TER/Tax optimized portfolio

It all doesn’t really matter or change things:

  • Reinvested dividends: No calculation on reinvested dividends, but the difference (additional compound interest on an additional 0.1 or 0.2%) would be negligible over the period.
  • Withholding tax: There’s none on the Irish ETF. With W8-BEN there would be 15% on the U.S. one, which you could claim credit for with DA-1 if you’re paying (enough) taxes in Switzerland.
  • Start and end price and trading hours: Again, they don’t matter, since we know that these two funds will move virtually identically, with close to 100% correlation anyway (even though the indices and holdings differ slightly - but again, differences are probably negligible, in addition to being unpredictable).

Edit: more bothersome might be VWRD‘s one-time distribution from capital gains though.

ok, agree

My question was rather: in the dividend per piece stated by you: has the withholding tax already been deducted from it or not? If so, did they deduct 15% or 30%? If there was a deduction, you should include it back in, as it will impact the calculation. 15% of 2% is 0.3%, per year!

Disagree. Like I said, imagine that the closing price in Europe was $70.00. But the US exchange remained open. The closing price there for that day was $72. But for you these prices are equivalent. And the same will apply to the end of the period. Europe closes with $110, but US drops to $108. In the end you will have 110/70 for Europe and 108/72 for US. This can distort your calculation by a few percent.

At what tax rate is VWRD cheaper than VT without any deductible interest from a mortage?

Oh, sorry. Yes, gross amounts, as communicated by the funds themselves and/or the Swiss tax administration.

In theory, they should perform the same over the long-term. Given same indices, holdings and distribution in full. However…

  • The indices and holdings are largely - but not fully - the same. But I’m not going to account for that, since it’s intended to just compare holding the two funds.
  • VWRD has curiously had this one-time (?) distribution from capital gains
    So that assumption might not hold water.

But how would you measure it?

I don’t know how, maybe I would take a whole sequence of start and end dates and draw a chart to see if there is a big difference between different reference points.

And I don’t know anything about the capital gains payout of VWRD. It’s interesting thought.

I just realised that the last fiscal reform changed something. If the swiss company pays a dividend with reserve from capital contributions, the company needs to pays a taxable dividend of the same ammount from other reserves. If it doesn’t do so, half of the “tax-free” dividend won’t be tax free. That’s probably the reason UBS did that in 2020. I checked their last annual report and they can still pay 4.68 USD tax free to share-holders, that means 13 years of 50% of tax-free dividends. We might see the percentage of tax-free dividend from the SPI drop a bit in 2020.