Yes, the TER fee is increasing as your portfolio grows. In accumulation phase, this is one parameter that strongly affects the final value. There are lots of illustrations showing the effects of high TER (or fees in general) on the portfolio growth.
It is also important because, while you can’t control market returns, you can optimize fees.
Let’s say
FV = Final Value
r = annual return from investment
N = number of years
IV = Initial investment value
B = buying cost at the beginning
re = r - TER
FV = (IV - B) x (1 + re)^N
As you can see, TER is more impactful because it is inside the brackets and can impact much more than the initial buying cost.
In addition, if there is any custody fees which is based on AUM then is also acts more or less the same, it reduces the Effective return
Yeah thanks everybody, too much wine and not enough sleep yesterday, today it’s perfectly clear that it should compound.
I have question about the tax declaration and IBKR, especially world wide ETFs: is it easier to have VT in two parts, i.e. one USA (VTI) and the rest ex US (VXUS) or doesn’t it matter? The question is only about the tax declaration, especially filling it out (time needed) and getting WHT back?
No difference there as both are US domiciled and have the same tax treatment regarding withholding tax in Switzerland.
Only for US residents it really makes sense to separate them, as they get an extra foreign witholding tax credit for VXUS, which they dont get if it‘s all in one fund VT. Not relevant for us (unfortunately).
Combined weighted TER is 30% lower if you buy separately.
No difference for Swiss residents from tax return purposes
Both are equally simple to file tax return
VT - one entry
Or
VTI / VXUS -: two entries
True, but both are so very cheap, there is not much material difference.
Although personally I‘m prononent of splitting and there is data on a harvesting a rebalancing premium.
For most average people one-and-done solution is to be preferred though, in my opinion.
Yeah, I know, just wanted to mention it. Not sure I would do it either.
I went down the rabbithole and compared a world ETF portfolio (VT, VTI & VXUS, FWRA) with IBKR, SQ, PF, neon and finpension. It has been… something 
I plan on posting it here shortly. I found a difference between VT and VTI & VXUS of 0.3% after 25 years (with IBKR).
In other words, in the order of a typical daily price change for stock indices.
FWIW I used to have split ETFs, but I’m moving to VT. The main reason is that it’s a pain to keep it balanced with cap weighted allocation, so you end up having to do manual decision (how to rebalance) which is extra overhead (and one more place where you can be tempted to tweak things, often for the worse).
I’m at 4, down from previously 8 and have so far never actively rebalanced between them. 
Only via a single transaction of the monthly saving, which takes maybe 2 minutes.
Every few months maybe a bit more if I update the prices and FX rates in my spreadsheet.
For taxes, I do one entry for the total account, so it makes no differences whether there’d 1 or 100 different positions in there.
Yeah that’s what I mean, this will diverge over time from cap-based (if your initial goal was to replicate all world). E.g. US gained quite a few percentage points over the past decade (and might go in the other direction in the next one).
OK, so I put together a little comparison for investing into world ETFs.
Scenarios (CHF)
For 25 years:
These amounts include fees, because these are the amounts of money that are put aside for investing, not more, not less, so fees need to be paid from those sums. Example: if broker X’s fees are CHF 10 and CHF 50 with broker Y, a monthly 1k would result in an actual investment (i.e. invested in ETFs) of 990 with broker X and 950 with broker Y.
If there is a particular scenario you want me to add, feel free to ask, it’s very quick to add a new one.
Brokers
Portfolios
Method
=== RESULTS ===
1k monthly after 25 years
| VTI & VXUS (IBKR) | VTI & VXUS (SQ) | VTI & VXUS (PF) | VT (IBKR) | VT (SQ) | VT (PF) | FWRA (IBKR) | FWRA (SQ) | FWRA (PF) | FWRA (neon) | fin-pension |
|---|---|---|---|---|---|---|---|---|---|---|
| 719’862 | 688’821 | 683’936 | 718’372 | 683’755 | 685’977 | 697’370 | 678’922 | 689’431 | 699’823 | 673’861 |
| -31’041 | -35’926 | -1’490 | -36’107 | -33’885 | -22’492 | -40’940 | -30’431 | -20’039 | -46’001 | |
| -4.3% | -5.0% | -0.2% | -5.0% | -4.7% | -3.1% | -5.7% | -4.2% | -2.8% | -6.4% |
.
