Author Topic: Switzerland: How should I buy index funds here?  (Read 90442 times)

wapiti

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Re: Switzerland: How should I buy index funds here?
« Reply #250 on: September 12, 2016, 02:28:24 PM »
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But I am not sure about Switzerland?? Would I have capital gains tax to pay?
No tax on capital gains. However, dividends are taxed as income.

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70% global stock index, 20% national stock index (BUT which one???) and 10% national bond index (but again WHICH ONE??)

Your portfolio will be too home bias. I wouldn't go this way...For national stocks, take SLI or SPI (SMI is not enough diversify). For national bond, I would propose iShares Swiss Domestic Government Bond 7-15.

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Here I am lost... What is the difference? And I thought the whole point of investing in a stock INDEX fund was that you don't have to be trading and managing the fund? You just buy it and hold onto it for a long long time. Would I have to physically go onto Swissquote or Cornertrade every 2 months and just click "buy" on the same stocks I had originally bought? (the 3 indexes listed above)

Yes, you will need to click on to buy each month. Don't worry, it's quite easy.
There are some services which offer automatic investing, but you have less freedom of ETF choices and the cost will be higher. For exemple, https://www.truewealth.ch/
The whole point to invest in stock index funds is to have a fund which follow an index, not an analysis or strategies done by traders.

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Thanks for this. I invested in the 3a pilier 2 years ago just to put my savings somewhere really! I got about 600-800CHF tax back which seemed like a good return to me but maybe I should just close it altogether and invest it in stocks instead?? But if I do this will I be charged to take the money out? Can I even do this? Or is that 15000CHF I have put in now there until I am 65? I've heard I can withdraw it if I leave the country? Is that right?
I got about 600-800CHF tax back which seemed like a good return to me but maybe I should just close it altogether and invest it in stocks instead??  You can also have an 3rd pillard invest in stocks. Take passive 3rd pillard fund to reduce the TER.
Have you fill the excel sheet ?

But if I do this will I be charged to take the money out? Yes

Can I even do this? Yes

I've heard I can withdraw it if I leave the country?  I believe you will be taxed. (to be checked)

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5. I guess a key thing I need to work out is HOW and WHERE to invest in the stocks from:
So if go with Cornertrade or Swissquote lets say, do I pay them a fee for using their platform and if so, how much?
If I only want to invest in the 3 things above: national index fund, global index fund and a national bond index - how do I know which ones to buy if it just me doing it? How do I ensure I am buying an index fund and not other ones?

So if go with Cornertrade or Swissquote lets say, do I pay them a fee for using their platform and if so, how much? Cornertrade no, Swissquote yes. Check on their websites.

how do I know which ones to buy if it just me doing it? Take time to analyze each ETFs and choose wisely.

How do I ensure I am buying an index fund and not other ones? you will have the name of the ETF, just enter it on the platform


I think you need to take some time to learn more about ETFs and passive investment before rushing. Also remember that this type of investment is mostly DIY approch.
Take time to check the fees of each platform.




« Last Edit: September 12, 2016, 02:35:46 PM by titi22 »

firereadery

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Re: Switzerland: How should I buy index funds here?
« Reply #251 on: October 07, 2016, 12:57:27 AM »
Hi Guys,

le me just say that this thread is amazing! I have a quick question to the participants in this group as the collective wisdom is impressive. I am finally at the stage where I am getting my finances under control but the whole thing is so overwhelming and I need your input...

What do you think about my asset allocation?
Keep in mind that I have the Swissquote Dynamic Saving Account and my choices of ETF's are limited....

  • 30% - The bond: ISHARES DOM GOV3-7 - TER 0.15%
  • 28% - iSHARES EURO STOXX 50 UCITS - TER 0.10%
  • 28% - UBS ETF - MSCI USA - TER 0.20%
  • 14% - UBS ETF (CH) - SLI (CHF) A - TER 0.20%

I am quite satisfied but I lack the knowledge to see if I am making substantial mistakes. Am I diversifying too much? Too little? Should I throw EU bonds in there even though they have a higher TER?

I really appreciate any input, I am so scared of making fundamental mistakes!


Grog

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Re: Switzerland: How should I buy index funds here?
« Reply #252 on: October 07, 2016, 03:32:53 AM »
I think that is one of the best portfolio that you can build using swissquote dynamic savings: kudos.
Remember that bonds are there to reduce volatility and for rebalance so if you choose bond with another currency like euro you add unnecessary volatility due to chf/eur exchange. Your 70/30 is perfectly fine, diversified and keep invest in it without toying and changing and you will be happy. But it really requires discipline.

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firereadery

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Re: Switzerland: How should I buy index funds here?
« Reply #253 on: October 07, 2016, 04:22:07 AM »
I think that is one of the best portfolio that you can build using swissquote dynamic savings: kudos.
Remember that bonds are there to reduce volatility and for rebalance so if you choose bond with another currency like euro you add unnecessary volatility due to chf/eur exchange. Your 70/30 is perfectly fine, diversified and keep invest in it without toying and changing and you will be happy. But it really requires discipline.

Thanks for the feedback, I'm happy that I didn't do major thinking mistakes and that I can carry forward!
« Last Edit: October 07, 2016, 07:04:51 AM by firereadery »

Stashing Swiss-style

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Re: Switzerland: How should I buy index funds here?
« Reply #254 on: October 07, 2016, 09:37:55 AM »
Hey Firereadery - that is great praise from Grog and he doesn't give praise lightly! 

wapiti

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Re: Switzerland: How should I buy index funds here?
« Reply #255 on: October 07, 2016, 12:12:41 PM »
Hi firereadery,

The portfolio is quite good ;) As a perfectionist, I have always something to say.

I think 14 % for the swiss market is too home bias. The swiss market is only 3% in the MSCI world index, so you shouldn't have more than 3% in this market.

Depending on your investment horizon and your risk profile, a higher equities share could be a good idea.

