# TER/Tax optimized portfolio

**URL:** <https://forum.mustachianpost.com/t/ter-tax-optimized-portfolio/3949>\
**Category:** Investing / Portfolios\
**Created:** [June 1, 2020, 6:38pm UTC](https://forum.mustachianpost.com/t/ter-tax-optimized-portfolio/3949 "2020-06-01T18:38:55Z")\
**Posts on this page:** 1\
**Showing post:** 7

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**Author:** ![greenore](https://forum.mustachianpost.com/user_avatar/forum.mustachianpost.com/greenore/32/3337_2.png) [@greenore](https://forum.mustachianpost.com/u/greenore)\
**Post date:** [June 2, 2020, 2:39pm UTC](https://forum.mustachianpost.com/t/ter-tax-optimized-portfolio/3949/7 "2020-06-02T14:39:05Z")

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Thanks for taking the time to study my portfolio and also for your response:

> [@San\_Francisco](#):
>
> Also, keep in mind that lower TER on paper doesn’t necessarily mean that your returns are going to be higher by that very same margin. I’ve seen examples where funds with slightly higher TER fared better than seemingly “cheaper” ones.

You’re making a good point and I agree that a TER difference of around 0.05 % is probably not “measurable”. However, my reason for choosing the above portfolio is not only to TER- but also to tax-optimize. This brings me to your statement in the previous thread:

> [@The incomprehensible obsession with TER (Total Expense Ratios) - is it justified?](https://forum.mustachianpost.com/t/the-incomprehensible-obsession-with-ter-total-expense-ratios-is-it-justified/2123/5):
>
> I’ve read a lot about tax advantages and TER, and lately began to feel as if there was sort of a consensus on this forum about preferring low-TER funds and US-domiciled funds over Irish ones.
> 
> […]
> 
> Optimizing for these elusive few basic points? Like the 15% residual withholding tax on a dividend yield of slightly less than 2% on the S&P 500 index…

I read on the [Mustachian Wiki](https://forum.mustachianpost.com/t/tax-optimisation-for-etf-investing/67) and also on other websites that the withholding tax can make a difference of up to 1.00 % per year.

Assuming an investment of CHF 100’000.- with an expected return of 8% p.a. and the compounding effect of 20 years this can lead to quite some savings:

| Delta in Costs | Total Savings |
| --- | --- |
| 0.05 % | CHF 4’335.- |
| 0.10 % | CHF 8’708.- |
| 0.20 % | CHF 17’570.- |
| 0.30 % | CHF 26’589.- |
| 0.40 % | CHF 35’768.- |
| 0.50 % | CHF 45’109.- |
| 0.60 % | CHF 54’615.- |
| 0.70 % | CHF 64’289.- |
| 0.80 % | CHF 74’133.- |
| 0.90 % | CHF 84’151.- |
| 1.00 % | CHF 94’345.- |

In order to “unlock” these savings (even just the CHF 8’708.- with a cost difference of 0.1%) all I have to do is to find a combination of tax/ter optimized funds. From there investing in 6 instead of 1 funds is not too much of a hustle and the fee’s with IB are negligible. Isn’t that worth it?

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