Post by: swisstash on May 24, 2014, 02:52:47 AM
First, how can I buy Vanguard funds? (vanguard.ch says to ask my bank, my bank says not available from them). Is there another Vanguard-like equivalent I should consider instead?
Second, what are the important tax differences between buying funds with a Pillar 3a account, an ordinary private account, or with my Holding company? (I'll probably do a little of each for reasons related to income tax.)
Finally, how can I buy the funds in such a way that they are "out of sight and out of mind" so that I am not tempted to play with them?
Post by: Grog on May 24, 2014, 04:36:14 AM
So basically you can choose to buy cheap Vanguard ETF, but then you will receive every three months dividend in US dollar (which is in terrible shape at the moment vs the CHF). And you pay taxes on the dividend (and there is a 35% withholding tax that makes reinvesting alittle bit slower, since you receive your money back only after declaring it).
My strategy for the moment is the following:
- Pillar 3a invested in a passive Swisscanto fond with the maximum split in equity (45%, 55% in Bond). Fee of 0.60% (as low as it gets in Switzerland, impossible to find lower).
- Buying of ETF through an online Broker: Strateo offer a good deal with Comstage ETF (9 chf fee up to 200'000 chf) that have the advantage of NOT distributing dividend but always follow total return index that includes dividend distribution. In this case you spare yourself the hassle of declaring them and retrieve the withholding tax. They are usually pretty low fee ( for instance you can buy a S&P 500 for a fee of 0.18%). I've started build my portfolio with them.
I know Swissquote has some cheap ETF deal.
- Invest through Postfinance fonds: if you have a top account (gratis after 25'000 chf) you can subscribe to three passive fonds (yearly fee of 0.59%, subscription of only 0.5 %, no fee when selling) that are very interesting for a three fund portfolio: a bond fund, a Swiss performance stock fund and a global fund. You can automatize the subscription and dividend are automatically reinvested, although you still have to go through the hassle of decalring them and retrieve thewithholding tax. The nice thing is you can buy part of a share (i recently acquired 1.044 shares of a passive fund :) ), and the minimum investment is either 2000 chf for a one-time thing or 100 chf if you decide for an automatic investment plan.
I do a combination of all these three since I don't like to have all of my egg in the same basket.
I think if you have a postfinance account and you have up to 1000 chf to invest per month, subscribe a combination of the Postfinance suisse and postfinance bond and let everything go automatically. subscribing 1000 chf in a combination of two three funds at 0.5% subscription cost (5 chf total) could be much cheaper then trading ETF on the SIX.
We could use this thread to exchange idea :)
Post by: swisstash on May 24, 2014, 01:12:02 PM
Hi and welcome to the forum!
Thanks! That is a lot of new and interesting information for me.
Vanguard still appeals to me the most for reasons of "keep it simple". Comstage, iShares, and others might be better but they seem more of an unknown quantity to me. Likewise smaller exchanges like SIX that seemed to have really awful liquidity for Vanguard ETFs (though I acknowledge could be because better alternatives exist around here). So at the moment I imagine my first investment will be to buy an Vanguard ETF in USD on a major exchange. Then I have to deal with currencies and taxes, but at least I'm safe from excessive fees and nefarious things like liquidity etc.
Pillar 3a also puts me on my guard. Is this financial institutions exploiting regulatory restrictions to sell crappy products i.e. trying to eat up tax savings with high fees? That might be the best alternative but perhaps it's worth looking for a better way?
My situation is unusual in that my income is mostly dividends from private companies that I have been involved in, and I plan to receive these dividends in a Holding company. So the money I want to invest will initially be in the Holding company and I will have to choose between drawing it out to invest privately or keeping it in the holding company and investing it there.
I am not sure about the pros and cons of private vs. holding company investments. Googling around now, it actually looks like the holding company would have the lowest taxes on dividends, and that they would become totally tax-fee if it would one day have a stake worth CHF 1M+ in some fund e.g. Vanguard S&P 500. That sounds like an unlimited/unrestricted alternative to Pillar 3a, which would be awesome :-). However: much more research needed and any relevant information would be most welcome.
Thanks again for the information and great to "meet" you!
Post by: swisstash on May 26, 2014, 11:28:33 PM
My strategy for the moment is the following:
- Pillar 3a invested in a passive Swisscanto fond with the maximum split in equity (45%, 55% in Bond). Fee of 0.60% (as low as it gets in Switzerland, impossible to find lower).
We could use this thread to exchange idea :)
Question for you: Are the tax savings of a 3a account enough to offset the higher fees?
Swisscanto 3a has 0.60% management fee and no dividend taxes. Vanguard funds would cost 0.09% + tax on dividends. If dividend yield is 2% and taxed at 15% then taxes are 0.30% for a total cost of 0.39%. This makes a Pillar 3a account seem very unattractive: the tax benefits are more than eaten up by the management fees and you would come out behind just buying funds in a regular account.
What do you think is the truth?
Post by: Grog on May 27, 2014, 08:51:14 AM
- You can deduct the whole contribution in the third pillar from the net income. That means that if you are in 25% bracket (between 30000 to 100000 chf of income in switzerland), if you contribute with 6000 chf, you pay 1500 chf less taxes. So you can decide what's better: investing 4500 in vanguard and pay 1500 chf in taxes (money you'll never get back), or put 6000 in Swisscanto funds.