You will have "impot anticipť" on the below funds because they are swiss based, this tax will be reimbursed, but will slower your dividends reinvestment.
30% - The bond: ISHARES DOM GOV3-7 - TER 0.15%
14% - UBS ETF (CH) - SLI (CHF) A - TER 0.20%

Are you sure that the dynamic account is really cheaper,  maybe only two funds a MSCI world and a bond fund is cheaper in the long run in a standard account ?

« Last Edit: October 07, 2016, 12:15:16 PM by titi22 »

firereadery

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Re: Switzerland: How should I buy index funds here?
« Reply #256 on: October 07, 2016, 02:43:22 PM »
I love perfectionism, thanks a lot!

Are you sure that the dynamic account is really cheaper,  maybe only two funds a MSCI world and a bond fund is cheaper in the long run in a standard account ?

I am curious about this point: on the dynamic savings account I have no deposit fees and buying my set of ETFs is 9 chf, even if they are more than one. That felt quite convenient to me... but then I  don't have the MSCI World at my disposal.

I would be happy to learn about a more convenient alternative!

Grog

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Re: Switzerland: How should I buy index funds here?
« Reply #257 on: October 08, 2016, 01:00:44 AM »
Don't forget that this is 14% of his taxable account; so depending if firereadery has a home /2nd pillar /3rd pillar it will be much less than 14% than his total assets. Personally across all my accounts my equities allocation are:
75 % all world vanguard
12.5% swiss large cap (smi etc that are included in most pillier 3a accounts)
12.5% etf ubs SPI-Mid, 80 small mid cap Swiss stocks.

So I have 25% of home stocks, with a general allocation of 70/30 makes for 17.5 % of my net worth linked to Switzerland. I tend to think that 15-20% is fine. It's always useful to have stocks that only suffers from 1 volatility factor (no currency effects) because if really really comes an emergency greater that your emergency fund there is still a chance that you can sell some Swiss stocks without currency effects (that is, you don't have to sell US stocks when the USD is really low etc). Forget the hedged chf etf because the contract is 1 rolling month so it doesn't really protects from long trend currency effects.
But I would never suggest more than 20% of your net worth in Swiss stocks, and for sure not with SMI. Either with SLI or diluted with some SPI mid or SMIM.


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wapiti

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Re: Switzerland: How should I buy index funds here?
« Reply #258 on: October 08, 2016, 07:44:52 AM »
I agree that hedged funds are useless, because of higher TER, small size fund, less choice and only a monthly hedging.

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if firereadery has a home /2nd pillar /3rd pillar it will be much less than 14% than his total assets.
Maybe, maybe not, a lot of 3rd pillar funds rely heavily on Swiss stocks. Check the studies from Vanguard on home-biais basis for more info.

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"I am curious about this point: on the dynamic savings account I have no deposit fees and buying my set of ETFs is 9 chf, even if they are more than one. That felt quite convenient to me... but then I  don't have the MSCI World at my disposal."
I have checked again this point and I was wrong, sorry 
A "world MSCI" index will be always expensive than "EURO STOXX 50 UCITS + MSCI USA", because the  "World MSCI"  has a lot more stocks than "EURO STOXX 50 UCITS + MSCI USA"

nugget

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Re: Switzerland: How should I buy index funds here?
« Reply #259 on: October 12, 2016, 03:38:39 PM »
Heyall,
here is a new mustachian from zurich, a so called excel-junkie :D
first I am glad to having found like minded people after about 3 years of making up my mind on my own, and finding so much similarity in thought. I got here via a link from the mustachian post. I am still on the first page of reading^^

second I want to ask straight away if there could be a better platform for the swiss mustachians than a single thread on some US forum that makes it impossible to put all the interesting information into order. maybe some free forum? unfortuanately i hae no clue on this :/

since I like all the calculations involved investing, as a first contribution, i attach a python script that calculates the distribution of funds into N pillar3a accounts. try it out :) feedback appreciated :D

this is a generic case of 8 depots, 3800 CHF/y , 4% annual return and 0.68% TER from VZ. these parameters are defined in the first lines of the script

I have so many things to ask and calculations to be discussed....
Hope to have a nice exchange soon!
best,
nugget
« Last Edit: October 13, 2016, 04:46:08 AM by nugget »

nugget

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Re: Switzerland: How should I buy index funds here?
« Reply #260 on: October 12, 2016, 04:01:43 PM »
.... and here is my first question to the mustachians:
From long-term annual mean returns, looking at equity vs bonds, I should go 100% equity. can you make sense out of my reasoning below or do you think this is wrong?

I am ~30, expecting above-average salaries in the future and currently planning not to use my stash before i am 65 or so. Modern portfolio theory + balancing suggest some passive equity/bond mix for a) less volatility than 100% stocks (e.g. the risk of panic-selling during a recession) and b) rebalancing.
For a: I decided for myself to be at peace with the risk, at least for this early pahse of investing.
For b: If I have a mixed (50/50, for example) portfolio running over 20 years, where stocks have (lets say) 5% and bonds 3% annually, would i not keep putting funds prefferentially into the lower-return bonds? therefore lowering my total return compared to 100% stocks?

THanks for your ideas :)
 

nugget

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Re: Switzerland: How should I buy index funds here?
« Reply #261 on: October 13, 2016, 05:10:23 AM »
... and here a 3a-pillar vs control fund excel model, that suggests that the tax bonus due to pillar 3 takes rather long (20-25 for my set of parameters) years to be eaten away due to higher fees. if equal returns are assumed, it will not be eaten away during my lifetime.
but since there are so many individual parameters involve, you need to check the model yourself.

known flaws:
-reflects my income tax situation from 2 years ago, i.e. Quellensteuer (really low!!) and assumes it constant => correcting this is in favor of pillar 3
-withholding taxes are wild guesses, since they transform into income tax once declared, of unknown amount => correctingthis can favor either side
-property tax is neglected => correction is in favor of 3a

have fun :)


Kilbim

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Re: Switzerland: How should I buy index funds here?
« Reply #262 on: October 13, 2016, 05:30:28 AM »
  • 30% - The bond: ISHARES DOM GOV3-7 - TER 0.15%
  • 28% - iSHARES EURO STOXX 50 UCITS - TER 0.10%
  • 28% - UBS ETF - MSCI USA - TER 0.20%
  • 14% - UBS ETF (CH) - SLI (CHF) A - TER 0.20%

I don't know the other options included in the dynamic saving. The thing I can say is to check if there are any overlapping constituents between ishares euro and sli, which means, ubs might be included in both of them. Check how many are already in both and if it's a lot maybe reduce a little sli.

