But what are the real dividend tax advantages of a total world fund based in USversus based in IE? I mean us equities are 55% of a total world fund, but they give only around 1.8 % dividends. The rest of the nations (45%) can give up to 3-4% dividend that are taxed maybe worse in US than in IE, because maybe IE has better tax treaties with more countries. So did anybody ever did the calculation of the overall dividend flow to US based fund vs IE based fund? For pure us equities like s&p500 etd is clear that us fund is better, for a total world it probably is, but how much better? Just wondering.
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Just heard from the Tax administration: VT is now ESTV listed. I am really impressed with the response time.
@grog
Interesting, but where would you get the data for that?
Maybe we could ask vanguard directly?
Are you sure Ireland has better tax treaties than the US, I would imagine the biggest industrial nation has some reasonable tax treaties?
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Hmm, comparing the reporting page for VT and VWRL, I see that VT has a gross return of 2.31% vs 1.977% for VWRL. In a previous post above, I had referenced a much lower yield for VT, which I think I took from here: http://www.dividend.com/dividend-stocks/uncategorized/other/vt-vanguard-total-world-stock-index-etf/. Not sure why such a big difference, honestly. Even purchasing it at the highest price in the last 52 weeks wouldn’t bring the yield that low 
Which means that if the ESTV numbers are correct, it would make a lot of sense for me to move my VWRL:swx investment from CT to VT at IB.
Well remember that VT is different than vwrl. At least 5% small stocks more that could account for the difference. They don’t even follow the same index, although similar. And in 2016 the ftse global all cap (VT index) returned 0.4% more than ftse all-world (vwrl), but in reality you say that VT was only around 0.33% better? It looks to me that VT then did a worse job in tracking the index than VWRL.
EDIT: I see now that you probably are thinking about dividend yield. I don’t know if that is such a good idea; as said they are different index. I think the best thing would be to compare each ETF with the basis index and see how they do from a total return perspective.
VWRL:
VT:
and here all the index:
What I am trying to say here is that once you got down to 0.25% TER, and looking to improve of some percentage point to 0.11% and doing dividend optimization, then it’s important to understand that VWRL and VT are not the same thing and the things that make it different (small stocks, country of residence and so on) may have a larger impact. Look at the variability. Sometime the fund is 2% better than the index, sometimes 1% worse! The impact of management for securities lending is a more important factor than some tax treaties, just saying… I can’t even find out why the benchmark in VWRL is reported as 8% but then the FTSE all-world grew 8.6% in 2016.
I am very interested in switchinig to US etf and IB since it seems so easy, but I guess I am too lazy and I really like buying stuff on the swiss exchange, although probably it is not rational.And I like CT.
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I knew it could not be that easy.
Where did you get that data? I would like to do the comparison using VWRD instead of VWRL since that would at least take the currency conversion out of the equation.
It would be nice but I fear it’s not possible…
You can find the data here
The ETF official currency is USD. I’ve already tried to contact Vanguard to know something about currency conversion rate with no luck…
Conversion rate markup is part of bid-ask spread. Just one part of it, another thing you’re paying for is arbitraging markup for the market makers.
Buy the most liquid, most highly traded ETFs, all other things equal: spread will be minimal due to natural competition.
Like said before in this thread, it makes sense to buy an U.S etf when the underlying securities are traded in U.S.
In the other cases, like all-world index, the advantages are not clear enough
Let’s not forget that 15% or 30% of taxes are applied by U.S on dividends. It’s possible to be refunded by the tax administration, however this amount would be blocked during months and can not be reinvested in the market.
That’s why I have chosen VFEM instead of VWO for emerging markets.
Well I’m only interested in % variation year to year compared to the benchmark so currency effect don’t really matter because the underlying assets are anyway in multiple currencies and in a similar allocation (VT, VWRL). The benchmark on the table is reported with the same currency than the ETF.
What I wanted to say is that when you are trying to get 0.1% better TER than you are entering a realm where you are more susceptible to tracking error and security lending, which are more or less manager dependent. So pure TER should not be the final criteria. You must understand the underlying index too.
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I’d be interested in opinions on my portfolio as I think it still requires a bit of refinement. I am deliberately underweighted in the US as I have taken an opinion that values are currently too high, over time I would consider increasing the weighting. The GBP funds are a requirement, as I slowly transfer historical GBP cash to CHF I wish to remain invested incase of GBP weakening hopefully fund performance would offset this a little.
Fixed Income:
- 10% IE00B5L65R35 IS15 iShares £ Corp Bond 0-5yr UCITS ETF GBP (Dist)
- 10% CH0016999846 CSBGC7 iShares Swiss Domestic Government Bond 3-7 (CH)
Equity: - 10% CH0032912732 UBSLI UBS ETF (CH) SLI (CHF) A-dis
- 20% IE00B3VVMM84 VFEM Vanguard FTSE Emerging Markets UCITS ETF
- 20% IE00B945VV12 VEUR Vanguard FTSE Developed Europe UCITS ETF (GBP fund)
- 15% US9220427184 VSS Vanguard FTSE All-World ex-US Small-Cap ETF (VSS)
- 15% IE00B3RBWM25 VWRL Vanguard FTSE All-World UCITS ETF (VWRL)
I was looking at somehow putting a Eurozone fund in there to reduce the UK and CH bias a bit as certain companies reoccur in multiple funds. I liked having the small cap world but was a little worried about having the US domiciled fund, not sure how much of an issue this is regarding dividend taxes etc (no US stocks, US domiciled, would consider a good alternative if someone has a suitable suggestion).