- Another nice touch is that your third pillar is not subject to the net-worth tax (vermögensteuer). If you live in Tessin, you are not taxed up to 200'000 chf of net worth, so it is maybe nice to have your vanguard funds outside the third pillar account. If you live in fribourg, the net-worth tax starts from a patrimony of 35000 chf and is 0.25 %: as you can see, depending on the canton you live, this tax (that only applies on investment outside the third pillar) could already eat up the lower fee of a vanguard account.
-Third point: dividend are added to your income, so if you are in the 25% bracket, you are going to pay 25% of dividend tax, not 15%. As far as I know and my tax software says :)
so by our own reasoning 25% of 2% is 0.4%, plus 0.09% in makes Vanguard only 0.11% better then Swisscanto.
Since you can spare 1500 chf of taxes, you must have a total worth of 1'400'000 chf in vanguard funds (of which the 0.11% is effectively 1540 chf) to recover the difference. But so much net-worth will be taxed at 0.1-0.3 % annually depending where you live so at the end you really have no benefit in not-maximizing your third piller.
So mainly for these reasons is always better to contribute to the maximum to the third pillar. But I've seen that on https://www.vermoegenszentrum.ch/
that you can maybe create your own ETF portfolio to invest as third pillar. But I didn't look into it.
Post by: swisstash on May 27, 2014, 01:51:08 PM
also I'll start by saying I'm by no means an accountant and I started looking into this stuff only in the last months. But your reasoning has some flaws:
True. The income tax deduction for Pillar 3a contributions was a big oversight on my part.
Here is my new attempt to state what options I have, as a self-employed person, to do with the part of my income that I want to invest:
- Draw it as salary, pay income tax, buy Vanguard funds. Pro: Low fees on the funds. Con: Contributions taxed as income (high rate) and dividends taxed too (also high rate, though perhaps less than salary?).
- Pay it into Pillar 3a (up to ~6800 CHF pear year). Pro: Contributions and dividends tax exempt. Con: High fees on the funds, likely exceeding tax savings on dividends.
- Declare it as profit, pay it as a dividend into my holding company, and invest it there. Pro: Low taxes during growth (profits and dividends taxed between 0 - 12% in Obwalden). Con: Eventually drawing out the money will incur capital gains tax (on holding company) and dividend tax (on me receiving them).
I suspect that the last option will be best. I don't know how to really calculate these options out though.
Post by: Grog on May 27, 2014, 11:18:27 PM
The overall performance of a fund is affected by currency swing: for example look at this iShares S&P500 chf hedged ETF (0.45% expenses):
https://www.justetf.com/ch-en/etf-profile.html?query=IE00B88DZ566&isin=IE00B88DZ566&from=search
Has an one year performance of 15.49%, everything included and with the currency hedged.
Look at the Vanguard one, without hedging:
https://www.justetf.com/ch-en/etf-profile.html?ic=Vanguard&isin=IE00B3XXRP09&from=search
Only 8.79%, you would have gained only HALF of the profit to spare 0.36% of fee.
Now in 2014 Vanguard seem a little bit better, but I would be very cautios because the iShares one is sparing you all the taxes declaration work, since they do it and is accumulating.
That's why I'm switching away from US and international exposure (right now only 50% of my stock allocation) and I'm focusing only on the SPI, the swiss performance index. The fund have low fees, dividend in franc and historically, since 1994, has an average annual return of 10.7%
http://www.msci.com/resources/factsheets/index_fact_sheet/msci-switzerland-index.pdf
Although as I said you have to decide for yourself :) and I really don't know anything about taxation of companies and holding so I can't help you with that.
Post by: swisstash on May 28, 2014, 06:30:28 AM
The Vanguard ETF with 0.09% is the S&P 500 quoted on the SIX, right? You really should pay attention to the currency change. Receiving US dividend every three months makes it difficult to reinvest, since every transaction has brokerage fee.
I imagine receiving dividends into a USD account and then buying more shares every quarter (on NYSE perhaps?). The transaction costs should be CHF
The overall performance of a fund is affected by currency swing
Is currency hedging valuable for long term holdings? I mean: can it be shown to increase expected returns or reduce volatility? (Or is it a gimmick used by bankers to sell more expensive funds?) I would love to read (say) a Boglehead analysis on this. The nearest I found on a quick Google is this: http://www.efficientfrontier.com/ef/799/hedging.htm.
It is not obvious to me that you can compare the one-year performance of hedged vs. unhedged funds and extrapolate to long term returns. Than sounds similar to comparing the one-year returns of gold vs. equities to decide which is better for the future.
Post by: Grog on May 28, 2014, 09:43:03 AM
dividends into a USD account and then buying more shares every quarter (on NYSE perhaps?). The transaction costs should be CHF36100 per fund per year (four transactions @ CHF ~25 per transaction with Swissquote). This seems likely to be dramatically less total fees than the European funds with higher expense ratios. Similarly, declaring the dividends myself will probably cost me CHF 100 in extra Treuhand fees each year, but that is a low cost.
Well 9 francs were only for ETF on the SIX, but I see you corrected it ;) . Still, did you included the Federal stamp duty of 0.15%?This applies on stock on the NYSE too. And probably there is some double taxation to avoid somewhere.
Other then that , didn't Swissquote make you pay 0.025% chf the safe custody (minimum 15 chf quarterly, up to 50 chf quarterly)? So you have to add this 60-200 bucks on the mix. For the moment only postfinance trading and CornerTrader do not make you pay the safe custody of your stocks.
Is currency hedging valuable for long term holdings? I mean: can it be shown to increase expected returns or reduce volatility? (Or is it a gimmick used by bankers to sell more expensive funds?) I would love to read (say) a Boglehead analysis on this. The nearest I found on a quick Google is this: http://www.efficientfrontier.com/ef/799/hedging.htm.