Swiss bonds are at the moment difficult. I started investing 4 months ago and  have i shares gov  3-7 and 7+ and also corporate swiss  bonds and they aren't performing too well because of negative yield of Swiss bonds. The problem is there is any good alternative out there (at least for me),  maybe real estate (gold is personally a no go) but it's not too convincing either.

Kilbim

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Re: Switzerland: How should I buy index funds here?
« Reply #263 on: October 13, 2016, 02:44:30 PM »
Don't forget that this is 14% of his taxable account; so depending if firereadery has a home /2nd pillar /3rd pillar it will be much less than 14% than his total assets. Personally across all my accounts my equities allocation are:
75 % all world vanguard
12.5% swiss large cap (smi etc that are included in most pillier 3a accounts)
12.5% etf ubs SPI-Mid, 80 small mid cap Swiss stocks.

So I have 25% of home stocks, with a general allocation of 70/30 makes for 17.5 % of my net worth linked to Switzerland. I tend to think that 15-20% is fine. It's always useful to have stocks that only suffers from 1 volatility factor (no currency effects) because if really really comes an emergency greater that your emergency fund there is still a chance that you can sell some Swiss stocks without currency effects (that is, you don't have to sell US stocks when the USD is really low etc). Forget the hedged chf etf because the contract is 1 rolling month so it doesn't really protects from long trend currency effects.
But I would never suggest more than 20% of your net worth in Swiss stocks, and for sure not with SMI. Either with SLI or diluted with some SPI mid or SMIM.


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So this means you have roughly 52% of your portfolio in USD (if not more)
Isn't this worrying to you in a long term? (providing you are planning to retire in switzerland and thus need to live using CHF as a currency)
More in general, what is a good split between home and international currencies, and what is the minimum % of home currency-etf (or investments in general) one should at least have in his portfolio?

Grog

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Re: Switzerland: How should I buy index funds here?
« Reply #264 on: October 13, 2016, 11:51:43 PM »



So this means you have roughly 52% of your portfolio in USD (if not more)
Isn't this worrying to you in a long term? (providing you are planning to retire in switzerland and thus need to live using CHF as a currency)
More in general, what is a good split between home and international currencies, and what is the minimum % of home currency-etf (or investments in general) one should at least have in his portfolio?

I am not worried. First, it's actually only 26% (half of my all-world etf is USD, the other half are euros, pounds+asiatic currencies and so on).
Second, well there is no right or wrong. I preferred the risk of currency that the risk of having all in the Swiss market. On top of that, I believe that during retirement my allocation will change. Depending on multiple factors a chf-hedged etf could be a good idea to lower volatility. But only in retirement and only if they get cheaper.
Bogle says one third home stock, one third international stocks and one third domestic bonds. But it talks for the US.


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Grog

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Re: Switzerland: How should I buy index funds here?
« Reply #265 on: October 14, 2016, 12:00:22 AM »
... and here a 3a-pillar vs control fund excel model, that suggests that the tax bonus due to pillar 3 takes rather long (20-25 for my set of parameters) years to be eaten away due to higher fees. if equal returns are assumed, it will not be eaten away during my lifetime.
but since there are so many individual parameters involve, you need to check the model yourself.

known flaws:
-reflects my income tax situation from 2 years ago, i.e. Quellensteuer (really low!!) and assumes it constant => correcting this is in favor of pillar 3
-withholding taxes are wild guesses, since they transform into income tax once declared, of unknown amount => correctingthis can favor either side
-property tax is neglected => correction is in favor of 3a

have fun :)
I still have to check your excel, but did you account for those factors:
-  funds outside the 3a pillar have their dividend taxed. If you are making ~80k this means that you have a tax percentage of 20-25%. That means that one fifth up to one fourth of your dividend is lost because of taxes. If your fund distribute 2% dividend (like most of them today) you pay up to 0.5% in taxes and this you don't have to pay in pillar 3a.
- second, wealth tax. Depending on your canton you start paying 0.1-0.2% of your wealth already from 50k. This is like a tax augmentation of your TER. Pillar 3a fund won't suffer from this.

So in general pillar 3a fund cost more (the cheapest are around 0.8% TER p.a.) but if the same money would be in taxable account then you will have 0.5-0.6% of more costs. This means that an ETF with a TER of 0.2% in reality costs 0.8% because of dividend and wealth tax.

My conclusion is that pillar 3a fund and taxable fund/etf costs more or less the same, so the tax bonus of the pillar 3a is really attractive.

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financialfreedomsloth

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Re: Switzerland: How should I buy index funds here?
« Reply #266 on: October 14, 2016, 01:52:15 AM »
So this means you have roughly 52% of your portfolio in USD (if not more)
Isn't this worrying to you in a long term? (providing you are planning to retire in switzerland and thus need to live using CHF as a currency)
More in general, what is a good split between home and international currencies, and what is the minimum % of home currency-etf (or investments in general) one should at least have in his portfolio?

Iíd like to weigh in on this one as well.

I am from Belgium, also a small country in the middle of Europe (but not as financially healthy as Switzerland unfortunately )
First off, it is my opinion that people in small countries or small amount of inhabitants (like Australia) need indeed watch the home bias. Having too much allocated to a small market is very risky. Even if you cover that whole market.

Second: about currency risk with your portfolio. I donít sweat it. I am personally 95% USD and not worried at all.
-   All big USA companies are international companies getting a lot of foreign income, a weaker dollar means those foreign profits are actually higher in USD amount so their share price or dividends in USD probably will go up

-   In retirement and following the 4% rule you will draw down only 4% (or less) from your portfolio each year. Yeas, each individual year currency fluctuations may have an impact on the amount you will get in your home currency but since most here are planning to be retired for 30 years or more the bad years will be smoothed out by the good years.

