Last Recommdation before investing

Investing / Others
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Hello everyone!

I am 30 and these last months I was reading a lot about investing. It is now time to start investing more actively than only with my 3A Viac Account. To begin with, I have between, 20-25KCHF to invest; then I will start with 1KCHF every month.

BROKER :

The cheapest solution for me would be Degiro Basic account. VWRL is among the ETF you can trade for free. However, at the moment they have a waiting list of more than 200 people. I do not know when it would be possible to make the account. Is it a reasonable fear of missing out to think that if it takes too much time I might be losing an opportunity to invest when the market is down (even if it’s already going up)? Or is it irrelevant?

If it is relevant, I might be choosing to go with IB (even if I am far from the 100K). CT seems as much expensive than IB when you take into consideration the transaction fees…What, you experienced investors, would advise me to do?

Portfolio

The new article published by MP yesterday was perfect timing.

I had the same allocation in mind, however, in the beginning, I’d like to invest only in the Total stock market (either VT or VWRL). I read a good amount of post here and it seems people tend to prefer VT than VWRL, for the lower TER + fact it includes small caps. If I go with Degiro, VWRL makes more sense since it is free to trade.

If I go with IB, I probably choose VT. However, I am not sure about the PRIIPs and the fact that swiss investors will lose access to US-domiciled funds. I know Degiro has removed access to VT. However, it is still available on CornerTrader. After a call with CT they seemed unaware of this situation (at least the person I spoke to…). There is as well the question of the estate tax, but I have less than 60K and from what I read from you guys this “limit” is no more in use, the new amount is way bigger.

Are you still affected by the loss of access to US Domiciled fund if you use IB? If yes, it does not really make sense to me to invest in VT only for a few months or a year before I lose access to it, right?

Accumulating vs Distributing :

According to my research on this forum, taxwise there is not much difference, yet people tend to prefer distributing. I’ll go with distributing as well. It was a comparison made by Nugget that if you fill W8-BEN; WVRL and VT are equal for the Witholding tax.

Thanks for your advice!

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If you go with Degiro, consider using Custody instead of Basic. The 1 EUR + 3% fee for processing dividends will “only” cost you an additional 2% x 3% = 0.06% cost per year on the total of securities you hold there (assuming 2% of dividends per year, but you can use accumulating ETF and bring it to 0% ). In return your securities are isolated from others (Degiro, their customers, their creditors, etc.)

With Basic they will lend your securities to others. You take a counterparty risk in case the borrower and then your counterparty Degiro can not pay back. You get those additional 0.06% per year as compensation for taking that risk.

Degiro’s explanation can be found here: https://www.degiro.ie/about-degiro/safe-and-reliable.html

Edit: Circumvention with accumulating ETF

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You trust strangers on internet about how to invest, trust me and don’t worry about PRIIP.

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Hi Doffy!

I too am in a similar situation (slightly older, but with more or less same amount of cash for investment :sweat_smile:). And I took the decision and acted upon it to start investing two weeks ago. So here’s my experience so far.

This is the million dollar question! Impossible to answer, but you can look at it from a different angle: say if you’d have considered starting investing one month ago (before the pandemic erupted), for sure the prices today look like a bargain compared to those from a month ago. Then there is the issue of trying to catch a falling knife or whether this will be a V, U or L shaped recovery, so from what I’ve been reading it’s better to DCA - i.e. go in at regular intervals of time, with a fixed fraction of your portfolio or incremental (as you gain confidence), but don’t go all in if you are not ready to see your portfolio drop in value.