It is not obvious to me that you can compare the one-year performance of hedged vs. unhedged funds and extrapolate to long term returns. Than sounds similar to comparing the one-year returns of gold vs. equities to decide which is better for the future.
I'm still looking into it, for now I've only found some article on 10x10.ch (page 9):
http://www.10x10.ch/wp-content/uploads/2014/05/10x10_0413_d.pdf
Post by: swisstash on May 28, 2014, 11:35:20 PM
I take your point that there are a lot of different fees to keep track of.
Regarding currency hedges, I wonder what financial instrument the funds use for hedging? (and how much would it cost to buy a hedge separately from the investment?)
I feel like through discussions I am developing a personal investment strategy:
- Keep it simple and do as the Bogleheads do.
- Optimize taxes. Spend money at the beginning on getting a tax-efficient structure in place (holding company).
- Optimize expense ratio. Avoid fees that will grow with the stash. Prefer low fees instead of convenience and non-Boglehead-approved benefits.
- Aim to track a major index. (Don't try to beat it.)
I am partly sensitive to the expense ratio from playing with FIRECALC's feature to investigate the effect of fees on funds over long time frames e.g. the 60 years that I still plan to live :-).
I have to work out my asset allocation next, and whether to buy individual index funds (like S&P500) or funds-of-funds (like Target Retirement).
Post by: swisstash on June 02, 2014, 12:55:30 AM
I am now googling around for funds that are:
- Low fees, ideally < 0.30%.
- Support a 60/40 or "age in bonds" asset allocation that is globally diversified.
- No "gotchas" on withholding taxes.
- Easy to reinvest dividends (ideally automatic).
- ETF with liquidity (low big/ask spread)
The nearest I have found is Vanguard's "LifeStrategy™ 60% Equity Fund - Accumulation (GBP)" but it is not (yet) available as an ETF. I might contact Vanguard UK and see if they accept clients in Switzerland.
The best ETF option I have found is a DIY asset allocation based Vanguard's Ireland-domiciled FTSE funds. The big/ask spread is too high to buy them on the SIX but seems to be more reasonable on LSE or Euronext. They don't seem to have problems with withholding taxes. (My tax rate will be about 12.5% here and I am not sure I could ever recovery the US's 30% withholding tax.)
I have been looking for more index fund ETFs to consider. I am looking for low fees, global diversification, high liquidity on both stocks and bonds. Do you have any tips?
Post by: swisstash on June 02, 2014, 08:47:13 PM
Their accumulating world equity ETF (iShares MSCI World UCITS ETF (Acc)) looks like exactly what I want for equities in one fund, now that the cost dropped from 0.4% to 0.2%.
Looking for a low-cost well diversified accumulating bonds fund now...
Post by: Grog on June 04, 2014, 11:32:25 PM
thanks for reporting it, I was seeing the S6P 500 at 0.07% and I was like confused, since I always thought was around 0.15%. Now I know why :D
In the moment I'm still concerning myself with currency hedging. I've found these interesting charts on the MSCI website:
MSCI USA 100% hedged to chf:
http://www.msci.com/resources/factsheets/index_fact_sheet/msci-usa-100-hedged-to-chf-index-net.pdf
EMU (Euro):
http://www.msci.com/resources/factsheets/index_fact_sheet/msci-emu-hedged-to-chf-index.pdf
UK:
http://www.msci.com/resources/factsheets/index_fact_sheet/msci-uk-100-hedged-to-chf-index-net.pdf
Canada:
http://www.msci.com/resources/factsheets/index_fact_sheet/msci-canada-100-hedged-to-chf-index-net.pdf
Australia:
http://www.msci.com/resources/factsheets/index_fact_sheet/msci-australia-100-hedged-to-chf-index-net.pdf
Japan:
http://www.msci.com/resources/factsheets/index_fact_sheet/msci-japan-100-hedged-to-chf-index-net.pdf
All these charts shows only growth (no dividend), but they compare buying an index using Local currency, using the CHF unhedged (buying at the current currency rate at the SIX) or buying investing with hedging.
Now for Australia and Canada hedging was not so decisive, but the 10 year return difference for the other countries are really different, without hedging your investment could have suffered huge drawback.
Point is, this is all good if the CHF is appraising compared to the other currencies, because the hedging works in your favor. In a reverse situation, it is obviously bad. I personally think that for now the chf is going to remain a strong currency. If I see an inversion of tendency, I will switch from iShares MSCI world chf hedged
to a non-hedged ETF.
I'm also thinking to dropping the iShares World CHF hedged ETF (with a ter of 0.55%) and build my own world chf-hedged index by using the UBS hedged ETF, that has the MSCI USA chf hedged @ 0.30%, the MSCI EMU chf-hedged at 0.33% (same for UK chf hedged) and Japan at 0.40%.
In this way I could lower my espenses from 0.55% to ~of 0.31% by making something like this (all ETFs from UBS, all accumulating, all chf-hedged):
55% MSCI USA @0.30%
8% Japan @ 0.45%
8% UK @0.33%
19% EMU @0.33%
10% MSCI Switzerland 30/20 @ 0.20% or similar indexes
avg expenses: 0.31 instead of 0.55%, without Australia and Canada. But it would be cool if in the fututre they'll drop 0.2 from the world chf-hedged index too...