-   You are retired and can play the international arbitrage game: the bad years (the dollar being too weak against your own currency) will be the perfect time to go travel the USA or travel countries where living is cheaper than your home country (possibly even renting out your home and getting rental income in a strong currency then Ö).

Looking at their asset allocation a lot of people leave out their house which is for a lot of people actually a big part of their net worth. I will have a house in Belgium (value of that is by default in EUR),I plan to have 2 years of expenses in cash when I do decide to FIRE and that cash will also be in EUR. Even with everything else invested in USD stocks my net worth will actually be 1/3 EUR en 2/3 USD. And the 2/3 will be invested in companies making a lot of profits in EUR also so even by having everything in USD stock if you look at where the value is really stored and where the cash flows really come from, my allocation probably is more something like: 45% eur, 45% usd and 10% rest of world.
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Kilbim

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Re: Switzerland: How should I buy index funds here?
« Reply #267 on: October 14, 2016, 05:05:34 AM »
So this means you have roughly 52% of your portfolio in USD (if not more)
Isn't this worrying to you in a long term? (providing you are planning to retire in switzerland and thus need to live using CHF as a currency)
More in general, what is a good split between home and international currencies, and what is the minimum % of home currency-etf (or investments in general) one should at least have in his portfolio?

Iíd like to weigh in on this one as well.

I am from Belgium, also a small country in the middle of Europe (but not as financially healthy as Switzerland unfortunately )
First off, it is my opinion that people in small countries or small amount of inhabitants (like Australia) need indeed watch the home bias. Having too much allocated to a small market is very risky. Even if you cover that whole market.

Second: about currency risk with your portfolio. I donít sweat it. I am personally 95% USD and not worried at all.
-   All big USA companies are international companies getting a lot of foreign income, a weaker dollar means those foreign profits are actually higher in USD amount so their share price or dividends in USD probably will go up

-   In retirement and following the 4% rule you will draw down only 4% (or less) from your portfolio each year. Yeas, each individual year currency fluctuations may have an impact on the amount you will get in your home currency but since most here are planning to be retired for 30 years or more the bad years will be smoothed out by the good years.

-   You are retired and can play the international arbitrage game: the bad years (the dollar being too weak against your own currency) will be the perfect time to go travel the USA or travel countries where living is cheaper than your home country (possibly even renting out your home and getting rental income in a strong currency then Ö).

Looking at their asset allocation a lot of people leave out their house which is for a lot of people actually a big part of their net worth. I will have a house in Belgium (value of that is by default in EUR),I plan to have 2 years of expenses in cash when I do decide to FIRE and that cash will also be in EUR. Even with everything else invested in USD stocks my net worth will actually be 1/3 EUR en 2/3 USD. And the 2/3 will be invested in companies making a lot of profits in EUR also so even by having everything in USD stock if you look at where the value is really stored and where the cash flows really come from, my allocation probably is more something like: 45% eur, 45% usd and 10% rest of world.
a

I don't follow the whole "if the currency is weak, it will be balanced by companies in my etf making more profits", I mean, I understand it but I think it makes no sense.
What matters is the final value of your investment in your country currency. If during those 30 years the dollar goes up 50% against your home currency, your investment will simply lose 50% of its final value when you cash it for paying living  in your country. Even if your etf did great because the companies were able to do great because of the strong dollar, at the end all the gain of the etf will be crashed by the loss in 50% of value when you go USD - > home currency.
Or am I missing something here?
Thanks

InvestOR

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Re: Switzerland: How should I buy index funds here?
« Reply #268 on: October 15, 2016, 06:21:02 AM »
Hi Guys,

My first post on this very interesting forum.
I've spend hours reading through all the posts and I want to thank everybody for sharing their experience and knowledge. Big help for anyone trying to improve their investor skills!

I will be starting soon (hope in the next days) to invest 50K CHF in: 70% ETF;s (Vanguard or something similar) for 10 years min, 20% stocks and maybe 10% penny stocks. As I'm still at the beginning, I'll not do a lot of trading (max 5/month).
My question marks are:
-which online broker should I choose?: US based - TD ameritrade or Schwab (TD has a better trading platform maybe and access to Vanguard ETF;s)? or IB (think too complicated for newbies?) ; Swiss based - too expensive (maybe Cornertrade?)
-which is the best and cheapest way to convert 50K CHF in USD? Currencyfair.com or using Postfinance account (too expensive?) or accept the rate which Schwab will give (they have a CHF bank account where you can transfer but when I asked what conversion rate they'll use, they said I'll be informed when money will be transferred)
-  In addition to the 50k, I might have some money left to invest in postfinance funds (maybe take advantage of this promotion: https://www.postfinance.ch/en/priv/prod/invest/fund/overview/promo.html . I know most of their funds TER is quite high, but do you think is there any particular fund which would be interesting, for 20K, for a buy and forget strategy? I will already invest my 3a in the Postfinance 75 fund.
- What would be the best, easiest and lowest risk to invest my monthly savings (around 4k) preferably in a swiss based fund or postfinance fund ? Or is better I transfer them quarterly to my US based broker and invest from there?
- from your experience do you think I could expect at least a 10% avg return/year from an ETF fund? (let;s say Vanguard FTSE All-World UCITS) Or more 15-20%? Long investment period - 10 years at least
Thanks a lot for your feedback and will keep you updated with my progress

nugget

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Re: Switzerland: How should I buy index funds here?
« Reply #269 on: October 16, 2016, 02:12:16 PM »
Hey InvestOR,
@avg return/year
based on some literature about passive, i use more something like 6%/y for stock etfs at six exchange (i.e. the vanguard stock etfs), including inflation. If ppl here feel this is wrong please let me know :) according to http://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp, sp500 had 12% annually before inflation, 7% after but still disregarding dividends. so 15+ seems quite unrealistic to me

-nugget

InvestOR

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Re: Switzerland: How should I buy index funds here?
« Reply #270 on: October 17, 2016, 03:42:36 AM »
Thanks Nugget. Will revise my expectations towards 10%..

