US etfs are still a bit better than IE etfs, mainly due to better treaties with Japan, Canada and Switzerland among others (while some european countries are a bit worse). Plus the other benefits such as size/liquidity/transaction costs/ter/more holdings.
Granted it‘s not a huge difference (for basic market cap weighted index etfs), but still worth it imo.
What you can do to estimate cost of specific etf is going through their yearly report and look how much dividends they had and how much was withheld.
And normally you should be able to fully claim DA-1.
We buy total market index funds here mostly. They are practical, self rebalancing and efficient.
We are discussing VT/VXUS etc. vs other IE domiciled funds at the moment also. I contributed, that US etfs are still more beneficial, due to the aformentioned treaties giving an advantage. Your point has nothing to do with that.
It does, kind of. There’s some nuance to it, maybe think about it again.
The difference between a single fund in IE and US is relatively small, percentage wise.
If you are willing to go through the trouble of reading yearly reports to compare withheld taxes on dividends, you might as well buy several index funds that replicate the total market.
Even though it’s difficult to get to final number easily, I think the real difference between VWRL and VT will amount to 0.1 to 0.15% per annum after taxes in terms of their tax efficiency and tracking differences. I don’t worry too much about TERs because they can be misleading sometimes.
However since they anyways don’t track same indexes, the performance will be different anyways. I did some calculations few weeks back and found both ETFs actually returned the exact same total return over long period. I forgot how long I checked . Maybe it was 10 years. Lower tax efficiency of VWRL was compensated by lower exposure to small caps.
So I concluded below
if you are okay to hold US ETFs and don’t worry too much about estate tax procedures , VT would be best
if you have some apprehension about holding US ETFs, VWRL will also be very good
I know you can try to do the math and 0.1% over 20 years might mean 2.2% of performance difference. But, let’s not forget 2% might be weekly fluctuations in price of these ETFs too.
I hold both. Simply because I don’t want to be stuck to one ETF or broker. Although majority is still in VT
You do that once and get a sense of the wht, that‘s all. It takes a couple minutes.
Your portfolio will get a big mess if your start with single country etfs, that may have high ters, less liquidity, higher trading costs, rebalancing effort to keep goal allocation, missing countries with no accessible index fund, or some with no/bad treaties etc.
It‘s wholly impractical.
You can also take this list from @Dr.PI as a reference:
Look, that table and your comment support my point. I was referring specifically to Japan and Canada.
Anyway, my portfolio isn’t a mess, nor impractical. Don’t get me wrong, it can be done simpler, I get that. I just wanted to share the thought. In the end, it’ll be just a few hundred CHF difference, so you do you.
Your post was good to read for my confirmation bias, as I came to the same conclusion. I also hold both, despite there higher costs of VWRL, as I view VWRL as a form of insurance (and in my case I also have more in VT than VWRL).
That’s definitely a good point to hold in mind to gain perspective on the sums involved! (I would however argue that there is a difference between 2.2% in volatility vs 2.2% expected difference… but your general point stands IMO)
I agree. We should try to reduce the costs if we can. Always.
But we should also not forget what the amounts are. That’s all I wanted to say.
I believe the discussion about TER etc started getting lot of attention during the times when active management use to charge a huge (maybe 1.5-2%) amount of money. Then index investing came into play with costs like 0.25%. So that was interesting and significant.
But now I see people start changing their whole portfolio for 0.08% TER difference by selling their ETFs and buying new ones. This is alright. But we should not get too much obsessed with these things.
Fair points. Yet on larger portfolios, even 0.08% difference can result in hundreds or thousands of savings per year.
As Tony1337 mentioned above, it’s something you research once and then go with it. Maybe reevalute once in a while.
Talking about reevaluating: Did someone compare options for Emerging Markets from the wh tax perspective? For example EIMU/EIMI (IE based) vs. IEMG (US based)? IEMG has a 0.09% lower TER. Composition seems minimally different.
Also, TER needs to be considered combined with the tracking difference. If a very low TER ETF has a high tracking difference it may still perform worse than a higher TER ETF with an excellent tracking difference.
I don’t fully understand those numbers. The USA should have a L2TW of 15% for Swiss residents. The same for Canada. I know that IBKR will apply the tax treaties correctly for both countries. For Japan, Swiss residents should only pay 10%.
It looks like you already subtracted foreign tax credit in Switzerland. But how did Japan end up with 5%? Non-treaty withholding tax of 15% minus 10% treaty rate tax credit? Have you tested this or is it only assumed?
The reason you can only reclaim 10% is exactly because that is the treaty rate. A good source for all international withholding taxes is on pwc.com. For Switzerland specific official rates there is an “overview” pdf on double taxation agreements on admin.ch.
So you are with IBKR and they use the non-treaty rate?
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