Post by: Grog on June 11, 2014, 10:14:09 PM
And about good ETF: I've just found out that although the KIID were outdated, UBS offer 2 incredibly sexy ETF with incredibly low TER:
MSCI Euro Mon Union@ 0.02% (!!!), fund currency in Euro
https://www.justetf.com/ch/etf-profile.html?isin=IE00B5B1MZ58&h=2&groupField=none&sortField=ter&sortOrder=asc&from=search&assetClass=class-equity (https://www.justetf.com/ch/etf-profile.html?isin=IE00B5B1MZ58&h=2&groupField=none&sortField=ter&sortOrder=asc&from=search&assetClass=class-equity)
and
S&P500 @ 0.05% fund currency USD
https://www.justetf.com/ch/etf-profile.html?isin=IE00B4JY5R22&h=2&groupField=none&sortField=ter&sortOrder=asc&from=search&assetClass=class-equity (https://www.justetf.com/ch/etf-profile.html?isin=IE00B4JY5R22&h=2&groupField=none&sortField=ter&sortOrder=asc&from=search&assetClass=class-equity)
So I'm leaning towards changing my World chf-hedged single account in a 60% S&P + 40% EMU so not to have all my investment tied up in only one nation with one currency. Maybe it will even be 50/50 and a staggering total of 0.035% of TER.
Post by: Stashing Swiss-style on June 13, 2014, 05:32:14 AM
Looking forward to more discussions with Swiss 'stachers !
Post by: swisstash on June 14, 2014, 11:51:40 AM
Post by: tensile on June 17, 2014, 04:20:25 PM
I have a Swissquote account and lazily assumed I would use that to get ETFs. I have some shares in there so the fees are sort of lessened by that (if I understand it correctly). I mean, if I'm already paying 15 francs a quarter on fees to have the shares, then it's not like I have to think of safe custody fees as a decisive factor. Am I right? Also there's an upper limit so when I've got billions in ETFs 50 francs a quarter is nothing.
But the second point is much more important and it became obvious thanks to Grog.
- Buying of ETF through an online Broker: Strateo offer a good deal with Comstage ETF (9 chf fee up to 200'000 chf) that have the advantage of NOT distributing dividend but always follow total return index that includes dividend distribution. In this case you spare yourself the hassle of declaring them and retrieve the withholding tax.
The stupid withholding tax! If we're trying to compound things and it takes ages to get the money back (I don't even know how to do it) it defeats the point somewhat.
So that Strateo idea looks like a good option. Are there any more ETFs that do a similar 'included dividend' thing?
I'm British so my other choice is to do the whole thing from the UK. To be honest I've been researching this for two days and keep hitting brick walls and dead ends. I can't work out what's cheapest and easiest... All help appreciated!
Post by: Grog on June 17, 2014, 11:50:41 PM
It is true that information is difficult to retrieve in Switzerland, nobody really cares for DIY finance and prefere to leave 1+% on the table to manager and stuff.
After a couple of weeks my perspective is adjusting, but is always shifting around. Things change. Here are my observation for now:
- Strateo online platform is terrible, truly awful and they don't offer the two UBS fund @0.02% and @0.05% TER. When I asked about it, they just told me that those two are not coming to strateo. As of yesterday I empited my account on it and I will close it in the next weeks. Trully awful online experience, the etf finder was horrible.
- I opened an account with Swissquote, just to test it out. They have the two cheap UBS fund and for only 9.85 chf pro trade (just as for almost all other ETF)! The fact is, they charge you 0.1% yearly (0.025% every quarter). True, there is a maximum of 200 chf per year, but you will need 200k to start diminishing the interest percentage and this is going to take me at least 4 year.
On the other hand, postfinance E-Trading has no account or safety deposit fee, but transactions start from 25 chf.
In the end, you always pay. It depends on how complex your portfolio is. If you have an one-etf portfolio (for instance with the iShares MSCI world @ 0.2%) then go for Postfinance e-trading. If you have 6-7 ETFs, use swissquote and pay the 0.1%.
Those two are the best options out there for ETF portfolios, AFAIK.
Take my example: I want to invest in 100% equity. The best and simplest solution is the iShares MSCI world at 0.2%. But the fund is in USD, one single currency. For me it is too much of a risk so I 've broken it down like this:
- 25% on US equity in US dollars (UBS S&P500 @0.05% TER)
- 25% on Europe equity (EMU) in Euro (UBS MSCI EMU @0.02%)
- 25% in Swiss equity in CHF (UBS MSCI CH 35/20 @0.2%)
- 25% in Emerging Markets equity in US dollars. (UBS MSCI EM @0.4%)
All this ETF are accumulating, so there are no delay in reinvesting with the withholding tax. The average TER is 0.13%, and the portfolio is slightly tilted towards Emerging Markets (the true proportion would be 85% developed World, 15% Emerging Markets). For the moment I'm sacrificing Japan, UK, Australia and Canada for the sake of a lower TER. What I really like is that if I have a true emergency I can withdraw by choosing the best currency at the best rate: if you are tied up in a one fund based on one currency and at the moment of need you have to sell at an horrible exchange rate, you are locking in losses.
Now I have only to decide how I want to invest in this portfolio. With swissquote, I could buy them in a more equilibrated and continous manner, but I'll have the infamous safe custody deposit fee. With postfinance I'll probably buy irregularly, but with less yearly expenses. I'll have to run some simulation :D
Post by: swisstash on June 18, 2014, 12:05:17 AM
These funds seem to have good liquidity on the London Stock Exchange (buy in pounds) and Euronext (buy in euros) but not on the Swiss stock exchange (buy in CHF).