Everyone - what about the other questions I raised? What's your view on the online broker choice? ..

Should I trust TD or Schwab with my savings or there are other better options ?! I need to make a decision today/tomorrow..please
« Last Edit: October 17, 2016, 03:44:51 AM by InvestOR »

nugget

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Re: Switzerland: How should I buy index funds here?
« Reply #271 on: October 17, 2016, 09:10:58 AM »
Hey InvestOR,
i dont know about your other questions without looking more into it.

Having time pressure on money stuff is always very bad, i cannot help you with that! maybe you want to go with the safest option until you have time to think it through yourself? in the end you need to be confident with your decisions yourself, everything else will expose you to any opinion you encounter on your way to FIRE :D

InvestOR

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Re: Switzerland: How should I buy index funds here?
« Reply #272 on: October 17, 2016, 09:31:25 AM »
I'm pretty sure some of the guys on the Forum already went through this process, so their experience and feedback certainly would help.

The only pressure is of lost investment opportunity..banks are not helping too much with the interest rates as you all know :)

osetrix

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Re: Switzerland: How should I buy index funds here?
« Reply #273 on: October 17, 2016, 01:31:56 PM »
I don't think IB is too complicated for newbies, the software is actually intuitive and there are many tutorials. I recently joined IB and I'm very happy with their service. Of course you have to look at their fee structure and see if you make sufficient trades to justify/avoid the inactivity fee but you mention some stock trading aside from the index investing, so have a look at their attractive fees for US stocks.

nugget

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Re: Switzerland: How should I buy index funds here?
« Reply #274 on: October 18, 2016, 04:15:20 AM »
Quote
The only pressure is of lost investment opportunity..banks are not helping too much with the interest rates as you all know :)

Yes, that is true indeed. however I strongly believe a few weeks or even months of putting deep consideration into what your long term planning should look like will outperform investing into the next best thing that comes along your mind :)

And if it is not you but some salesman putting pressure on signing soon, this is a clear indication for the famous  "hands-off-strategy" ^^


nugget

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Re: Switzerland: How should I buy index funds here?
« Reply #275 on: October 18, 2016, 04:28:22 PM »
Dear all,
The Mustachian Post opened a forum for swiss mustachians:
http://forum.mustachianpost.com/
it is new and eager to be filled with content :)

financialfreedomsloth

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Re: Switzerland: How should I buy index funds here?
« Reply #276 on: October 19, 2016, 06:42:55 AM »
So this means you have roughly 52% of your portfolio in USD (if not more)
Isn't this worrying to you in a long term? (providing you are planning to retire in switzerland and thus need to live using CHF as a currency)
More in general, what is a good split between home and international currencies, and what is the minimum % of home currency-etf (or investments in general) one should at least have in his portfolio?

Iíd like to weigh in on this one as well.

I am from Belgium, also a small country in the middle of Europe (but not as financially healthy as Switzerland unfortunately )
First off, it is my opinion that people in small countries or small amount of inhabitants (like Australia) need indeed watch the home bias. Having too much allocated to a small market is very risky. Even if you cover that whole market.

Second: about currency risk with your portfolio. I donít sweat it. I am personally 95% USD and not worried at all.
-   All big USA companies are international companies getting a lot of foreign income, a weaker dollar means those foreign profits are actually higher in USD amount so their share price or dividends in USD probably will go up

-   In retirement and following the 4% rule you will draw down only 4% (or less) from your portfolio each year. Yeas, each individual year currency fluctuations may have an impact on the amount you will get in your home currency but since most here are planning to be retired for 30 years or more the bad years will be smoothed out by the good years.

-   You are retired and can play the international arbitrage game: the bad years (the dollar being too weak against your own currency) will be the perfect time to go travel the USA or travel countries where living is cheaper than your home country (possibly even renting out your home and getting rental income in a strong currency then Ö).

Looking at their asset allocation a lot of people leave out their house which is for a lot of people actually a big part of their net worth. I will have a house in Belgium (value of that is by default in EUR),I plan to have 2 years of expenses in cash when I do decide to FIRE and that cash will also be in EUR. Even with everything else invested in USD stocks my net worth will actually be 1/3 EUR en 2/3 USD. And the 2/3 will be invested in companies making a lot of profits in EUR also so even by having everything in USD stock if you look at where the value is really stored and where the cash flows really come from, my allocation probably is more something like: 45% eur, 45% usd and 10% rest of world.
a

I don't follow the whole "if the currency is weak, it will be balanced by companies in my etf making more profits", I mean, I understand it but I think it makes no sense.
What matters is the final value of your investment in your country currency. If during those 30 years the dollar goes up 50% against your home currency, your investment will simply lose 50% of its final value when you cash it for paying living  in your country. Even if your etf did great because the companies were able to do great because of the strong dollar, at the end all the gain of the etf will be crashed by the loss in 50% of value when you go USD - > home currency.
Or am I missing something here?
Thanks
You only cash out about 4% a year. When the dollar is weak I will have less euro to live on, but when he is strong I will have more. If you look at the past, there have been fluctuations, strong ones in both directions, but overall it mostly evens out. The only scenario which could cause a problem is where the dollar would keep on losing value for the entire 40 or 50 years of my retirement. But that is an extremely unlikely scenario.

