IBKR Cash, convert to USD or keep CHF?

Investing / Brokers
1

New to the forum, let me know if I’m doing something wrong with the post.

I have some cash sitting on my IBKR account. Am I wrong to understand that if I convert it to USD I get like triple the interest? Anything against this?

I’m aware of the Currency rates risks

Thanks

2

After depreciation should be roughly same return and more tax paid so generally not a good idea. If you do that and truly don’t care about currency risk, at least find a more tax efficient way (something like BOXX but do your own research).

3

Ok, it’s mostly money that is still used to trade and invest so it’s not like its all sat there, but depends a bit on the market and the month

4

you also don’t get paid interest on the first $10k.

5

My understanding of interest rate parity theory is that if financial institutions see an arbitrage opportunity, they would borrow in CHF at low rates and convert to USD at higher rates. USDCHF FX rate and interest rates will thus move until they reach a new equilibrium and the opportunity no longer exists.

So in theory it should not make a difference which currency you hold, because USDCHF is expected to decline to offset the higher interest rate. You can search “USDCHF futures” to see market prediction for exchange rates. In addition as a swiss resident you would pay additional tax on the higher USD interest rate. Risk is also a factor although I understand the amounts here are small

But in the end predicting FX rates is fool’s game…

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6

For my curiosity, what’s the point of keeping cash in IBKR?

I usually only have 30-40$ cash on IBKR, as when I send money, I directly buy ETFs with it and just keep the remaining.

The only cash I have beyond these 30-40 bucks is in my normal Swiss bank account, for everyday use, bills, etc.

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7

For my curiosity, what’s the point of keeping cash in IBKR?

Sorry to jump in, but I find myself in a similar situation.

I will receive around 50k EUR and I already decided the following:

  • 50% of it lump sum (25k EUR)
  • the remaining 50% DCA during the year (around 2k per month for 12 months)

Now, I already know I will buy VT in USD from IBKR. But:

  1. if I exchange the currency with Wise / a bank I will pay substantial fees
  2. if I convert it with IBKR I will pay little fees:
    2A. from EUR to USD I will then already have USD ready to buy VT. Problem: high tax on 4% interest on USD
    2B. do EUR → CHF (enjoy the 1% interest, low taxes) → USD (when I buy VT)

Is it better 2A or 2B?
In the end, everything will be converted in USD. But I will have to pay higher taxes if I do it early.
Probably the best option is to convert everything in CHF, and each month convert the 2k (+ my usual part of salary I save) to USD and buy VT.

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8

You could convert everything to USD and put the excess into BOXX ETF until you’re ready to sell and exchange for VT.

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9

A quick calculation, if you convert everything to USD at the beginning.
image
You’ll earn $217 in interest rate (first 10’000 in IB is interest fee). Does the tax on this really bother you?

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10

And the same numbers if you invest it into a bond ETF at 5%:

$25,000 $104
$23,104 $96
$21,200 $88
$19,289 $80
$17,369 $72
$15,442 $64
$13,506 $56
$11,562 $48
$9,610 $40
$7,650 $32
$5,682 $24
$3,706 $15
$1,721 $7
$729
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