Should I sell my low volume ETF shares

Leap · January 30, 2018, 12:08pm

A few months ago I switched from ComStage MSCI EmergingMarkets TRN UCITS ETF to the UBS MSCI EmergingMarkets UCITS ETF.
Mainly because of the lower TER and its bigger fond-size. Now by “switching” I mean I just started to buy the UBS one with my monthly investments, I haven’t sold the other one yet.

Now since I’m buying the new one I realized how tiny the trading-volume of the ComStage one was. I don’t have to wait for 15 minutes for somebody to sell to me and I don’t have to use wide limits.

My question is: Is there any risk attached to holding onto a low-volume ETF? Do I risk not being able to sell when I want to? Obviously I would lose some money to transaction-fees if I had to sell and buy new (100-200CHF) that I’d rather avoid.

Some numbers:

Volume-difference: 15 ComStage vs 115’392 UBS
Spread: 0.33CHF ComStage vs 0.07USD UBS

wapiti · January 30, 2018, 4:08pm

If the liquidity is lower and you want absolutely to sell now you will need to set a lower price.
The SIX website displayed “Time weighted average spread” under each fund for exemple: https://www.six-swiss-exchange.com/funds/security_info_en.html?id=LU0480132876CHF4

The spread needs to be taken into account when choosing an ETF (like the TER).

I think either the UBS fund and the Comstage fund are a bad choice for EM on the SIX.
I would recommend:
iShares Core MSCI Emerging Markets IMI UCITS ETF
Vanguard FTSE Emerging Markets UCITS ETF

Leap · January 30, 2018, 4:59pm

Thanks for your reply. Why do you think they’re both a bad choice? Or why are the other ones better? I saw that the EM IMI also has small-cap in it. Does this justify selling? Or should I hold on to, if I’d buy the iShares from now on, three different ETFs for “the same” index?

wapiti · January 30, 2018, 5:19pm

Comstage and UBS are Swap based (not replicated physically) and the comstage one has an high spread.
Ishares and Vanguard have a lower spread and are replicated physically.

The main differences with the indexes are:
MSCI and MSCI IMI are not so much different: https://www.msci.com/documents/10199/97e25eb7-9bd0-4204-bea9-077095acf1d3
FTSE emerging market doesn’t include south korea

I would sell all using stop limit (maybe on multiple different days) and move everything in one index.

Leap · January 30, 2018, 5:45pm

I don’t care that much about it being Swap but I do like having only one instead of three ETFs to worry about.
I calculated that it would cost me 130.- to sell and rebuy at my broker. I like my ETFs accumulating so I tend towards the iShares MSCI EM IMI. Also it would be nice having some exposure to small-caps. Thanks for your help.

wapiti · January 30, 2018, 6:26pm

I don’t know which broker you have but the fees are outrageous (unless you have a big sum). You should think at choosing another broker (Swissquote or IB)
The iShares Core MSCI Emerging Markets IMI UCITS ETF is accumulating however it’s traded in USD. You broker will convert the CHF to USD. Depending on the broker the rate is quite bad.

Leap · January 31, 2018, 8:58am

I’m with Strateo. It ended up costing me 120.-

23 Stempelsteuer + 25 transactionfees for selling the ComStage ETF
17.51 Stempelsteuer + 15 transactionfees for selling the UBS ETF
39.- for buying the iShares MSCI EM IMI ETF
= more or less 120.-

The whole transaction was around 20’000.-

Alex · January 31, 2018, 10:16am

Good time to look at other alternatives.

Leap · January 31, 2018, 5:16pm

Stamp-duty is the same everywhere I suppose? What would have been cheaper with a different broker? Transaction-fees?

wapiti · January 31, 2018, 5:30pm

If the broker is outside Switzerland, there is no swiss stamp duty (even if you trade on the SIX). Yes also transaction fees.

nugget · February 1, 2018, 9:10am

Here is a fully representative example of how low IB commission fees are: for 6 shares of VBR worth $800, I pay $0.34 in commissions/ exchange fees/ whaterver, maybe add a bit of spread:

on top of that comes the forex cost:

for small amounts <25000 it’s more or less flat CHF 2

uhhh nayone knows what MTM means?

Bojack · February 1, 2018, 12:26pm

Why 25’000? IB charges max(0.002%, 2 CHF), so you can only get more than 2 CHF fee if you exchange over 100’000.

No idea what MTM is - googled it. It says that it’s the difference between trade value and current value. So kind of like Profit/Loss. So MTM 5.72 CHF would mean that you made that trade at a more favourable rate than now, that’s how I understand it.

Leap · February 1, 2018, 6:50pm

Thats really a huge difference. I still struggle with the idea of my money not “being in Switzerland” although I know that it isn’t really a rational thought. With Strateo I also have 0.6% loss in CHF-USD conversion I just figured out…

nugget · February 1, 2018, 10:57pm

if you read up my story you will find that i first went to corner trader because of exactly this. well, i don’t know how this affect my future finances, or brexit, since IB is in london

jrmycohen · February 5, 2018, 7:14am

One more thing: IB is in London and they have a representative office in Switzerland channeling orders to London… but the custody is carried out by IB LLC, in the US.

Hence money is not in CH, neither in the UK but in the US (which has other advantages such as the $500k SIPC protection).

MTM should mean Mark-To-Market (https://www.investopedia.com/terms/m/marktomarket.asp), which is the “fair value” of your assets as per their market price.

Bojack · February 5, 2018, 8:06am

I don’t understand what you mean by fair value, that doesn’t explain much. The way I understood it, is that mark to market shows you the difference between current value and initial value.

https://ibkr.info/node/56

jrmycohen · February 5, 2018, 9:07am

Mark to market is a valuation method of your assets while Mark to market P&L is a valuation method of your P&L.

If you are looking for the value of your assets, look at the MTM column but if you want the difference between your current value and initial value, it’s rather the MTM P&L column.

Bojack · February 5, 2018, 9:56am

OK I think I get it now. So mark-to-market accounting is a way of reporting open positions. Until you sell, you don’t know the actual value of that position, other than the initial value, which may no longer be even close the the current value. So with the old style of accounting, they don’t update the current value until you close the position. Mark-to-market takes the current “fair value” (market value adjusted for some special cases), at which this position could theoretically be closed.

jrmycohen · February 5, 2018, 11:05am

Mark-to-market takes the current “fair value” (market value adjusted for some special cases), at which this position could theoretically be closed.

Spot on!