You have clearly misunderstood what I’m saying. I said that a small difference in TER might look huge when accumulated over many years and applied to the entire portfolio, but it’s a misleading perspective, as the 100k saved 50 years from now does not have a current value of 100k. I did not talk about an annual difference of 1%…
annual_perf_diff = 0.04%
year_count = 50
without compounding
0.04% * 50 = 2%
with compounding
1.0004 ^ 50 - 1 = 2.019726%
performance difference after 50 years => 2%
Btw, I checked, out of curiosity, what is the value of 100k using DCF method
I can imagine that in 20 years VWRL/VWRD has a TER of 0.11% and VEVE+VFEM is 0.07%. But of course, we don’t know. Just wanted to point out that a “proportional decrease” will also cut the gap proportionally, and not keep it.
Btw, is it actually clear that the “actual” fee/cost of the ETF is the advertised TER? I tried once doing some comparisons, but it’s very tricky. I think that all the dividend-paying ETFs which track an index, eventually hug that index, so the difference is not visible in price, I think? So I assume that they deduct the fee from the dividend. I just want to say, I don’t have enough knowledge, but I wouldn’t just blindly assume that you can take the face value of TER and strictly apply it as cost.
And is TER a value which is known a priori and the deductions are fixed for the future? As such, is it guaranteed by the fund that this value will not be exceeded? Or is it rather a summary of the funds total costs minus income (if they do securities lending, market making, or other shenanigans) from a past period? I guess, reading your comment, that it has to be the former. But in that case, the ETF would have to bear the risk and cover the difference between the income from the TER and the actual cost of running the fund.
I just wonder why we don’t see this constant divergence between the S&P 500 and VOO or even VUSD. With a TER of 0.10%, you would expect a difference of 1% after 10 years. Or maybe we do see it, but it’s so small that it’s invisible on this chart without a proper zoom.
Which you can’t control or estimate a priori. Unlike fees.
There is a management fee which is fixed in advance and other costs, mostly trading fees. There are expected TER and actually realized TER, typically 1 year rolling. It should be possible to find both in reports etc.
The fund management is using futures to “leverage” cash positions and bring the fund exposure into an agreement with the index tracked.
Going back to the original question. I calculate actual costs saved based on the portfolio size and see if it is worth the effort. 0.09% with 200k portfolio size saves you 180 CHF per year. For me it is totally worth the effort and extra fees.
Considering that US taxation very strictly distinguishes between dividends and capital gains, selling securities to cover costs would be a big no-no, I guess.
As long as your fund is listed in the federal tax administration‘s database (which VWCE is), there’s no simplification in tax matters. Software will calculate things for you, and you don’t have to reinvest dividends with an accumulating fund.
On the other hand, there have been reports of „refunds“ (or rather offsetting) of U.S. withholding tax having been denied with the U.S. ETFs - even though they did have a portfolio reports indicating withheld taxes.
Thank you everyone for the great comments in this thread.
I currently own 100% VT (with IB), accumulation phase. I’m concerned of staying with VT for the reasons listed above. I am considering switching to VWRD.
Question on tax impacts: Is there a best time to sell the VT shares and buy VWRD?
I’m currently negative on my VT investments. Would it be better to sell now and switch to VWRD to avoid capital gain taxes?
Any benefits of keeping both VT and VWRD? And potentially selling VT later on.
Firstly, I think it’s important to take some time to decide what’s best for you, don’t worry about your VT sitting in your IB account for now.
The only thing, if the US estate tax is one reason while you’re considering the switch, and you have more than 60k invested currently, you should sell at least the amount that’s over 60k, so you can sleep better at night.
Now, there is no capital gains tax for private investors in Switzerland, that you got alright
Actually if you google it, you will find info on this subject like this article:
explaining how it works and mentioning the five criteria the federal tax office uses to differentiate private and professional investors. Check those out and see how you stand.
The criteria (criterion?) that might apply to you if you’ve been investing in VT all this time, is that you have some VT that you bought less than 6 months ago. But even if this was the case, if this was the only criteria that applied to you, even if you had some gains, everyone on this forum will tell you, you would still likely not be considered a professional investor. But again, if there’s no gain, there’s no tax anyway.