Regarding the broker, I too was oscillating between IB and Swiss Quote, but in the end the costs argument won and chose IB. I applied for account on Sunday and on the following Monday was already buying VT (for holding on to it) and other individual stocks (but with very small play money just to learn to get a feel of the market and taking advantage of the volatility - this played out very good so far, but I’m basing it all on pure luck and don’t fool myself that I’m an awesome trader). So far, I tested the following processes: send CHF from my Swiss bank (received the funds in IB account the same day without any fees charged), exchanged CHF into USD and EUR in IB, bought and sold ETFs and individual stocks (both US and EU stocks), withdrawn EUR from IB into my Revolut account (transfer effected the same day without any fees charged). All these processes run smoothly and hassle free. One thing that I noticed is that there’s a settlement period of 2 working days on avg for when you’re selling stocks, meaning that if you liquidate all or part of your portfolio today (because you don’t have any cash left) to buy a stock that you deem very cheap now, you won’t be able to do it on the same day but have to wait for the cash for 2 days, so you may lose the opportunity to get your greedy hands on that cheap stock (but this is only with cash account, don’t know how it works with margin accounts). In conclusion so far I’m very happy with IB.

Anyway, as I said before, this is my experience so far and I’m somewhat a noob at investing, so do your own research and try to filter everything through your judgement and have a critical mind. Also, as a beginner, to compensate for the lack of experience, you must have a process in place and stick to it. The caveat is that you should write your process in pencil, because the world is constantly changing and you can’t be rigid. The process will protect you from variability/ capitulation/ crises of confidence, but you have to be mentally nimble so, if warranted, you’ll be able to adapt the process while sticking to it’s principles.

Good luck, and please do share your experiences.

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@Helix I considered the custody account. However, The shares are not held directly by DEGIRO but by SPV, a separate legal entity. It would take the borrower to default at the same time as Degiro to be in trouble. But yes, it is worth thinking as the additional cost are low especially for the amounts I am investing! thanks. Accumulating will be a good idea, but only VWRL is on the free list.

@ma0 Could you elaborate, please?

@laoo_g Thanks for the details! :slight_smile:

Is there a reason you choose IB instead of Degiro? I assume you wanted to invest in VT not VWRL.

As for the timing, I don’t know…I am still waiting on the Degiro waitlist and they give no info how long it will last. I will wait a bit more and if nothing move I’ll open my account with IB.

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There are plenty of discussion on the forum, but since we don’t have a wiki I repeat again.

  1. I can’t find the pdf from PWC that explained the meaning of the law and what matters to us.
  2. The law says that banks can’t sell you those products, but the word “sell” means that they can’t tell you “hey, why don’t you buy this?”. If you instead tell them you want it, they can’t refuse to sell it to you.
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Hey @Doffy have you advanced in that waiting list so far? Asking because I have just applied to open an account with Degiro too (thought it would be good to use it for the money we invest for our children, and also not to have all eggs in one basket), and I’m 719th on the waiting list :astonished: . Was wondering how fast is their approval rate these days…

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They can - but might not have to.

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I applied on Tuesday last week and am 3rd on the list. I guess they just stopped accepting new accounts.

24.03.2020: 3
27.03.2020: ~200
29.03.2020: ~720
Faster then Corona?

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When it comes to investing with no prior investing and business valuation knowledge, I’d highly advise to refrain from trading large amounts of money.

I strongly side with the recommendations made above on buying total market or certain country index funds in a DCA manner because this way you’ll evenly distribute your hard earned money and dramatically reduce risk.

From what I understand is that you are in for the long haul? If yes then start buying now. Your investments will compound anyways ; trying to time the market calls for disaster.

————

Just to clarify (For my understanding): PRIIPs are the products you are burying- a provider is required by law to disclose all and any information in a KID (key information document) of the product(s), right?

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@ma0 Good to know! Thank you for the explanation.

@laoo_g I am still number 210. Nothing has changed, I guess I am going for an IB account. Might cost me more, but at least I can start investing now…

@snoware thanks for the advice. I will in a DCA manner. I am indeed in for the long haul. How would you DCA if you had 20K to invest ? 5K every month for 4 months ? Or would you recommend to split it across the year and do not take advantage of current situation ?

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When I started off I made smaller monthly investments throughout a year to get a feeling for the markets and stocks I was buying.

Following article summarizes DCA and VA quite well:

But as you mention… If you can take advantage of the current situation. Yes, then put all of it in the market: this is your call to make.

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