minimum fee on currency conversion or crediting of USD distributions.

For reinvestments, I’d still convert the distributed USD “back” to CHF to buy more VWRL (and not VWRA), just to keep it simple and neat. I wouldn’t worry or try to optimize for a 1.x% spread for currency conversion on a 2.x% yearly dividend yield (even with a million CHF worth of shares in VWRL, that’d be less than 20 CHF a month). Also, if he/she were to transfer the shares to another broker for whatever reason (prices hikes by Swissquote?), it’d be one position less.

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55

Hello,

could you tell us what have you done at the end? FYI - in the meantime there was another one added which should match your requirements: Most cost-efficient European ETF - #8 by San_Francisco.