Some help with fund choice and fund currencies

Investing / Portfolios
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For the longest time I was set on using VWRL with Corner Tradèr. Alot of you guys here recommend US-domiciled funds with IB though, so this has got me thinking.
I am sorry if this has been discussed here before.

For some odd reason I feel more comfortable holding a CHF-denominated asset, rather than a USD one. I think that the dollar will continue to lose value against the CHF over the next 40 years (like it has been doing) Is this an irrational fear?

I like the composition of VWRL and would prefer a one-fund solution. I can either buy VWRL on SIX in CHF or as a USD-Version.

Now I know that ~50% of of the assets in the fund are traded in USD and thus the trading currency does not matter. If the dollar falls against other currencies, those in turn provide a higher value in the dollar amount. This can be said when looking at one specific time frame, eg. it was nicely observable when the SNB unpegged the CHF.

So now lets say I save up for 30 years and I retire. Both funds (VWRL in CHF and USD) should be worth the same calculated in CHF right? Or is one better?

I guess what I am trying to ask is what happens when I retire, having always invested in dollars and the dollar has fallen 30% compared to the Franc.

Will I just lose 30% in value comparing USD->CHF

Or would it have been better using the CHF version of VWRL all this time because it. constantly adjusted to the USD/CHF ratio?

I can imagine that the answer to my huge paragraph above is a simple: “it doesnt matter” And i am truly sorry if that is the case, I had to be sure.

In light of this, what kind of portfolio would you recommend I go with if I were to use IB? should I stick with IE-domiciled VWRL or try to model it with multiple US-domiciled funds?

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If you go with IB, choose VT (US based fund) from Vanguard.

If you stay with CT, VWRL in USD or VWRL in CHF doesn’t matter. I would choose the CHF one as you don’t need to convert the money and pay fees to the CT.

Yes, worth the same.

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I do not know if it is irrational but I do know that given the behavior of the Swiss National Bank in the last decade, your assertion is far from given. The SNB has been devaluating the CHF like crazy by massively printing money. Sure, everyone else is doing it. But this is hardly a reason to impoverish its own residents.

Anyway, for what is worth, the “stability” quality of the Swiss frank has lost a lot of splendor for me. The swiss economy and political system are very strong and stable, but the behavior of the currency itself is not better than any other in the developed countries.

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Like what? SMI? These companies have only a small percentage of revenues sourced from Switzerland, it’s largely a USD index all along. Swiss economy is tiny compared to world, this so called ‘home bias’ is a far greater risk than USD devaluation

Over a 30+ year investment horizon such drop means almost nothing, it’s at the noise level

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First of all, what do you mean by BOTH funds? VWRL is only one fund with a single factsheet and ISIN. On the factsheet you can see that this fund is traded on several exchanges and currencies (USD, EUR, GBP, CHF). The base currency however is only one: USD. The CHF version of the fund is just a thin wrapper that directly exchanges your CHF into USD. So yes, it’s completely irrelevant in which currency you buy this fund, you will in the end hold the same number of shares.

It’s up to you if you stick with CT or IB. CT will just cost you a fraction of a percent per year.

VTI is USA only, he’s talking about all-world. Don’t give false advice. The equivalent of VWRL is VT.

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You are right, sorry. It’s VT, not VTI. I corrected my post.

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Thanks for your inputs guys!

No I meant holding VWRL in CHF.
I didnt consider a drop of 30% being so little over a scale of 30 years, thanks for opening my eyes.

Sorry I meant both versions(CHF and USD), I know that VWRL is a single fund. I want to know if the CHF version, which directly exchanges the currency, gives me any benefits after 30yrs.

So concerning VT. Do I have this wrong but hasn’t VT performed noticably worse compared to VWRL? the latter has a 10% EM part, which VT doesnt have. VT additionally has small caps.

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Well, you answered the question yourself. It’s just one fund, so what difference can there be? If you buy 1000 shares of VRWL in USD or CHF, it does not matter, because you will pay the same price, taking exchange rate into account. And when you sell it, it you will also get the same money.

you mean the former. And of course VT has emerging market as well. The only difference is, VT has small caps. So it covers the world market even deeper. VWRL has sth like 2500 companies, VT has 7500. Having small caps is an advantage, because you don’t want anything to slide through your fingers.