Letís keep things simple: my investments pay 12.000 USD a year dividends and 1 USD = 1 EUR.
So I have 12.000 euro to spend per year, covering my basic costs of 1.000 eur each month.
But the USD takes a beating and becomes weaker compared to the EUR so 1 USD = 0,8 EUR
If my dividends are 12.000 USD, they will only be 9.600 euro, what to do to for the remaining 2 and a half months? O no, I will starve!!
But wait a minute, all those companies make big bucks all over the world, their earnings in USD go up, because every euro they make now ends up as about 1,2 usd in their numbers. So they actually raise their dividend! Yes!! I now am getting 15.000 USD per year paid out and with 1 USD = 0,8 EUR that is still the 12.000 eur I actually need a year.
Will it match perfectly like this? Off course not. Thatís why I am planning on having 2 years of expenses in cash in EUR. With the currency fluctuations, it will sometimes be in your favour (that is the time to add to your stash, not go spend it) and sometimes it will not be in your favour. But over several decades this should even out.
And like I said, I will be retired, I can always do geographic arbitrage and move to a country where they accept USD as payment (several low cost countries in south America happily will accept USD). I will then rent out my house in EUR, so getting income in the strong currency and will be spending money in USD, the weak currency at that moment.
If you buy coca-cola you have a stock which is trading in USD and receive dividends in USD. So is it a USD investment? No!! The underlying cash flow is only around 20% in USD, the remaining income is earned in the rest of the world. If the USD gets weaker, the amount of reported earnings will rise because all that foreign money will be worth more dollars and normally their dividend will follow.
So yes, provide some safety cushion, but with a 4% withdrawal, a house and if you are willing to relocate for a few years: donít sweat the currency risk.

http://financialfreedomsloth.com/

achieving financial freedom one lazy step at a time

Kilbim

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Re: Switzerland: How should I buy index funds here?
« Reply #277 on: October 21, 2016, 09:20:24 AM »
Question to everybody:

As swiss investors, so somehow tied to the CHF currency, how do you go about swiss bonds?
Obviously one wants bond to counter volatility, which means you want them in CHF. But swiss bonds have at the moment bad yield, which makes them a difficult investment, and indeed in the last months they have done nothing but go down.
So, what is your alternative (if any)  or your course of action in this case?

Grog

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Re: Switzerland: How should I buy index funds here?
« Reply #278 on: October 21, 2016, 03:56:32 PM »
Cash. We have negative inflation -0.5% so is not bad and is not losing value.

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wapiti

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Re: Switzerland: How should I buy index funds here?
« Reply #279 on: October 22, 2016, 11:55:02 AM »
@grog Have you include in your simulation the tax at the withdraw of your 3a ? between 1 to 10 % depending the canton and if you are married or single.
What is "3a-reduced withholding tax" in your excel ?

Grog

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Re: Switzerland: How should I buy index funds here?
« Reply #280 on: October 22, 2016, 10:57:39 PM »
I didn't have any spreadsheet, i think you are talking about nugget?
Anyway the tax you pay are so low are already offset by the savings in reduced income.

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nugget

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Re: Switzerland: How should I buy index funds here?
« Reply #281 on: October 23, 2016, 02:24:23 AM »
@wapiti
if you referred to me, then you found one of the more uncertain points in it. Besides of it being "reduced" i have no idea on even what the calculation basis is.

the spreadsheet assumes 17.5% for the 3a-cash-out and 35% for the control fund cash out.

I try to build up some knowledge base at the swiss based  http://forum.mustachianpost.com/ about this, of course you are invited to join efforts :)

Kilbim

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Re: Switzerland: How should I buy index funds here?
« Reply #282 on: October 23, 2016, 07:56:29 AM »
Cash. We have negative inflation -0.5% so is not bad and is not losing value.

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So should I stop buying (or highly reduce my percentage,  Say from 4% to 1% each month, as well as reducing the total allocation toward bonds) bonds and keep what I would invest in them as cash in a bank account? What if I already have cash and would exactly do something with it different then keeping in a bank account?

samuck

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Re: Switzerland: How should I buy index funds here?
« Reply #283 on: October 23, 2016, 08:48:39 AM »
Cash. We have negative inflation -0.5% so is not bad and is not losing value.

Sent from my YD201 using Tapatalk

So should I stop buying (or highly reduce my percentage,  Say from 4% to 1% each month, as well as reducing the total allocation toward bonds) bonds and keep what I would invest in them as cash in a bank account? What if I already have cash and would exactly do something with it different then keeping in a bank account?

I would stick to your strategy and asset allocation you have originally chosen. (Disclaimer: I have 0% bonds...)

wapiti

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Re: Switzerland: How should I buy index funds here?
« Reply #284 on: October 23, 2016, 09:24:03 AM »
@nugget yes, I was referring to you ;)
"the spreadsheet assumes 17.5% for the 3a-cash-out and 35% for the control fund cash out."
Why the control fund would be taxed when you will use it ?

Honestly, you excel sheet is good except the 3a-reduced withholding tax and withholding tax that I don't understand.
Is the 17.5% for cash-out the same as 3a-reduced withholding tax ?

I will join the mustachian forum soon ;)


financialfreedomsloth

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Re: Switzerland: How should I buy index funds here?
« Reply #285 on: October 24, 2016, 03:18:45 AM »
Question to everybody:

As swiss investors, so somehow tied to the CHF currency, how do you go about swiss bonds?
Obviously one wants bond to counter volatility, which means you want them in CHF. But swiss bonds have at the moment bad yield, which makes them a difficult investment, and indeed in the last months they have done nothing but go down.
So, what is your alternative (if any)  or your course of action in this case?

The negative interest rate environment is creating a brave new world with all new issues.
If bonds are less attractive than cash you should just keep it in cash. Conventional wisdom dictates that bonds should be better than cash but, well, these arenít conventional times.
You could look for bonds in another currency and then buy something like a currency option to cover the currency risk. But COPT (currency options) are usually not available (or expensive) for a retail client.
Since you are asking about cash or bonds in CHF I am assuming you are planning to stay in Switzerland for the next few years.
Some out of the box ideas to put your CHF cash at work.

