I recently moved to Switzerland and I am looking to build a simple passive ETF portfolio. I already have exposure to the US via a vanguard account that I have there with a 401K and brokerage account invested in target date funds. We also have real estate as a family in different countries.
For my Swiss account (via Degiro), I am looking to keep it simple with 2 funds:
- 40% Ishares global aggregate bond [GL AG EUR-H ACC] AGGH
- Hedged to Euros so it aligns with my future needs (I’ll likely retire somewhere in Europe)
- 60% Vanguard FTSE All-World ETF VWRL
- Traded in CHF on SWX to essentially save on any currency exchange and trading fees (all free on Degiro with this specific etf)
Would love to get any thoughts on this.
Hedging to euros is currently very expensive due to negative interest rates set by ECB, I don’t think your first etf even makes any profit after hedging cost is paid. So you might be better off keeping money in a savings account at 0% interest
As a long term investor never hedge in any currency. If you feel uncomfortable to invest in bonds in USD, CAD, AUD…, then invest only in EUR. On the long run you will get better return.
The ETF VWRL is a good solution if you do not want to exchange your CHF in USD. You have to be concious that the dividend is paid quarterly in USD which make that you end up managing foreign currency even if you wanted to avoid it. (I did not find any better solution, thesaurising ETF are negociated in USD).
To me, the ongoing fees of 0.25% on VWRL is a bit high, I ended making a blend of more focused ETF with lower fees (VUSA, VFEM, VJPN, VAPX, VX5E).
Thanks a lot for the tips!
For aggh, based on your recommendations, I can swap for aggg which is in USD distributing. This would address the hedging issue.
As for vwrl, I am ok paying for the slightly higher TER for the simplicity of the investment.
Are you sure? I own the CHF version of VEUR and used to own VUSA and they both pay out dividends to my CHF saldo. Are you saying there is an implicit conversion on the Corner Trader side?
Yes, Cornertrader is charging 0.5% to convert the dividends to CHF. I asked them to put it to my EUR account (VEUR) or USD (VUSA) but it isnt possible they say.
There is no small profit for a financial institution. The customer shall not feel the pain of the fees which is typically the case in this example.
Whoa guys, thanks for enlightening me.
So just to put it into real numbers. 0.5% of 2% is like 0.01% of the whole portfolio per year. So if I have 100’000 at CT, then I get charged 10 CHF per year by CT for currency exchange. I guess I can live with that . But still it’s great to know.