Road to redemption

Hello everyone, like many of you I also recently stumbled across MP’s blog by chance and a whole new world has opened up to me since then. This forum is also a treasure of information and knowledge.

A brief introduction about me:

  • I moved to CH from Italy in 2012 and have been living in a rather frugal way since then;
  • I have been investing in a quite unstructured way, feeling the urge to stay invested but clearly making many mistakes along the way; when I started reading the blog, my portfolio included cash, a rented apartment abroad, several funds in PF (you don’t want to know the TERs I discovered when I looked into it few weeks ago… :exploding_head:) and some shares bought based throughout the years (I swung between growth and DGI ending up with a messed sub-portfolio there as well);
  • no 3rd pillar at the moment;
  • mid-term (5yrs) FIRE target…embedded in my nickname :slightly_smiling_face:;

I am now making some cleaning up and, first thing, was to get rid of the ridiculously expensive funds in PF. This is freeing some liquidity up and I am willing to invest it in the most minimalist way, through VT (my tax man is going to be happy about that!).

One question for you guys:
Some of that liquidity (approx. 30k) is in Eur, so it was already converted in the past from CHF;
as I have learnt, currency really has no impact in the long term but would you suggest to find an effective way of investing it in EUR (VWRL), also considering that it will be most probably my FIRE currency in the future, rather than convert it again in USD?
Please also consider that, when I move to a EUR-based country, I plan to reset my cost basis and sell VT taking advantage of the Swiss (no)taxation on capital gains. ETFs in my portfolio from then onwards will necessarily be in EUR.

Any thoughts?
Many thanks for your help.

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Your tax man would probably be happier if it was VWRL or VWRA instead - since with these there‘d be no need to deal with form DA-1 (you might have noticed the occasional „discussion“ or denial by the tax authority, or the fact that not every tax software lets you automatically import US ETF shares into DA-1). On the other hand, your tax man might be happy about additional time and effort that he can charge you for.

In any case:

  1. Decide if you want to invest rather than keeping liquidity
  2. Decide what to invest in (and I don’t mean a particular fund but more general the idea. VWRL and VT are so similar, they can be considered the „same thing“ here)
  3. Work out the most efficient way to do so (costs of buying, recurring costs, taxes)
  4. Double-check for any caveats (details and things you might have missed)
  5. Take action.

I am not pretending to dispense any great insight here. It’s just common sense rather. From your question, I am not really reading out your will or decision to invest. And that shouldn’t depend on the currency that you’re currently holding these funds in - because currency conversions will be just a small one-off costs. So applying to your particular question, it might rather follow something like this:

  1. How much liquidity are you going to need? Do you “need” the 30k (or currency equivalent!)? What for? Are you prepared to invest them at a loss, over a five-year period? Any benefits of keeping in cash?
  2. Do you want to invest 30k (or currency equivalent!) in an All-World equity ETF? Yes or no?
  3. Which particular ETF to choose (VT/VWRL,VWRA,IWRD…) would be most efficient, and in which currency would you incur least costs to buy and hold it?

Thank you SF, I appreciate your help.

The tax man I referred to is the guy at the tax office that deals with my declaration (I prepare it myself), who made it clear to me that he was being driven mad by my long list of investments.

Ref your questions:

  1. the 30k are up for investing, no need to be liquid as my emergency fund is filled already and my allocation in bond is in my 2nd pillar.
    No problem to invest it in the stock market and look my portfolio drop by 30+% (actually, it happened in Feb/Mar…it was scary but I did not sell anything, actually I considered it as an opportunity to average down on some positions)

  2. yes. I also considered a combination of VTI+VWO+VEA to reduce the TER but in the end I opted for keeping it simple via VT

  3. that is the point I am trying to figure out, limitedly to what I already have in EUR ,considering that:

  • I have already decided that the proceedings from selling PF funds in USD and CHF will be for sure invested in VT (I already started yesterday with a 10k purchase via IB)
  • I will need to go all-in in European ETFs once I move but, at the moment, a TER of 0.25% vs 0.08% still makes a remarkable difference in the long run + tax-wise, VT is more efficient than VWRL
  • I could move to EUR-based country sooner than FI (within 1-2 yrs)

I guess that, considering the lower costs and its higher efficiency from tax perspective (not considering possible issues with denial from tax authority), VT seems to come as the natural choice then…correct?

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