Stock up on non-perishables. The negative interest rate environment is making this A LOT more interesting.
Example: 10.000 CHF ins saving account or bonds giving you close to 0% interest is after three years still worth around 10.000 CHF.
Buying 10.000 CHF in non perishables (yes, you now enter the totally ridiculous world of buying three years of toilet paper or tooth paste) at a 10% discount (and big volume or making a trip over the boarder to get the stuff cheaper can get you this discount) is actually giving you around 3% return per year on your money. When bonds or saving account rates used to be around 2% it wasnít really worth the hassle but now that interest rates are 0 or negative, well itís a brand new world Ö
The only issue is: you can only do it for non-perishables that do not increase your consumption of them (I could stock up on cans of coca-cola for a year at a nice discount, but that would only increase me drinking coca-cola and completely killing the savings). Buying big volumes of tooth paste or washing machine products or shower gels is not going to have me use more of it. These limitations make it only usefull for about 15.000 CHF max (I would not advise in stocking up for more than three years, who knows what interest rates will be like in three years).
These savings are of course just going to make the problem worse and give you more cash in CHF to invest, three years down the line. But stocking up can give you around 3% return on your money for an amount up to 15.000 CHF.

Risks/downsides are:
-   Interest rates could start going higher, but I do not see them go higher than 3% in the next three years (hence the limit on the years to stock up)
-   Products could become cheaper if we would get hit by deflation. But price decreases of more than 3% per year? Governments are going to do all they  can to avoid that. (the limit on the years to stock up also help for this, just do not stock up anymore if you think there is a serious change of deflation)
-   You are going to have to put some time and effort in it
-   You need space to stock it all (although you would be amazed at how little space a couple of thousand euroís of washing and shower products take up)
-   Your stock could get damaged destroying more value than your savings (hence the choice of non perishables)

Solar panels may or may not be attractive. It is investing CHF now to avoid having to pay future CHF. In Belgium I do not find them attractive, liking stock investments better (we have a few decent companies paying out around 3% dividends each year so they have my preference). I do not know what the Swiss situations is there. Giving the fast evolving possibilities (and government rules) in this field, I personally want a decent return before committing the 5.000 to 10.000 euro it takes for an average installation. And at the moment, in Belgium, you are not getting that (in Swiss, it might be different).

Home isolation can produce nice savings: wall and roof isolation is not very expensive and will get you nice savings in heating costs (again spending CHF now to avoid having to spend future CHF). Our roof isolation cost around 400 euro, an amount we made back in less than 2 years in the reduction of our gas bill.

The issue with all these things is, you are spending it now to get savings in the future and those savings give you a nice Ďreturní on the spend money but the amount you can spend in this manner is limited and will provide you with more CHF cash in the future.
http://financialfreedomsloth.com/

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extremis

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Re: Switzerland: How should I buy index funds here?
« Reply #286 on: November 01, 2016, 09:12:43 AM »
As a total newbie in investing, ETFs certainly appeal to me; i have decided to start my investing journey with the so much praised S&P 500. Then, i discovered this awesome thread with fantastic information on ETF investing. I was thinking of opening an account at Swissquote, then i realized they (unfortunately) do not offer S&P 500 ETFs.

To avoid dividends and the associated taxation problems i have decided to go on with the accumulating iShares Core S&P 500 UCITS ETF (CSPX), investing 10K USD; later on i could add more funds, or even better, buy a couple other accumulating ETFs to build a diversified portfolio. I intend to keep it for at least a decade (Buy and Hold strategy). I have found CornerTrader has this specific ETF. The relevant costs, as far a i understand, are: 0.5% conversion fee, 35USD London Stock Exchange (minimum) fee and 0.15% duty stamp fee; so i expect to pay around 100USD to buy 10K shares. Is my calculation correct? Are there any other (hidden) fees i should be aware of? Isn't that too much to pay for 10K shares? I guess, i will have to pay the same amount again, when i decide to sell my shares.

Is there any cheaper (and reliable) alternative in Switzerland that accepts persons domiciled abroad? If they also offer banking services (e.g. SEPA transfers to/from 3rd parties) it would be really nice as i could use just one account for both investing and everyday banking.


Thanks in advance for any suggestions.

Grog

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Re: Switzerland: How should I buy index funds here?
« Reply #287 on: November 01, 2016, 10:56:33 AM »
Are you in Switzerland? Depending on your status the dividend income is always summed to your total income for taxation purpose. It doesn't matter if it's a distributing or accumulating ETF.

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extremis

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Re: Switzerland: How should I buy index funds here?
« Reply #288 on: November 01, 2016, 01:15:16 PM »
No, i'm not in Switzerland, does it make any difference for taxation purposes? What do you mean by "depending on your status"?

Grog

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Re: Switzerland: How should I buy index funds here?
« Reply #289 on: November 01, 2016, 01:43:49 PM »
I mean that i don't really know how the people source taxed deal with dividends. But for people gaining income in Switzerland and with resident tax status there is no difference between accumulating and distributing etf.

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extremis

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Re: Switzerland: How should I buy index funds here?
« Reply #290 on: November 01, 2016, 02:51:07 PM »
Thanks, that's perfectly clear now. How about the cost to buy 10K of shares, is my calculation correct? Is it normal to pay 100USD? Are there any cheaper brokers around that offer CSPX ETF?

Kilbim

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Re: Switzerland: How should I buy index funds here?
« Reply #291 on: November 10, 2016, 04:21:08 AM »
So swiss fellows, what is your "secure investment", the one you use to counter volatility and currency effects, given the fact that swiss bonds aren't a solid invest anymore?
« Last Edit: November 10, 2016, 06:33:24 AM by Kilbim »

samuck

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Re: Switzerland: How should I buy index funds here?
« Reply #292 on: November 10, 2016, 05:00:27 AM »
So swiss fellows, what is your "secure investment", the one you use to counter volatility and currency effects?

Staying the course, investing for the long term. 

Kilbim

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Re: Switzerland: How should I buy index funds here?
« Reply #293 on: November 10, 2016, 06:34:13 AM »
So swiss fellows, what is your "secure investment", the one you use to counter volatility and currency effects?

Staying the course, investing for the long term.

In my question I forgot to write "now that bonds aren't a safe investment anymore"

Maynard

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Re: Switzerland: How should I buy index funds here?
« Reply #294 on: December 13, 2016, 02:46:38 AM »
Hey guys, first post here, I really appreciate you sharing your knowledge in this thread, I found it super informative.

I recently moved in to Switzerland (Zurich). I currently work in consulting and for the first time I see myself have the opportunity to save/invest a considerable amount.

