In the past month I discovered the world of bogleheads and mustachians, thus realizing that low cost US index funds are something I want to invest in.
14 years ago my parents bought me funds at Migros Bank tracking Swiss and Liechtenstein companies in CHF. They did ok… although they underperformed VT.
The thing that makes me want to move my funds away from MB is the high TER ~1.26%, the withdrawal penalty 5% and the low diversification.
Currently im building up a portfolio on IB where I invest in VTI/VXUS - 80/20.
The problem is that if I reinvest the funds, I‘ll loose up to 5%!!! Maybe that‘s not that bad since its YTD is currently 2% and VTI‘s is -12%…
Now my question to you guys is. What would you do?
I would take the money out despite the penalty. The lower TER of passive ETFs will compensate a 5% penalty after 4 years or so, assuming the Migros fund doesn’t outperform index investment. If you stay invested for many years, I wouldn’t want to pay such high fees every year. It adds up.
You could take a look at the fact sheet and compare the fund performance with the benchmark. I don’t know which fund you have but e.g. “Migros Bank (Lux) Fonds SwissStock A” underperformed the benchmark by 2.12% p.a. in the last 5 years and by 1.90% p.a. in the last 10 years. I.e. the difference has been significantly higher than the TER.
Has the 5% fee been stated/confirmed by the bank? In the KIID of the above fund I see a maximum fee of ‘only’ 2% (Rücknahmekommission). I.e. maybe the fee is not even that high.
You could consider reinvesting part of it in an SPI ETF (iShares Core SPI) in addition to VTI/VXUS to balance your US bias in the current VTI/VXUS allocation a bit. However, that’s a separate question.
Clarification: My current Migros Bank Portfolio is “Migros Bank (CH) Fonds SwissStock A” 40% and “Migros Bank (Lux) Fonds 50B” 60%.
I appreciate your input and you’re right it’s actually 2% and not 5% (Ausgabekommision). I read that wrong.
I think I’ll make the switch.
Regarding your recommendation for a home bias. Why would you consider it?
Your current allocation has a US bias, which is fine if that’s what you want, of course, however, it should be a conscious decision.
While listed Swiss companies are generally global companies, I’d still expect a bit more correlation between SPI and the Swiss economy/currency compared to e.g. VTI. I want that bit of extra correlation in my portfolio, which is why 20% of my stock allocation is in Swiss stocks (mix of SMI and SPI Mid/Extra). Whether you want that as well or not is up to you, of course. There is nothing wrong with a stock portfolio without home bias.
My current plan is to invest in a 70/30 allocation and slowly over the years switch to a more VT-like allocation. I read somewhere in a boglehead forum that VXUS acts as a dollar hedge. I must admit I’m not fully aware on how it works but wouldn’t that be enough of a measure against currency fluctuation? I guess it’s up to me to assess that.