Switching strategies: Sell or keep old "portfolio"

So when I say portfolio I mean 1! stock. I was, very wrongly from what I’m reading now, under the impression that an accumulating ETF (SWDA) was a good idea in Switzerland. Welp… live and learn. Luckily I’ve only been investing for a year but some damage is done and I’d like to switch to VWRL. Would you keep SWDA and start investing in VWRL or sell SWDA and buy VWRL back with the money earned?

Thanks for the advice!

There is no capital gains tax in switzerland so your only cost is trading fees.

That’s extremely, neglibly cheap at IB, but probably rather expensive if you have a swiss broker - I’d look into transferring the portfolio to IB first. You’re going to pay the cost sooner or later either way, might as well do it sooner.

But distributing VWRL is not much better, no? It’s still IE domiciled, so you stil end up getting double taxed by US on US dividends.

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Now I’m confused again… Isn’t Switzerland taxing the reinvested dividends in acc-funds anyways?

Yes, dividends are always taxed, be in in accumulating or distributing funds, it makes little difference. For accumulating funds the swiss look at fund’s annual reports, find out how much dividend was reinvested inside and deem that as your taxable income, even though it’s not paid out.

Domicile of the fund matters more, US domiciled funds are better due to the ability to reclaim US withholding taxes.

So if you’re going to pay the switching costs, it’d make sense to switch into US funds to save on US taxes, not into IE which are about as same as your current IE funds.

I guess I’d have to read more on the topic as I still don’t quite get it. I’ve always been reading that IE funds are better for swiss investors for tax reasons. I guess all the articles didn’t take into account being able to reclaim the withholding tax?

I’m trying not to start investing in VT or us domiciled funds as I don’t know if I’m going to be able to buy it in the future.

What articles? Where did you read that? Did they even consider the US funds at all? That US domiciled ETFs are better for tax reasons is a common knowledge here.

Well you can still buy them now and you should still be able to sell them in the future even if that law passes

Even if we lose access to US ETFs in 2 years. Why not buying VT till then? You can still keep the ETF and profit from the tax refund.

IE-domiciled funds are the 2nd best for Swiss investors. At least the dividend loss is only 15%.

Hm… I’ve read that on several posts but I can’t find the ones I used 1 year ago. A quick search shows f.e. this https://www.10x10.ch/etf-und-steuern-beat-fruehauf-ishares/. I guess I’ve never much looked into it (buying US domiciled funds).

“Bleiben wir bei obigem Beispiel: Auf den Erträgen an einen ausländischen Investor – ausgenommen sind Pensionskassen – appliziert die US-Steuerverwaltung wiederum 30 Prozent Verrechnungssteuer. Ein Schweizer Privatanleger kann auf relativ aufwendige Art und Weise die Hälfte zurückfordern.”

Yeah, they are wrong here. It’s only complicated if you’re with a crappy (non-Qualified Intermediary) broker, like most swiss probably. With Interactive Brokers it’s as simple as clicking a few checkboxes online (W8-BEN), declaring your US stocks in DA-1 instead of WV in the tax declaration - which has the same format as WV however, and then sending its copy to a local swiss tax office that deal with refunds to get the refund. You get 100% money back.

“Beat Frühauf ist Leiter institutionelle Kunden für die Deutschweiz bei iShares”

Pay attention to who wrote the article - a european fund manager. He’s not independent, and the only purpose of the publication I can discern is to get you to buy their funds.

Irish funds lose 15% of US dividends on the other hand. Funny he didn’t mention that, huh

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US stocks in DA-1 instead of WV in the tax declaration - which has the same format as WV however, and then sending its copy to a local swiss tax office that deal with refunds to get the refund. You get 100% money back.

Interesting! I’ll have to look into that more, since taxes are the scariest component for me … I don’t know why :smiley:

Pay attention to who wrote the article - a european fund manager. He’s not independent, and the only purpose of the publication I can discern is to get you to buy their funds.

Damn, I feel dumb…

So basically this spreadsheet of this post is the go to when it comes to long term investing for swiss residents.