I hope you guys can answer some of my very basic questions as no one, including my colleagues, can give me a definitive answer.

3rd pillar:

Having registered a checking account from Credit Suisse, I see that I can register a retirement account for my 3rd pillar in there. How good of an idea is this? Are there better platforms to do so? Reason why I'm asking is due to Grog's post on the first page explaining he invests his 3rd pillar into a passive Swisscanto fund. Another question for the 3rd pillar, I have 2 options at Credit Suisse - a savings 3rd pillar account with higher risk but potentially higher return, and a relatively risk-free retirement account. If that's up to my goals, I would go for the former, but am I missing something in here? Also I don't quite understand yet how it works - is the contribution a one-time payment, or rather a fixed (capped) percentage of my salary going there every month.

As for ETFs/fonds I am also lost into which platform I should choose and which ETFs / fonds to buy into.

If it will make it easier, I get 89k CHF / year, saving 3k/month that I can put aside for 3rd pillar / ETFs / fonds. I have zero debt.

Any advice appreciated, thank you very much.

nugget

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Re: Switzerland: How should I buy index funds here?
« Reply #295 on: December 13, 2016, 04:08:42 AM »
hey Maynard,
welcome to the swiss mustachians :)
first of all i'd like to draw your attention towards the swiss forum where we try to establish the swiss community:
http://forum.mustachianpost.com/

@Credit suisse: being one of the two big banks everything at CS is more expensive than elsewhere, including 3a accounts and products. try to look around a bit and take a few month time - it's worth it :) a starting point can be here: http://forum.mustachianpost.com/t/the-pillar-3a-tutorial/46/7
however you can put the yearly maximum amunt of CHF 6768 (i guess you are not self employed consultant - then another number applies) on a simple savings account now and decide next year what to do with it within the 3a to get the tax benefit for the 2016 year.

@Swisscanto: is currently regarded as one of the most mustachian 3a options considering long term. make sure you open the depot with LUKB, as pointed out here: http://www.mustachianpost.com/2016/10/07/ask-the-readers-in-which-swiss-bank-can-i-buy-the-swisscanto-lpp-3-index-45-r-third-pillar-with-the-lowest-commission-fees/


@ 2 options at Credit Suisse: within 3a there is 4 classes of products: simple savings account - low interest, low cost and no fluctuations. life insurances - keep you hands off them, i believe they are very bad. 3a fonds - many products available, but only few (among them the swisscanto) interesting from the mustachian point of view. 4 - some non-capital-building insurances like empolyment-unability- and death-insurances can be done within 3a. with the same tax benefit.

@ Also I don't quite understand yet how it works: 3a is a yearly saving that can be deducted from the taxable income - up to CHF 6768 for employed people. On recieving a rather moderate tax applies. You can't access the 3a money unless you buy a house, leave the country, found a company or retire after 60. that's it. You have to actively submit a tax-recalculation before end of march of the next year- otherwise the tax benefit vanishes.

@ETF platform: have a look at http://www.mustachianpost.com/2016/10/24/best-broker-with-cheapest-fees-for-an-etf-portfolio-as-a-swiss-investor/
and certainly not CS or UBS :D

best,
-nugget



Maynard

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Re: Switzerland: How should I buy index funds here?
« Reply #296 on: December 13, 2016, 08:54:08 AM »
@Nugget,

Thank you very much man, you rock! I wasn't aware about the Swiss forum, on to it now.

Much appreciated!

night

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Re: Switzerland: How should I buy index funds here?
« Reply #297 on: January 15, 2017, 04:22:41 AM »
Hi all, first post here, been reading the thread and many others, I have only one question right now but it's so important I registered :). Might have other questions later but you guys discussed everything I'd possibly want on dividends, allocation, etc.

What is the difference between VRWD (USD @ LSE) and VWRL (CHF @ SIX), and for a Swiss individual, is it really justified to buy the former when:
  • you get charged exchange fees (CHF to USD, eventually USD to CHF when you retire or cash out),
  • fees to buy shares from most Swiss institutions (let's say we keep the money here :) ) are way higher (buy 20 shares of each: about 50 USD for the former, 15 CHF for the latter).
I don't think VWRL CHF is hedged (might be wrong, if hedged, I understand why I'm not going to hold it). If not hedged the last reason I'd think VWRL CHF is not super attractive is liquidity / size of the fund, is that it? And how crucial of a problem it is vs. the cost difference?

Thanks a million for all the info! Thanks to this thread and other resources I'm feeling comfortable, going for 80% equity (50% total world, 10% SMI, 20% Swiss small cap), 20% cash (bonds in CH?... lol), very long horizon. I understand the 50 world - 30 Switzerland ratio might be bad in some people's view but well, I love my country and believe in it long term. Might refine that allocation as time goes buy.

Have a great 2017 all!

edit: will cross post to the Swiss forum, delete my post if you think it's more relevant at the swiss one (in that case, sorry :) ).
« Last Edit: January 15, 2017, 04:25:19 AM by night »

Dago

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Re: Switzerland: How should I buy index funds here?
« Reply #298 on: January 15, 2017, 06:45:36 AM »
Hi,
Welcome !
VWRL is not hedged, it saves on the exchange rate (it is internalized and most certainly a better rate than what you would get) and it saves on the fees. Those are the reasons I chose it instead of VRWD. As you noted, it is less liquid but still bearable.

Tax wise, it is complicated and someone more knowledgeable could comment better than I.

Cheers,
Dago

FIeuropeanstyle

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Re: Switzerland: How should I buy index funds here?
« Reply #299 on: January 17, 2017, 04:17:00 AM »
But for people gaining income in Switzerland and with resident tax status there is no difference between accumulating and distributing etf.

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Hi Grog, Are you sure about this ? I have seen people saying that this is not the case. For example, you buy Ishares core eurostoxx 50 (CSSX5E) on the SIX (Swiss) market . The etf is ireland based so no dividend is payed in Switzerland, everything is accumulated. Are you saying that you have to actually pay a tax in the dividends reinvested by the company even if you never received a dividend yourself ?