This is mustachianpost.com, so naturally the great majority of people will tell you that VT also “contains VT” and recommend you not do something else.
My own recommendation will only be that you should not base your prospective investment on what currency you (rather randomly) happen to be holding right now. Even if you feel better to invest in a European fund and/or one with European holdings. Cash can always be converted into another currency cheaply.
My reflection was only sparked because of the current exchange rates. Although the EUR/USD pair isn’t as bad as EUR/CHF. But I suppose, in the long term, this doesn’t really matter ?
(At least not to you anymore - whatever that fund’s trading or reporting currency. Only indirectly, macroeconomically may it matter to the fund’s holdings, in terms of sales revenue currency, the supply chain etc. But these are often protected against changes of exchange rates)
If you want to invest in EUR, I would avoid the currently expensive (that is with a high valuation) iShares Core EURO STOXX 50.
The Vanguard FTSE Europe ETF is broader and less expensive by most metrics, but it includes UK and CH exposure.
As a country-specific ETF, the Vanguard VGER includes large, mid and small cap stocks of companies located in Germany at a good price.
That’s it for the summary and I have detailed a buffet of options in this article if you want to go deeper into the subject: Investments in European indices.
The trading currency has nothing to do with the location of fund’s constituents. You can transfer EUR to IB, exchange to USD and invest as usual. But if you want to have some diversification with respect to brokers, you can open an account with a European broker (degiro, Flatex, dkb, comdirect, …), transfer your money there and invest in any fund you want (European ETFs only, obviously). VWRL, VWRA, whatever.
I already have a crypto “investment” plan. I don’t think I want additional exposure to cryptos.
That’s a really cool ressource, thank you. Does your analysis also take into account the new german coalition? If not, would it change your investment advice?
Thank you for your feedback; this review of options was done without adjusting for any additional political risk discount - in the UK case, it is obvious that the relatively low valuation is explained by a non-negligible part of political risk…It is less clear with Germany, but the price difference with French large caps is so wide that it should still gives us a good relative margin of safety.
Partly. I’m not even sure if it’s so much political risk rather than just the sectors composition.
If you look at the Footsie’s 10 biggest constituents, they - with maybe the exception of the two pharma companies - are all in lower-valued sectors: consumer staples and commodities. Plus a bank.
I also tend to think that the alleged political risk is kind of exaggerated in the EU. While the UK is certainly in a period of transition after Brexit, they’re pretty much keeping calm and carrying on.
The big exodus hasn’t come. Financial services providers have created subsidiaries/entities in EU member states where necessary.
And both RELX, Unilever as well as Shell have decided (after Brexit) to consolidate their company structure into running out of London - giving their up domicile in the Netherlands.
As you know since the conflict in the Ukraine the CHF/EUR exchange rate changed to 1:1 for 1-2 days and is now at 0.99 EUR for 1 CHF. The last time we had such a ratio was 2015.
My question is: is it the right time to convert CHF into EUR?
My biggest concern is the infaltion rate in EURO area which was 7.5% in march compared to Switzerland with 2.4%.
I’m planning to invest a bunch of Euros within the next 1-2 years into a house. So no one has a crystal ball to see what happens in future but I would be interested about some opinions whether it’s wise to change the money now than later.
I have no crystal ball. A higher inflation in the euro zone than here in Switzerland could continue to weaken the EUR against the CHF. Inflation could also lead to higher house prices.
I personally would change the money, once you closer look at houses. But I guess only the future can tell you, if thats the smartest move.
I did buy some euros when CHF/EUR was 1:1. My gut feeling is that the SNB will intervene again if CHF/EUR drops further below 1.0, trying to protect the Swiss economy / export business sector and countering currency safe haven speculations. Therefore I think it’s a great time to buy EUR if you are going to spend it short-mid term, otherwise inflation might be problematic.
I think the Euro will further weaken. The current sanctions will hit very hard the economy. Of course, the CHF can also weaken, but I would say Euro will more
I don’t know what you should do or what will happen, but I can tell you what I did.
I sold recently >77k EUR in CHF and USD because I was tired to see the exchange rate dropping year after year , even though I had an account @ 2.5%.
I sold almost everything (rate around 1.038: just before the war)
→ I kept 3-4 k for vacations and triathlon training camps in the eurozone that were coming and planned
→ 5-6 k in BTC / ETH
→ I sold all the rest in CHF and USD . (I didn’t want to go above the 50k CHF limit on IB , all the rest I sold in USD . Since I already had CHF cash i can’t tell you the exact ratio)
→ I invested 20-30 % already in Swiss and US ETF and will do the rest later this year
I could maybe have sold my EUR progressively but I wanted to stop watching the exchange rate . Just to be done with it.
I don’t know if what I did is any good but personally I am satisfied.
If you mean by “inflation” the consumer price inflation, it’s the other way round: when new money flood the market, first house (at other asset’s) prices begin to climb, then eventually consumer prices join the party. It’s called the Cantillon effect.
Interessting comment, I had to google the Cantillon effect. As far as I understand it, it doesnt necessarely mean what you stated. My understanding of it is, that those who can access the “new money” first, will profit the most. Dependent on the spending of those “ealry receiver”, house prices might increase, decrease or remain the same.
In addition, inflation is measured by the CPI, but their cause are explained by different economic views/theories (monetarists vs. keynesians).
Exactly. And you see that effect well in real estate and stock prices since 2009. The rich know how to profit from the new money. Later, the poor get the bill when buying food (it’s clear now at least in the USA).
We are about to buy a property in the Eurozone and need to transfer CHF to EUR. the timing is right now but looking at different options to convert CHF → EUR I am undecided between Wise and Revolut. I haven’t used either and they look like the 2 best options. Any experience or recommendation?
(looks like I’d need a premium account in Revolut to transfer large amounts)
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