That makes sense to me, but then we should see a steadily widening gap between the index and the ETF over the years.
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.
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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.
Huh? So they’re eventually making up for the TER?
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.
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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?
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I’m currently negative on my VT investments. Would it be better to sell now and switch to VWRD to avoid capital gain taxes?
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Any benefits of keeping both VT and VWRD? And potentially selling VT later on.
There’s no capital gains tax in Switzerland, unless you are qualified as a professional investor.
How much VT are we talking about?
There are no capital gain taxes for private investors in Switzerland.
If you insist on distributing shares, there is no real difference between them.
Furthermore, you can buy VWRL with any European broker, it doesn’t have to be IB. (Or yes, margin loans).
- I’m currently negative on my VT investments. Would it be better to sell now and switch to VWRD to avoid capital gain taxes?
If you are negative on VT, there would be no gain.
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.
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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?
I don’t think so.
According to this:
one only has to file the documents if the holdings are more than 60k.
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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…
There’s no capital gains tax in Switzerland, unless you are qualified as a professional investor.
How much VT are we talking about?
Around 150K USD
Furthermore, you can buy VWRL with any European broker, it doesn’t have to be IB. (Or yes, margin loans).
Clear thank you. Are there advantages of switching to an European broker? I like IB.
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.
Way to go
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 …
Obviously this issue with the US estate tax is very debated, and besides personal reasons, let’s be honest, also for some ambiguity associated with it - many of us at some point in time were wondering a lot about this before doing our research, and this thread shows very well that there’s still a lot of uncertainty.
And that’s the problem with this in my opinion, a lot of us haven’t done our research before starting to invest in US securities / ETFs. I personally knew of the estate tax and the 60k limit from the beginning, but not the issue with the US tax return and formalities etc.; had I known, I would have stuck with VWRD.
I don’t know if this applies to @uji, but I can bet there are others out there who have invested 100k+ in US stocks/ETFs and never thought of or planned for this estate tax.
As long as they never get informed (via this forum for example) and if anything ever happens to them, their family would find themselves in a position of not knowing anything about this, and/or where to start, or what documents to file for the IRS.
And this is why I think it’s so important to get the word out there about this, so people can make an informed decision and plan for it, even if they do decide to stay invested in US stocks.
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What I mean is, it should never be recommended to start with VT and then switch once you reach 60k. Exactly to prevent your case. Best to learn the pros and cons at the beginning and choose the right ETF at the start.
Financially no, but many members here prefer to have their wealth at a Swiss or at least European broker, as it might be better and easier to handle very bad situations if the broker goes bankrupt for example.
Nevertheless there is always an option to transfer securities from one broker to another and if you are not comfortable to keep your life’s savings at IB, you can just transfer out the accumulated securities.
For US securities the commission is paid on the number of shares traded. If your total order is more than 100 shares, your commission is just proportional to the number of shares. They are very small anyway.
I have over 100k in US ETFs at IB and I plan to continue buying. I have informed myself about US estate tax in advance and I decided to not fuss about it.
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If I’m terminally I’ll, I’ll sell my US assets on the deathbed - in the hope that it will make it easier for the executors of my estate/heirs.
If it doesn’t or I’m unable to, they’ll pay a professional a couple of thousands of CHF to file. It’ll still be worth it, it they inherit a six or seven figure amount. And it’s not as if they’d be well-versed enough with tax filings to do it in Switzerland (for European securities) either.
Honestly, I’m not fussed about it at all either.
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