Some help with fund choice and fund currencies

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.

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.

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?

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.

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

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.

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.

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?

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

No man (woman?). This article is about you being able to write off the whole 5 million, like the people in USA can. 60’000 is the default for countries without a treaty.


Dont the things mentioned in cray’s article still apply though?

The “cray’s article” is the treaty from 1951. It applies, and it says that “if you are domiciled in Switzerland at the time of death, you shall be treated as if you were domiciled in the US”. The estate tax exemption has been going up for years, and you can see the history on the wiki page I linked.

Is there a risk they will abolish this exemption? Sure. But then you should close all your positions in USA and buy the Irish ETFs. Sure, you might as well stick with the Irish ones from the start, but as you said, you get 0.5% taken away every year. Over 30 years that’s 14% difference on your portfolio.

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They are held in broker’s name (but segregated) in both cases, you’re not a big enough of a fish to deal with central securities depositories (like SIX, DTCC) directly are you. In US you have SIPC guarantees on top of that. In UK/CH nothing.

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Is it clear with IB what kind of assets are under SIPC and which ones are not? You mentioned somewhere that assets managed by the IB US get protection, but assests managed by IB UK dont.

Another thing I am scared about is, somewhere in a post somebody found IB’s “emergency fund”, basically the amount they have to cover ALL clients assets, if they had to and it was a ridicoulus low amount…

Well in Switzerland my shares are held in my name, is this not enough of a gurantee?
If a broker goes bust and misplaces my shares in my name, arent there legal consequences?

The broker’s name is on the books at CSD, not yours, both in Switzerland and abroad

If you want your name there, you’ll need to deal with CSD directly which probably means you’ll need to buy yourself a small bank for a start.

An alternative existing in US is DRS system, where you can opt to transfer shares from broker to the company directly whose stock you bought, and then company’s name will be on the CSD books. It goes bankrupt, well, its stock’s a zero anyway.

Read up on MF Global bankruptcy as a case study

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