However if it makes you feel better, you can just wait 6 months before you sell the shares (or the shares that were bought this year), simple as that.
Does it makes sense to keep VT and VWRD? No.
from an investing and allocation point of view no - they both cover the whole world and mostly overlap.
depending on your reasons for switching away from US-based funds you might anyway want to sell VT completely sooner or later.
and unless you really love seeing both in your portfolio, having only one fund will make everything from your portfolio managing to dividends and tax return much easier, no reason to complicate your life.
And a last point you might worry about when you get to it, unless you have 100s of k worth of VT accumulated, even if it’s a larger sum, check the number of shares the ask first when you sell, but don’t worry about selling it in one transaction. Also the best way to go of course fee-wise.
So to make it clear: if you own even a single share of US-domiciled stock/etf at the moment of your death, this is potentially subject to US estate tax, and in order to waive that tax, you need to file paperwork and wait for the approval from the IRS?
Since I own many TSLA shares and do not intend to sell anytime soon, I guess I just have to live with that. So in my case owning VT on top doesn’t change much, just whether that other part of my portfolio would be available relatively soon or not. If my heirs don’t want to lose any money to taxes, they would need to file the paperwork anyway, right?
Well, either way, 60k is peanuts. I wouldn’t recommend anyone to start with VT and switch to VWRL after reaching 60k. I would rather say: plz man acquire skills, get a better paid job, up your savings, and forget about funny ETF optimization…
The only thing, if the US estate tax is one reason while you’re considering the switch, and you have more than 60k invested currently, you should sell at least the amount that’s over 60k, so you can sleep better at night.
Shouldn’t I still need to file it and flag to US tax authorities, even if under 60K?
And a last point you might worry about when you get to it, unless you have 100s of k worth of VT accumulated, even if it’s a larger sum, check the number of shares the ask first when you sell, but don’t worry about selling it in one transaction. Also the best way to go of course fee-wise.
Can you explain this one further? I do have more than 100K. Should I sell in smaller increments to save on fees, instead of 1 large order?
Well, either way, 60k is peanuts. I wouldn’t recommend anyone to start with VT and switch to VWRL after reaching 60k. I would rather say: plz man acquire skills, get a better paid job, up your savings, and forget about funny ETF optimization…
@Bojack It’s however my case, I have invested in VT but am considering switching to VWRL (based on this threads comments). I’m not doing funny ETF optimization, but looking to simplify and stick with 1 ETF. I’m above 60K on VT already.
You yourself wouldn’t, your descendants might. But according to the IRS website (see above) no. You’ll also find articles in the Swiss press if you google this, mostly in German, that attest to this.
Well, not that I have any experience with this but I can imagine you would want to plan a large trade like this.
Placing a market order without checking the spread and BID/ASK prices would probably not be wise, you risk selling parts of your position at lower prices; and setting a simple limit order might leave you with unsold portions of your shares if there are not enough shares in the BID.
All this might not be relevant for VT that has a very high volume and where even 150k is not a big sum Currently there are 1200 shares in the BID (changes all the time) @ $87.04 which amounts to 105k, so technically you could place a limit order for 1200 shares at that price and get it filled immediately. Or alternatively set a limit price slightly lower let’s say at $87 for all 150k worth of shares and hope to sell everything in one go to save on fees.
Btw does anyone know how the fee system works if you put a limit order and it gets filled in increments (separate trades)? I assume the fee is still charged once, as there was only one order, but I’m not sure.
Also I wonder how it would work if you placed an IB MidPrice order for the 150k worth VT …
By reading and partipating to this forum, you confirm you have read and agree with the disclaimer presented on http://www.mustachianpost.com/
En lisant et participant à ce forum, tu confirmes avoir lu et être d'accord avec l'avis de dégagement de responsabilité présenté sur http://www.mustachianpost.com/fr/
Durch das Lesen und die Teilnahme an diesem Forum bestätigst du, dass du den auf http://www.mustachianpost.com/de/ dargestellten Haftungsausschluss gelesen hast und damit einverstanden bist.