I am targeting a 60/40 equities/bonds portfolio. Still looking for a suitable internationally-diversified bonds fund for that. Tips welcome!
Post by: tensile on June 18, 2014, 03:28:05 AM
@Grog - when I was wandering around Swissquote, I couldn't find the TER info anywhere. Do I have to go to external sites and look up each and every one I'm interested in? Also, how do you know which are accumulating?
@swisstash - that's very interesting about the Irish domicile - that would solve one of my problems. How do we find out for sure?
Post by: Grog on June 18, 2014, 05:05:12 AM
for ETF:
www.justetf.com (http://www.justetf.com)
there is just about everything, you can personalize your search and find out wich one is cumulating/distributing dividend, where is the domicile and the TER.
Other than that, it has some nice review and ocmparison between ETF tracking the same index and a review of all the transaction costs for ETF in swiss online broker!
https://www.justetf.com/ch/online-broker-vergleich/etfs-kaufen.html (https://www.justetf.com/ch/online-broker-vergleich/etfs-kaufen.html)
Useful article on ETF investing:
www.10x10.ch (http://www.10x10.ch)
All the fund and ETF, very useful for your third pillar 3a investment :
www.swissfunddata.ch (http://www.swissfunddata.ch)
Post by: tensile on June 21, 2014, 08:02:57 AM
Note that the CHF 9 offer is only for Swiss-based funds! The ones I wanted cost a bit more - like 12 euros or 12 francs to buy.
I'm reading through the MMM blogs from start to finish and just got up to REITs. I remember hearing about them from Prof Shilling on a Yale course through Coursera.
They seem like something I'd be very interested in but I'm having problems getting info on the Swiss equivalent because my German is ... ah... nicht.
It seems the Swiss equivalents are called KGKs. Could you guys point me in the direction of a couple of REIT-style index funds I could look into?
Post by: swisstash on July 02, 2014, 01:27:12 PM
Here is the path I have taken:
- Asset allocation: Age-5 in bonds (rebalance annual with 5% threshold)
- Equities: VWRL (TER 0.25) Vanguard FTSE All-World UCITS ETF
- Bonds: IEAG (TER 0.25) iShares Euro Aggregate Bond UCITS ETF
Post by: tensile on July 04, 2014, 02:07:44 PM
I thought maybe the Swiss-based mustachians could try to get together and have a casual chat about saving and investing in the challenging world that is Helvetia! What do you think? (I live in Zurich.)
Post by: nassoro on July 07, 2014, 09:02:12 AM
Celebration! I have taken the first step and become an investor (and a boglehead).
Out of curiousity, did any of that end up in 3rd Pillar? Having finally just done my US and Swiss taxes a few weeks ago, I'm ready to try to reduce them where I can. I'm inclined to fund the 3rd pillar via Swisscanto, as its one of the few options open to me - mostly equities in indexes, is the plan. Now I just I have to I get myself to the bank during bankers hours (I should also brush up on my banking French before then :) )
Post by: Stashing Swiss-style on July 07, 2014, 09:13:46 AM
First, it's a great idea for Swiss MMMers to meet up, but I'm in Vaud so not so easy (or cheap :-)). Second, until I actually get my Swissquote account activated and start investing, I'd not feel worthy to contribute to a conversation about investment strategy. I'm not shy about contributing to conversations of any other sort, especially over a nice glass of Swiss white wine ! I'd be keen to start a thread on this forum about ideas for saving money in this crazily expensive country. When I read about MMM's budget (and others on this forum), I'm skeptical that FI is even a possibility here. I spend an average of CHF2,500 in supermarkets (food, wine, cleaning products etc) per month (feeding 6 people, but still....) - I think that's close to what MMM spends per month on everything !!
Post by: Stashing Swiss-style on July 07, 2014, 09:15:00 AM
Post by: swisstash on July 08, 2014, 01:27:48 AM
Quote
Out of curiousity, did any of that end up in 3rd Pillar?
No. Pillar 3a would add complexity and the tax savings seem to be offset by the higher fees of the 3a funds, at least compared with corporate taxes (~15% on dividends and gains) which is what I expect to pay as a self-employed person who invests via my company. I would probably use Pillar 3a if I were an employee and expected to save more on income tax or if Pillar 3a offered index funds with lower expenses (like Vanguard).
I am a newbie but to me the Pillar 3a regulations seem to be protecting overpriced financial products from competition and that smells bad to me.
Post by: swisstash on July 08, 2014, 01:28:41 AM
I'd be keen to start a thread on this forum about ideas for saving money in this crazily expensive country.
You should post this to the Ask a Mustachian forum!
I would be interested in a meet up some day but not at the moment.
Post by: Grog on July 08, 2014, 01:32:53 AM
I'm around maybe 300 chf for me and my gf for groceries. We practically don't eat any meat, we don't buy processed food and buy wine only through LeShop.ch when it has 40-50% reduction, we stash and it lasts for 1 year at least.
About third pillar: I'm still researching around, for the moment the two cheapest are:
Bank coop: (since this 1. July they offer the Swisscanto index 45 retrozessionfrei @0.35% TER + 0.5% deposit for a total of 0.85%)
Postfinance Pension 45 @ 0.88% TER
I still have to find a way to access the retrozessionsfrei Swisscanto products going through a cheaper bank than Bank Coop.
Vermögenszentrum allows you to build your own portfolio of ETFs for your third pillar but it still takes 0.68% as custody fee, to which you have to add the 0.20-0.4% of the few ETF they offer, so it is mostly more expensive.
