VWRL - to buy in CHF or EUR?

Hi again,

After much reading I fear I might still ask a naive newbie question here, so apologies in advance!
I think I’ve narrowed down my monthly investing plan into a long-term buy-and-hold of VWRL (I would prefer VWCE so as not to have to deal with dividend taxation but that would then incur monthly transaction costs whereas VWRL is free to buy once per month on Degiro). We’re talking fairly small amounts (btw 500 and 1000CHF each month)…

Just as I was getting ready to make my first purchase, I realised that VWRL / IE00B3RBWM25 is available in Degiro to buy on SWX in CHF or on XET/EAM in EUR.
My account is with degiro.ch and linked to a CHF bank account, so would I be better off buying the CHF version (no currency conversion in exchange connection fee in Degiro, but lower volumes) or buying on one of the EUR exchanges (higher volumes and may make my life easier for taxes due to being tax resident in France, but with currency conversions when buying and selling)?

The best might be to just open an account with Degiro.fr and do everything in EUR for tax reasons, but unfortunately Degiro are not opening any new accounts at the moment due to Covid-19…

Any thoughts please?
Thanks!

Accumulating funds are taxed all the same.

As for EUR vs. CHF, maybe try both and see the actual cost empirically :slight_smile: (between spread, fx, stamp duty, that’s a lot of variables).

Sorry, can’t figure out how to quote you, but for accumulating being taxed the same as distributing: my understanding that for the tax law in France the accumulating will only be taxed when I sell (ie in 25-30yrs), whereas for a distributing ETF I would have the hassle of declaring and paying tax on any dividends paid out each year…?

Ah yes, if you’re a french tax resident then things are likely fairly different (but then maybe start with a PEA anyway?)

PEA is definitely in the plan, but I already have a Degiro account open (jumped the gun somewhat there!) and it will take time to open a PEA account at something like Boursorama, Binck, etc
Since I already have 2000CHF sitting at Degiro waiting to invest, I thought I would go ahead in parallel…Degiro are supposedly meant to be realsing a PEA offering for French investors (per degiro.fr), but the current situation has probably pushed that back…

It’s easy, you just highlight the text you want to quote and a button will appear.

1 Like

Hello,
I faced the same question about investing in vwrl in chf or euros.
Wouldn’t investing in euros expose me much more to euros/chf exchange rate? Or is that becoming irrelevant because stocks are in multiple currencies anyway?
Who know what this will be in 30 years…
Any thoughts about that exposure?

Yes. Not only that, the underlying stocks are always the same regardless of the currency. So optimize your currency chice in terms of fees and convenience, not risk. :slight_smile:

The Irish Vanguard funds are available in the following currencies:

Which one you should choose boils down to:

  1. Which currency you have or at what cost can you acquire it. The currency itself makes no difference, as you hold the same ETF share, regardless of it. The price ALWAYS includes the current exchange rate.
  2. The liquidity/spread. Each row listed above is traded separately. Before you buy, check historical trading volumes and intraday spreads. But, even if there is nobody willing to trade with you, a so called market maker will step in and make the trade.
  3. The stock exchange. There could be differences in fees, depending on the stock exchange.

To sum up, I would say: if your broker does not offer attractive forex conditions, invest in the currency which you have (CHF). If you are with a broker that DOES offer cheap fx, like IB, exchange to USD and buy the VWRD.L, since it has the largest liquidity.

2 Likes

Thank you very much for the answers, very helpful.
As I’m using degiro I’ll keep buying the Dutch one in Euros as there’s a free allowance.

Yes, this is the right move unless you are making larger monthly purchases.

The total fee you pay is 0.1% in currency exchange. If you buy on SIX (in francs) it costs € 2.00 + 0.03% (CHF2.11 + 0.03%). So if you are buying <3014CHF of VWRL each month, buy it on the Amsterdam exchange…

7 Likes

That’s very helpful!

I get the points buying VWRL in USD cuz of the higher liquidity and the better spreads. However, in my understanding, in this case we bet on the development of the ETF and the currency. CHF/USD might be attractive now, but when we need CHF back in 20 years to cover expenses in Switzerland, we might sit on a lot of USD. USD might have depreciated a lot then. Of course, nobody knows. And somehow the price of VWRL in CHF will be quite similar than in USD given the exchange rate cuz of effective arbitrage of market participants.
However, can somebody please elaborate more, why so many of you are fine with buying this ETF in USD and are not worried how the exchange rate might evolve.