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Trading currency is irrelevant, as long as it’s not some kind of currency hedged shit. You can always convert currency anytime when you need. Much more important is internal currency exposure - where are the companies you invested in making money as that determines their earnings - the basis of stock valuation and how much dividend they’ll afford to pay

Often especially for smaller companies, their stock’s trading currency will reflect the main currency they’re exposed to. This is less true for giant multinationals which rake in truckloads of cash from all over the world. Sometimes the stock’s currency is even not indicative at all: e.g. Philip Morris, a USD traded stock has zero exposure to US market (US part of biz is handled by Altria) and Nestle, a CHF stock has only a percent or two exposure to swiss market. INR rate has more influence on it than CHF

An ETF or a mutual fund is just a weighted sum of companies. Ultimately what matters is still the weighted sum of their currency exposures, but that’s not an easily available statistic. Most commonly you’ll just know the breakdown of stocks they invested in by country, so keep in mind that’s only an imperfect proxy to what ultimately matters

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I think I am beginning to understand everything a bit better now. Thank you very much for all your answers.
There really is no point going with corner trader and VWRL in CHF. I will have to revisit that later.

What if I choose to hold VWRL with IB? would this be an alternative, or should I go for US-domiciled funds? What are the advantages besides lower TER/TWR for US funds?

So now I am looking at VT, but here a consideration would be to have VTI and VXUS/VEA? This seems like a preferred option here.

That would be a great statistic to have, I guess you would have to take a look at every single company in a given index.

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Trading is of course cheaper for US-funds, but this is arguably not the main point. Vanguard US funds have a considerably lower TER. Your selection is also better (probably not relevant for you).

You should just avoid dropping dead (holding them as a Swiss, tax implications).

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This question has been covered several times on this forum. I refer you to my post:

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@Bojack Thanks for confirming the advantages, I apologize, I realize most of my questions now have been answered already. i was surfing through some old topics and was astonished to find so much information and valuable discussions hidden away under broad subject lines

@cray You are referring to the estate tax. This is an aspect I am still pondering on. 2 years ago the limit was 60’000 and everyone was avoiding US-domiciled ETFs, now its somethink like 5Mio, just recently changed to ~11Mio.
I dont like these quick changes, what are the chances its back to 60’000 when the next US president comes along? Does anyone have any insghts here?

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What are you talking about? I thought the treaty between US and Switzerland is in effect since 1952.

And the limit was increased from 5 to 11 million not as a change in the treaty. It applies to everyone, also the US citizens.

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I am not talking about the treaty per se. I am talking about the specific amounts. within a very short span we went from 60k->5Mio->11Mio

I remember when MP made his blog post about his portfolio he mentioned he will think about switching from VT to something non-us-based before he hits 60k. Around that time alot of comments appeared stating that they rather not use US-domiciled funds because of this low limit.

I am wondering how easy these limits get changed, I am wondering if it will ever be reduced to the likes of 60k

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60k is and always has been the treaty exemption limit. There is talk about renegotiating it, but nobody seems to be in a hurry.

The other figures are the domestic U.S. limit that can be invoked. That limit is often changed (or the estate tax even abolished) by different administrations. This does not touch the 60k treaty limit.

Edit: Just keep on living. If the situation is too much for your nerves, it could be that DeGiro or CT are maybe better for you.

Edit2: The tax consequences are ugly though.

https://www.nzz.ch/finanzen/bitte-keine-us-aktien-vom-erbonkel-1.18379127

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Well maybe I’m not long enough in the early retirement business, but I haven’t yet heard that the exemption is valid since only two years. As far as I know, the treaty I mentioned lets the Swiss get treated as US citizens, and it dates back to 1952.

I don’t know what you’re talking about. 60’000 is the exemption for non-resident aliens WITHOUT a treaty. Like, if I lived in Poland and would die, there would be a 40% estate tax on my US domiciled stock above 60’000.

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Exactly. Art. III. That’s the Swiss one.

https://www.eda.admin.ch/dam/countries/countries-content/united-states-of-america/en/tax1951.pdf&sa=U&ved=0ahUKEwil4LDr-ZnbAhWyhqYKHSzRC2oQFggTMAE&usg=AOvVaw0IWXCdMwyYbQ5C016H7JSc

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Gotcha, the 60’000 limit was never touched.

So in my opinion IB has two negatives, which still keep me from using it:

  1. this treaty situation with assets >60’000
  2. Asset protection (shares held in brokers name at IB under FSCS, maybe SIPC?, vs. shares in my name with CT)

I calculated, that CT will cost me 0.5% more of my wealth compared with IB… is this worth it, what do you think?

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What’s the problem if - as said - Switzerland ‘has’ the treaty ?