Regarding a meeting: I will say right ahead that I'm really not a big fan of meeting and face-to-face discussion, it is just my character and I prefer the anonimity of the forum. But maybe in the future I will change my mind.
Post by: Grog on July 08, 2014, 01:38:59 AM
1) great idea about the post on the "Ask A mustachian" section: I would love to talk about frugality in the most expensive country of the world!
2) Third pillar: depending of the canton, you are taxed at around 0.1-0.4% of your total net worth in taxable account/swissquote and so on.
So I'm maxing out my third pillar because starting from 50'000 chf of total worth I'll have to pay around 0.3% of net worth taxes, so the capital "hidden" in the third pillar at 0.85% (thus not paying the NW taxes) in reality has a TER of ~0.5%, which is high but not terrible, and I can deduct from income reducing my taxes of 1600 chf annually.
Post by: swisstash on July 08, 2014, 01:53:47 AM
frugality in the most expensive country of the world
Great name for the topic! The whole forum would probably be interested to follow that discussion :-)
Post by: Grog on July 08, 2014, 02:00:33 AM
Post by: Stashing Swiss-style on July 09, 2014, 04:43:10 AM
Post by: Svarto on July 13, 2014, 02:57:02 AM
I am in PostFinance at the moment, I see mention of the Swissquote, looked into their pricing structure but couldnt find out if they also have to pay federal stamp duty (as investments through PostFinance forces you to do)?
I crunched some numbers comparing PostFinance with SwissQuote, see attached graph. In summary, PostFinance is cheaper than SwissQuote when:
1) For 20k assets, you do one trade per year
2) For 80k assets, you do less than 3-4 trades per year
3) For 150k assets, you do less than 9-10 trades per year
4) For 200k assets, you do less than 12-13 trades per year
Do anyone know if you pay the transaction fee both when buying the fund as well as when you sell? So basically, each enter & exit costs 2x the transaction fee?
Post by: Grog on July 16, 2014, 06:02:19 AM
Do anyone know if you pay the transaction fee both when buying the fund as well as when you sell? So basically, each enter & exit costs 2x the transaction fee?
Hi, welcome to the forum. Yes the transaction fee are identical both ways.
Don't forget that you can move securities (if I'm not mistaken it costs 50chf) from Swissquote to Postfinance.
From post to swissquote it costs much more: 100 chf ffor swiss securities, 150 chf for international ones.
Swissquote costs you from 60 to 200 chf per year of deposit, postfinance is free bus has more transaction costs.
0-60'000 chf: 60 chf /y custody fee
60'000-200'000 chf: 60-200 chf /fee
200'000 -> : capped @ 200 chf /y
so you could buy it via swissquote, and when you reach 110'000 chf (110 chf per year) you could pay 50 chf to transfer a 50'000 worth position from swissquote to postfinance, and reducing thus your expense at swissquote to 60 chf for 60'000 chf.
you could to the same if you have to invest a large sum (100'000 chf+)
Post by: Astromarine on July 22, 2014, 02:08:48 AM
Post by: tensile on July 22, 2014, 02:30:34 AM
Post by: Astromarine on July 31, 2014, 06:22:10 AM
I'm working on my investments currently, trying to allocate stuff to where it might make sense. I created a swissquote account, and bought some stuff there that I liked (also the low TER funds that Grog mentioned. Thanks!) I got to my current age knowing almost nothing about money and investment, so I'm having to make up for lost time.
I dunno. I think the only chance I have to FIRE is to make some super radical changes to my lifestyle. One option is to go back to Portugal to retire, as costs of living there are ridiculously low. But even then, it's gonna take me years. Price of a misspent life, I guess.
Post by: Astromarine on August 07, 2014, 02:52:27 AM
Cheers
Post by: samuck on August 10, 2014, 09:16:44 AM
A question for you guys. I currently have my pillar 3 (A and B) in UBS, on a couple of asset allocation funds. I got these way before I found this site and started getting interested in investing at all. My question is, anyone know if there are huge differences in fees and costs etc between different providers of pillar 3 accounts? Should I get my money out of UBS in general? if so, put it where?
Cheers
Hi Astro, comparis can help you find the best deal, however, only for pillars 3a with fixed interest rate: http://en.comparis.ch/banken/vorsorge/default.aspx
Your bank should provide you the Total Exchange Ratio (TER) of your funds. I'm using Postfinance Pension 45 with a TER of 0.88 (which is high for ETFs but ok in comparison to other pillar 3a funds).
Post by: Astromarine on August 10, 2014, 04:48:04 PM
So, this UBS retirement fund.
TER: 1.53%
someone hold me, I think I'm going to cry.
Post by: Grog on August 11, 2014, 12:33:14 AM
1) Swisscanto BVG-45 R, a passive index fund ("retrozessionsfrei") with maximum equity (45%) with a TER of 0.35%. It's easily accesible through Bank Coop that requires an annual deposit fee of 0.5%. Total cost: 0.85% yearly.
2) Postfinance Pension 45, already mentioned: TER of 0.88%, identical stock/bond composition as the one above.
3) Build your own ETF portfolio through Vermögenszentrum: the annual deposit fee is 0.6%, plus ETF TER. The very limited choice of ETF (all around 0.3 % TER) make it around 0.85-0.90%.
For the moment I inveest in number one, since I don't like some of the conditions of the ETF-based third pillar account of VZ.