Because if you buy a sheep with usd, eur, Bitcoin, or cowry shells, in the end you end up holding the same sheep.
The currency doesn’t matter as explained in the many threads covering that topic, it’s the same assets.

1 Like

Thank you. Maybe something is blocking me to really understand that.
The the underlying asset is the same, just expressed in different currencies I get.
But - let’s assume CHF/USD now 1/1.03 and in 20 years it would be 1/0.98. Wouldn’t that be a “loss” if I would need to convert that back then?
Or are you saying, it does not matter, cuz the price of the stock expressed in USD and traded on LSE will be the same than the stock expressed in CHF and traded on SIX - assuming efficient market mechanisms

Let’s imagine an ETF composed of one US company. The price of the stock is 10 USD and so is the ETF share. You buy it now for 9.7 CHF or 10 USD. Then the USD goes down to 0.5 CHF and the stock price goes up to 11 USD. The price of the ETF will be 5.5 CHF or 11 USD. In both case you will get 5.5 CHF back, whatever the ETF version you own.

What’s the alternative ur suggesting?

Buy a CHF hedged version? Hedging’s expensive. You’re swapping variable currency risk for relatively fixed hedging costs ~= difference in interest rates.

Buy it on SIX in CHF? That’s just trading technicality, at most will save you some fx conversion commission. At the end of the day you will hold exactly the same security no matter whether you paid for it USD or CHF.

You know, like in Switzerland you can pay for your groceries in euros, right? Same thing. At the end of the day you will hold the same basket of groceries no matter whether you paid for in EUR or CHF. Just your trading costs will vary between these two possibilities, shops/banks change euros at unfavorable rates.

Markets have to be efficient down to a penny, when it comes to trading the same product in different currencies. Otherwise you buy it where it’s cheap and sell it where its expensive (arbitrage).

That’s why this is always true:
Price in CHF = Price in USD * current x-rate

Thanks to all of you. I see where you are going, but unfortunately I’m still struggeling.
For me there are three things to consider.
1 - Let’s say today CHF/USD is at 1:1. For this I buy a sheep/groceries/sheep (real stuff) at an US market. Tomorrow CHF/USD is at 0.5:1. Let’s keep the price of the sheep constant. I sell it, get 1 USD for it, convert it back into CHF, cuz I need to cover my expenses in CHF. I get 0.5 CHF. In a way I “lost” 0.5 CHF = 50%, unless the price of the sheep on a CH market dropped to 0.5 CHF as well cuz we are dealing with efficient market. Then it wouldn’t make a difference, whether I bought the sheep in CHF in the first place - correct?
2 - Converting CHF into USD today is a kind of speculation. Today it might be 1:1 and I get one sheep for it in USD. Tomorrow it might be 1:2. Let’s keep the price of the sheep unchanged = 1 USD. Hence, I’ll get 2 sheep instead of only 1. Still the same sheep.
3 - If I hold the CHF in cash instead of buying real stuff, my 1 CHF will still be 1 CHF nominal, regardless of the development of the exchange rates. Of course, I might only get 0.5 sheep, if the sheep is traded globally and all information about it is know at the same time to all market participants.

I would follow the recommendation from Gerd Kommer (german article) and other inverstors (german article) and not using heding. If I’m not mistaken hedgehog from this forum took a strong stand for this position, too.

When you say the largest liquidity, I assume you you refer to trading volume. But then I look at the VWRD.L in London


Until now there were barely 4000 stocks traded and the average is at 44k.

While the Euronext in Amsterdam:

Has a daily already 23k today and 164 thousand average daily.

Or am I misinterpreting something here?

By reading and partipating to this forum, you confirm you have read and agree with the disclaimer presented on http://www.mustachianpost.com/
En lisant et participant à ce forum, vous confirmez avoir lu et être d'accord avec l'avis de dégagement de responsabilité présenté sur http://www.mustachianpost.com/fr/