By the way… thanks for taking the time and answering all my stupid questions.

This thread is much ado about …well, not that much.

It is a good idea.

There’s no big mistake that’s been made here.

It is.

They are, compared to Swiss funds.

That is oversimplifying it.

The 15% WHT “advantage” only applies to dividends from one single country. While the U.S. does make up the biggest part of MSCI world, it’s only a bit more than half of it. And vice versa, there will be countries from which dividends are taxed more favourably in Irish funds, compared to U.S. funds.

He did in fact mention it quite clearly:

Wenn der ETF zum Beispiel den S&P 500 abbildet und in den USA domiziliert ist, kann dieser die Verrechnungssteuer über 30 Prozent auf den Dividenden der Aktien komplett zurückfordern. Auf Portfolioebene entstehen also keine steuerlichen Kosten. Ist es ein irischer Fonds, kann dieser die Hälfte der Steuer zurückfordern.

I am not aware of any non-European ETF that are even allowed to be marketed in Switzerland (to Swiss retail investors).

That’s why I have VTI in IBKR and the rest in VIAC. I hope it’s the most efficient way of investing in terms of taxes.

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Honestly I started the thread because I read about dist vs. acc funds and got annoyed (at myself for not studying it more before buying) that I’m paying taxes on the dividends anyways. I simply thought that’s not the case. That’s why I was saying it was a bad idea.

PS:

Your impression that you’ve made great mistakes and taken “some damage” (by choosing SWDA over VWRL) is utterly exaggerated. Especially in light of the fact that “your” ETF, SWDA, has performed slightly better than VWRL, the one that you want to switch to, over the last 1, 3 or 5 years (according to JustETF, pre-tax, but shouldn’t be different after tax).

With all these expense ratios and tax implications, we’re really talking micro-optimization here (which is not to say that it would be “wrong” or uninteresting).

EDIT:

Sorry, didn’t see that post before I posted this.

Anyways… I don’t think it’s wrong to diversify into VWRL, due to the wider geographic coverage and the fact that it’s a different company.

15% US withholding is no microoptimizing.

Assuming 100k portfolio invested in US stocks, 2% dividend yield, that’s $300 savings a year we’re talking about. Worth spending a few hours of your time to learn about it.

US is the biggest weight in MSCI World and also with one of the highest tax rates as well. IIRC ex-US withholding averages at about only 7-8%, and it’s similar for both US and IE funds, there’s not much meaningful difference between them there.

IE funds have the advantage for people domiciled in countries without a US treaty, for example Hongkong. Instead of paying 30% to US, those people can choose to pay only 15% by investing thru IE fund. But Switzerland has a good treaty with 15% rate already, so this argument doesn’t apply here.

Assuming MSCI World, 100k in U.S. stocks makes for a total portfolio volume (including non-U.S. stocks) of approximately 158k.

So it’d be 0.1something per cent. In relative terms, that’s what I would still call “micro-optimization”. It also seems to pale against the consequences of choice of funds here (see above).

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It’s risk free money that you’re leaving on the table but not investing a little bit of your time into it. It is not “micro” - $300 is well worth an hour or two of your time even if you’re well paid. It’s recurring every year, and as your portfolio grows, it grows proportionally. At $1M invested in US, at which point you’d be roughly FI, we’re talking about $3000 cost a year! If that’s peanuts to you, I’d gladly collect them off of you.

It’s only “risk free” if all other things are equal. Which they often aren’t. Or at least we shouldn’t blankly assume. For starters, I maybe wouldn’t want to keep my $1M+ portfolio solely in U.S. funds with a U.S. broker (because… few if any else will offer them to European retail clients).

But going back to the original question in this thread, the original poster has (quote) “only been investing for a year”. I doubt that he has so far accumulated as much that we’re talking such dimensions. :wink:

I doubt that he has so far accumulated as much that we’re talking such dimensions.

Nope! Not at all :slight_smile: That sound like one of them good problems though :slight_smile:

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