It's useful to remember that if you plan to use this mone only in your sixty, could be best to have 5 different accounts (usually 4 different third pillar, one second pillar) so that instead of taking out 500'000 chf all in one at 65, you can take them out 5 times 100'000 from 60 to 65. In this way you'll end probably paying less taxes, depending on the canton and how you reinvest this money. I remind you all that if you are always obliged to withdraw money fully from one account, you cannot withdraw only 50% of your total stash. The only way to retire only parts of your wealth is to have multiple accounts, and fully empty each one in different years.
The same is true if you retire early and withdraw your third pillar money to pay a mortgage/start your own business, since taxes percentage increase with the amount of money withdrawn, and you can keep stashed away from wealth taxes part of your pension.
Having multiple third pillar account over different banks is anyway more safe against bankruptcy, although in Switzerland banks are almost state-guaranteed (see UBS)
Post by: Astromarine on August 11, 2014, 01:22:55 AM
Of course, plans can change, and if they do I'd rather have something, since you can't pay for past years. I think? You guys that know more about this stuff, I'd love a couple ideas what I should do in my case. Maybe it makes sense to just stop paying, and invest that cash elsewhere. I dunno.
Post by: Grog on August 11, 2014, 05:48:57 AM
yeah, that's my main question: as things currently stand, my plan is to FIRE in the next few years and move back to Portugal. So in any case I'll take the pillar 3a all at once soon. I'm mostly using it to save a bit on taxes right now, and invest that cash. But considering it's such short term (for now) is it worth it to even move it out of UBS into something else?
Of course, plans can change, and if they do I'd rather have something, since you can't pay for past years. I think? You guys that know more about this stuff, I'd love a couple ideas what I should do in my case. Maybe it makes sense to just stop paying, and invest that cash elsewhere. I dunno.
I never changed third pillar provider; but as far as I know, is not complicated at all. A couple of letter some waiting for the transfer in the nev custody account and voilà.
Let's compare your UBS with the Postfinance Pension 45. You absolutely don't know which one will do better in the next future, when you (hipotethically) plan to cash out. Past performance are NOT a predicter.
Now, let's say that you have 150'000 chf in your third pillar and you are paying 0.88% annually. That's 1320 chf.
Now with 1.53%: 2295 chf.
That's 1000 chf per year that will always grow together with your stache: the bigger the stache, the higher the costs in absolut CHF.
Let's say changing your third pillar will require 10 hour between writing a letter, telling your wife, making phone calls etc. And it will save you 2000 chf for the next 2 years, when you will be cashing out. That's a 200 chf/hour rate, I don't know if you make more but for me is a lot of money.
All in all, please consider that if you need that money in 2-3 years, and you want to be sure to have it, please consider a less aggressive investment plan (like the postfinance25) or even to cash out and move everything to a normal third pillar account with a fix 1.4% and no expenses.
You should be in stock only if you have a very long time-horizon, 15+ years. If you are counting on this money to retire in 3 years and purchase something (an house in Portugal, or I don't know) to start your life as retiree in my opinion you shouldn't be in stock.
If you are going to just cash out this money and reinvest it in a taxable account, maintaining yor asset allocation, then is different, leave everything in stocks and bonds.
But if you plan to use it, and you count on this money to be at disposition to be spent, I suggest a more prudent approach: this passive third pillar accounts have usually 45% of equity, divided in 20% swiss stocks and 25 % in MSCI world stocks. If the market crash in 3 years, and goes -50%, you'll found yourself with a third pillar stache that is only 75% of what you have now.
Post by: Astromarine on August 11, 2014, 06:24:33 AM
As for the pillar 3a, both me and the wife have around 60k in our 3a custody accounts, currently all in 'UBS Vitainvest' funds. How are management fees calculated? Checking my ebanking statement, I don't see any expenses deductions. Is it on the dividend payout? The gross and net price and of fund shares are the same, and when I buy the fund I don't pay any commission or fees.
Looking at my situation now, it seems like the dividend payout is around 0.6%, and the market price has appreciated about 11.3%. What this actually means I have no idea. It's already a great personal victory that I know enough to *find* this stuff and ask decent questions, actually interpreting the data is so far still beyond me.
Also, unrelated: I also got roped in a while ago to get a pillar 3b account for me and the wife, and between both of us we have about 80k in it. Am I correct in that this is basically a shitty version of a custody account with severe fund limits, and therefore I should cash it out and invest it elsewhere now that I know how to?
Post by: Grog on August 11, 2014, 06:51:58 AM
thanks for the help. Yeah, the plan I've been discussing with the wife is to move to Portugal in a 1-4 years max. Once we do, we'll transfer all our current market positions to a Portuguese broker (we might do that sooner, actually. Fees there are *ridiculously* lower than here, even in Swissquote). So for my main investments I don't mind being a bit risky.
As for the pillar 3a, both me and the wife have around 60k in our 3a custody accounts, currently all in 'UBS Vitainvest' funds. How are management fees calculated? Checking my ebanking statement, I don't see any expenses deductions. Is it on the dividend payout? The gross and net price and of fund shares are the same, and when I buy the fund I don't pay any commission or fees.
Looking at my situation now, it seems like the dividend payout is around 0.6%, and the market price has appreciated about 11.3%. What this actually means I have no idea. It's already a great personal victory that I know enough to *find* this stuff and ask decent questions, actually interpreting the data is so far still beyond me.
The fund takes out 0.xyz % everyday to pay for the expenses, and in your case in total they reach 1.53% per year. Simple as that. For a very, very rough estimation you could say that if there are 250 working days where the fund can actually be bought and sold, the fund manager take out 1.53%/250 = 0.006% everyday from the fund. As for today, in your case, 0.006% * 60'000 chf = 3.7 chf per day.