This portfolio makes up about 70% of my wealth, with the rest in pensions etc. Considering my investment horizon due to perhaps buying a house in the next 5 years I am probably overweighted equities. I am aware of this but happy with the portfolio as we just can’t decide what we want to do medium / long term anyway so maybe it doesn’t happen so soon.
You’re losing money with it at crazy rate from holding (Weighted Average Yield To Maturity: -0.62%), fund expenses (-0.15%), taxes (assuming 35% tax * 2% distribution yield: -0.70%) and transaction costs. The only way you’d make any money out of it is if yields would drop down a lot more and that’s not exactly happening for good last half a year (SNB, Bloomberg).
There’s no reason for retail investors to buy any of these negative yielding abominations. You can just hold the cash in a savings account at 0% and still be covered by the government up to 100k per bank. Once you start running out of banks you could trust your money to, then it might make some sense to do it, to put the trust into government. Otherwise it’s just a rather expensive bet on interest rates going down.
You might have bought it from an exchange which quoted it to you in GBP, but don’t fool yourself: it’s not really tied to GBP in any way and only has 28% of UK companies in it. And also it seems to have already some 10% in Switzerland, overlapping somewhat with your SLI position (e.g Nestle Novartis Roche make up 7% and 26% in each).
If you’re certain that you want to buy in 3-5 years and have a high tax burden, I’d rather put the money for downpayment into pillar 2 and 3. Tax savings is guaranteed income (albeit one time only) and easily blows away other investment alternatives for such a short term, despite abysmal interest rates.
But if you’d rather stay heavily in equities for this period, then I’d at least cut out EM and small caps, these casinos will tank faster than the market in a downturn, they are rather low on defensive sectors. Maybe also consider low volatility themed funds instead of capitalization weighted.
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As I said before, depending on which broker you are you may pledge 50% value of your ETF to get money to buy a home.
Except Swissquote, which broker offers this option ?
IB will loan you CHF currently at 1.5% on the margin. But at 50% it’s very risky, they’ll start selling stocks once the market goes down. You need to be below 50% at the end of each day
Some banks I’ve heard accept stocks as collateral and would give you a higher than 80% mortgage then, but you need to pay them custody fee and mortgage rate on this extra money, so in the end it might not be much better than IB. I don’t know though what margin they allow in this case, so possibly you could loan more through bank than IB
You should be able to arrange something with brokers linked to banks like cornertrader with cornerbank.
I don’t know if Postfinance offers it
Exactly if you have stock to pledge they may go higher and give you 85/90% mortgages.
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Well I’ve heard cantonal banks do it, e.g. ZKB. But you’re looking at paying 0.3-0.4% custody fee for parking stocks with them, in addition to mortgage interest. Amortization payment will also be higher, this part of the mortgage has to be fully amortized linearly within 15 years
I’m targeting following portfolio:
- Cash 5%
- db x-trackers Global Agg Bond ETF (USD) + Swisscanto 3rd Pillar 30%
- iShares Core MSCI World UCITS ETF (USD) 55%
- SPDR MSCI Emerging Markets UCITS ETF (USD) 5%
- SPDR MSCI World Small Cap UCITS ETF (USD) 5%
By the way, do you have any sensible alternative to keeping cash in bank account (for daily expenses and emergency situations)?
Update: I switched to VT and BND at Interactive Brokers.
traditionally this was the purpose of the money market (short termed bonds <1 year, even down to 1 day) but since the low interest area, it hardly serves al alternative to cash anymore.
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So, here I come up with the last draft of my new portfolio. the old one is here. By extending my investment universe to US based Vanguard funds, It is now much more consequent in terms of how my dream-portfolio looks like. Again, this would be an equal amount of $$ in every liquid stock in the world, with some value weighting. 100% stocks, at least for that part of my stash that i can freely define (unlike pillars 1,2,3):
- 15% VTI: US total stock market
- 15% VXF: US ex large cap (US minus SP500)
- 15% VBR US small value
- 20% VXUS exUS total stock market
- 20% VSS exUS small cap
- 15% VWO emerging markets
with a total expense ratio below 0.1% 
and an weighted average of 3’700 stocks per ETF 
but be aware of some overlaps.
the regional distribution is close to that of VT, with EM somewhat overweighted:
- 50% north america
- 20% Europe
- 20% emerging markets
- 10% rest
- rest: others
the size factor is clearly different, with mid caps overweighted and small caps significantly overweighted: 40/34/26 where VT has 77/18/6.
I also want to overwight Value stocks, but when i wrote down the value-blend-growth distribution according to morningstar, I found i cannot do too much about it unless i sacrifice diversification and low TERs. VBR seems the only value fund that does ok with both, but is actually not that valuey, according to altruist advisors. it has about 50% value stocks according to morningstar, somewhat more than 1/3rd.
I also dropped the home bias since SPI stocks are already contained in VXUS. Nestle is the top position there, and roche & Novartis #4 and #5 
my beloved SMPCHA simpy shatters at the diversification argument.
I have not commited yet as i feel no pressure, so i keep tweaking here and there. any suggestions welcome
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What exactly are you trying to achieve with this value and size tilts? Value’ is not a defensive play, everything will crash just as fine as general market. Small caps even more, with their 1.10 beta at the moment
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