IE vs US domiciled funds (VWRL vs VT)

This is unbelievable to watch… reconsidering my thoughts about US broker and VT

off-topic:
IBKR just also showed me the restriction.
My EU bank just filled my GME buy within minutes, through NYSE.

Hehe, Casino Thursday?:slight_smile:

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Having spent a lot of time on Bogleheads resulted in viewing the world in US, exUS developed and emerging markets. Don’t know why, but it influenced me. I even started believing that the US is the only relevant stock market and the rest is just for diversification.

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You don’t know why? Maybe because the forum is dominated by Americans. Plus US takes over a half of global market cap. And it’s the most available and cheapest to buy stock (fees). And the last 10 years it has been outperforming the rest of the World. But it doesn’t have to stay that way. Maybe it takes 10 more years until the trend changes, but I think it’s reasonable to assume that it will change.

US brokers, maybe. But VT? How does a broker blocking you from trading a very volatile stock change the view if an ETF is a good investment or not? You could also hold VT with a Swiss broker.

Maybe I’m just too calm about this, but as a passive investor I do not really care if they block me from buying stocks that I don’t care about. One could be frightened about the outlook of what they could do, if they have done this. But I think it’s a long way from causing any trouble for the average passive investor.

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Just wanted to share that VT and some other Vanguard funds (VEU, VXUS, VTI…) can be bought for free at eToro. If you ignore the social trading crap, it’s a good platform for that limited use case.

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U.S. Treasury Secretary nominee Janet Yellen reportedly said she would consider taxing unrealized capital gains

I wonder how they would want to implement it and would it only apply to US residents or maybe to holders of US equity. So far it’s just talk and probably nothing will come out of it, but you can’t really know for sure.

Btw if they want to tax unrealized gains, will they give back the money for unrealized losses? :smiley:

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How mad is that idea? Just budget properly and there‘s no need for tax raises by government.

“I don’t think it’s a practical plan and I don’t know how you go out and tax everybody’s assets every year at what is supposed to be their market value”

Where’s the problem? Just ask the Swiss. They do have wealth tax on assets.

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Yes, but it has a lot of issue. Stock is easy people it’s liquid, what about painting, house, ect

Why buying US based ETFs instead of IE based ETFs like the regular EU/Swiss investor?

Yes, the VT TER is 0.07%, when doing that with 3 IE ETFs (World, Emerging ,SmallCaps) you will end with 0.15% and you have to rebalance it from time to time…

But is it worth to expose your ETF to the risk of having the US involved for the 0.08% per year?

In addition that the VT ETF is a distributing and not an accumulating ETF

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Being able to get a tax credit for US WHT is typically the main reason besides the lower TER. The trading costs of US ETFs at NYSE (with IBKR) are also much lower than at European stock exchanges.

See IE vs US domiciled funds (VWRL vs VT)

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Do I assume correctly that this is only relevant if you do an ordinary tax declaration (as in Source Tax you cannot get anything back?)

So in Source Tax, the IE and US are largely identical in their ~15% total Withholding Tax, the only difference is where you pay that 15% (Level 1 or Level 2) and that you - once you get ahead in your career and fall “out” of Source Tax - will start to get those 15% back at some point in the future?

Best

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For a fund solely holding US companies, yes, IE- and US-domiciled funds are equivalent with regards to dividend taxes when not filing DA-1 (either no ordinary tax assessment or US WHT amount below CHF 100). This assumes the US-domiciled fund is held at a foreign broker because Swiss brokers have to deduct an additional 15%, making them worse when not filing DA-1/R-US.

For a global ETF, an IE-domiciled fund would even be better as 15% US WHT is not applied to non-US companies (and L1 withholding might also be slightly lower for IE-domiciled funds).

However, keep in mind that you’re required to switch to ordinary tax assessment if you have substantial dividends or wealth, even if your employment income is below CHF 120k. In ZH the threshold is at CHF 3’000 of income a year (that isn’t taxed at source by Switzerland) or a taxable net worth of CHF 80k (or CHF 160k for married couples). Other cantons have different threshold.

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Ah true, so for a Source Tax person it’s actually better to have the IE ETF, interesting - even though the forward outlook probably makes it worth to pay a bit higher tax now and then in the future get a bigger refund.

What is your opinion on diversifying funds btw? I mean in the sense of, I have the VT from Vanguard now, is it worth it to change to a HSBC, iShares, xTrackers at some point to protect myself against the 'issuer risk’s? I know VT is already very diversified in a stock sense, but it’s still my life savings in the hand of a single (American!) issuer

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With IB you can always sell your current holdings and buy other funds, trading costs are very low and can be easily beaten by one year tax savings.

If it concerns you, sure, go on. I would recommend Xtrackers Ireland, the funds are totally fine and they were Deutsche Bank, so economically speaking quiet “far away” from Vanguard, iShares and even HSBC.

Thanks for the advice! xTrackers seems to only offer MSCI World (instead of a VT or FTSE AllWorld) and there has quite a high TER of 0.19%, but I guess that’s a pill I’ll have to swallow to diversify a bit.

IE00BK1PV551: 0.12%

But honestly, neither 0.18% nor 0.12% is „high“ in costs IMO.

You‘d have missed out on the Emerging Markets component, yes.

You have to add MSCI emerging markets, yes.