100k lump sum after 25 years
| VTI & VXUS (IBKR) | VTI & VXUS (SQ) | VTI & VXUS (PF) | VT (IBKR) | VT (SQ) | VT (PF) | FWRA (IBKR) | FWRA (SQ) | FWRA (PF) | FWRA (neon) | fin-pension |
|---|---|---|---|---|---|---|---|---|---|---|
| 476’298 | 444’220 | 458’477 | 473’953 | 442’671 | 456’342 | 454’497 | 429’448 | 444’468 | 451’772 | 427’671 |
| -32’078 | -17’821 | -2’345 | -33’627 | -19’956 | -21’801 | -46’850 | -31’830 | -24’526 | -48’627 | |
| -6.7% | -3.7% | -0.5% | -7.1% | -4.2% | -4.6% | -9.8% | -6.7% | -5.1% | -10.2% |
.
100k lump sum + 1k monthly after 25 years
| VTI & VXUS (IBKR) | VTI & VXUS (SQ) | VTI & VXUS (PF) | VT (IBKR) | VT (SQ) | VT (PF) | FWRA (IBKR) | FWRA (SQ) | FWRA (PF) | FWRA (neon) | fin-pension |
|---|---|---|---|---|---|---|---|---|---|---|
| 1’196’160 | 1’158’511 | 1’151’536 | 1’192’325 | 1’151’770 | 1’151’397 | 1’151’867 | 1’132’910 | 1’142’734 | 1’151’595 | 1’101’532 |
| -37’649 | -44’624 | -3’835 | -44’389 | -44’763 | -44’293 | -63’249 | -53’426 | -44’564 | -94’628 | |
| -3.1% | -3.7% | -0.3% | -3.7% | -3.7% | -3.7% | -5.3% | -4.5% | -3.7% | -7.9% |
.
250k lump sum + 2.5k monthly after 25 years
| VTI & VXUS (IBKR) | VTI & VXUS (SQ) | VTI & VXUS (PF) | VT (IBKR) | VT (SQ) | VT (PF) | FWRA (IBKR) | FWRA (SQ) | FWRA (PF) | FWRA (neon) | fin-pension |
|---|---|---|---|---|---|---|---|---|---|---|
| 2’992’564 | 2’917’648 | 2’900’762 | 2’981’891 | 2’915’129 | 2’912’653 | 2’884’924 | 2’863’709 | 2’867’298 | 2’878’988 | 2’753’830 |
| -74’915 | -91’802 | -10’673 | -77’435 | -79’911 | -107’639 | -128’855 | -125’266 | -113’576 | -238’734 | |
| -2.5% | -3.1% | -0.4% | -2.6% | -2.7% | -3.6% | -4.3% | -4.2% | -3.8% | -8.0% |
.
Please let me know if I missed something or made wrong/nonsensical assumptions.
Very interesting since I’m comparing for myself VT (IBKR) and FWRA (neon) at the moment. This helps, thanks.
Just to make sure: You calculated FWRA (neon) with the current 0% commission when using the savings plan? So this assumes that the 0% commission will stay for the next 25 years (which I doubt)?
I calculated 0.5% fees for the lump sum and 0% for monthly deposits (plus stamp duty). If I use 0.5% for monthly deposits as well, the difference to the best-performing column above increases by 0.3 (for 100k/1k and 250k/2.5k) to 0.5 percentage points (for 0k/1k).
Income taxes on dividends will be higher for the US ETF and finpension variants as you will pay Swiss taxes on the 15% US WHT. This will reduce the end result by around 1%, depending on your marginal income tax (estimation based on about 0.04% p.a., I haven’t done the full calculation).
TradeDirect (BCV’s solution): TradeDirect / Markets and online trading They should score around the same level as SQ.
Pretty sure you can find a slew of Swiss brokers allowing the trade of US stocks/ETFs (Even though I don’t recommend using them, I’d be surprised if CornèrTrader didn’t). Edit: according to Jay’s answer below (thanks!), it turns out they don’t.
Thanks for having run the math. Significant but not make or break results.
Cornèrtrader used to offer US ETFs (back then without W-8BEN) but then removed access. I’m no longer a customer there but as they use the Saxo platform and Saxo Bank Switzerland doesn’t offer US ETFs to non-professional customers, I would guess they still don’t offer them.
Just to be sure.
15% WHT is deducted from 7% return would result in following , right? Just from dividend and WHT perspective.
Yield for VT -: 7% yield (including 2% dividend , out of which 0.93% comes from US stocks and 1.07% comes from non-US)
Yield for FWRA -: 6.86% yield (including 0.79% Dividend from US and 1.07% comes from non-US)