You never see this expense in your normal statement, if you really want to see absolute numbers you have to go read the annual, semi-annual and quartal prospectus.
But in the end what matters is that all that you see is the net variation and net gain/loss after expenses.
Also, unrelated: I also got roped in a while ago to get a pillar 3b account for me and the wife, and between both of us we have about 80k in it. Am I correct in that this is basically a shitty version of a custody account with severe fund limits, and therefore I should cash it out and invest it elsewhere now that I know how to?
Yep couldn't have said it better myself. ETF all the way.
Post by: Astromarine on August 11, 2014, 07:20:07 AM
Now for the best problem in the world. Turns out I have about 80-100k that I need to figure out where to invest. So far it's been play money, but this is the real deal, and I'm getting spooked :D
Post by: Grog on August 12, 2014, 01:43:08 AM
http://www.bogleheads.org/wiki/EU_investing (http://www.bogleheads.org/wiki/EU_investing)
The principles apply very well to Switzerland. I think the optimal ETF for swiss investors has following characteristics:
- For tax reason: Accumulating (dividend reinvested automatically by the fund), not distributing. ETF based in Switzerland (that only have 0.075% of swiss stamp tax for stock transaction, instead of 0.15% for ETF based elsewhere) are only distributing. From the link above:
The problem with distributing ETFs is that you may have to pay dividend tax in your home country, then when you reinvest the dividends you must pay brokerage commissions, and also the bid/ask spread. These problems don't exist in capitalizing/accumulating ETFs.
- Preferably quoted on the Swiss Exchange, to keep it simple tax-wise and because of lower transaction fee (usuallly).
- Best if not synthetic ETF but a full replicated/optimized sampling one. Still, I consider everything put out from UBS quite safe since our state seems willing to back our big banks up and a bankrupt seems quite a remote possibility.
-Lowest TER as possible
-The bigger the fund (moneywise) the better.
- Avoid ETF based on UK becase of the british stamp duty (ISIN starting with GB...)
For the moment I only buy stocks ETF. A good ETF for the Switzerland stocks is:
https://www.justetf.com/ch-en/etf-profile.html?isin=LU0977261329&h=2&groupField=none&sortField=ter&sortOrder=asc&from=search&country=CH&assetClass=class-equity&distributionPolicy=distributionPolicy-accumulating (https://www.justetf.com/ch-en/etf-profile.html?isin=LU0977261329&h=2&groupField=none&sortField=ter&sortOrder=asc&from=search&country=CH&assetClass=class-equity&distributionPolicy=distributionPolicy-accumulating)
It is the largest,accumulating fund out there, full replication. Automatic reinvesting and no dividends. Lowest TER with 0.20% (among the accumulating ones).
The problem I see with Swiss-only investing is that 3 companies (Nestlé, Roche & Novartis) Represents 50% of the total swiss stocks market. That's dangerous. Another alternative is to buy the MSCI Europe index, that includes the largest EMU, Swiss, UK and nordic companies. The two best are:
iShares in EUR
https://www.justetf.com/ch-en/etf-profile.html?region=Europe&groupField=none&sortField=ter&sortOrder=asc&distributionPolicy=distributionPolicy-accumulating&assetClass=class-equity&isin=IE00B4K48X80&from=search (https://www.justetf.com/ch-en/etf-profile.html?region=Europe&groupField=none&sortField=ter&sortOrder=asc&distributionPolicy=distributionPolicy-accumulating&assetClass=class-equity&isin=IE00B4K48X80&from=search)
or
db x-tracker in USD:
https://www.justetf.com/ch-en/etf-profile.html?region=Europe&groupField=none&sortField=ter&sortOrder=asc&distributionPolicy=distributionPolicy-accumulating&assetClass=class-equity&isin=LU0274209237&from=search (https://www.justetf.com/ch-en/etf-profile.html?region=Europe&groupField=none&sortField=ter&sortOrder=asc&distributionPolicy=distributionPolicy-accumulating&assetClass=class-equity&isin=LU0274209237&from=search)
in both of them Switzerland is represented around ~13.4% (same size of Germany :D) and with a TER of~0.30%
You could build your own "Europe" portfolio at a lower TER. For EMU contries the choice is quite clear with a TER of 0.02%, but beware that is a synthetic ETF although form UBS:
https://www.justetf.com/ch-en/etf-profile.html?isin=IE00B5B1MZ58&h=2®ion=Europe&groupField=none&sortField=ter&sortOrder=asc&from=search&distributionPolicy=distributionPolicy-accumulating&assetClass=class-equity (https://www.justetf.com/ch-en/etf-profile.html?isin=IE00B5B1MZ58&h=2®ion=Europe&groupField=none&sortField=ter&sortOrder=asc&from=search&distributionPolicy=distributionPolicy-accumulating&assetClass=class-equity)
and for the UK, full replication @0.10 % TER:
https://www.justetf.com/ch-en/etf-profile.html?isin=IE00B53HP851&h=2&groupField=none&sortField=ter&sortOrder=asc&from=search&distributionPolicy=distributionPolicy-accumulating&assetClass=class-equity&country=GB (https://www.justetf.com/ch-en/etf-profile.html?isin=IE00B53HP851&h=2&groupField=none&sortField=ter&sortOrder=asc&from=search&distributionPolicy=distributionPolicy-accumulating&assetClass=class-equity&country=GB)
For the USA you have a choice between one synthetic fund @0.05% from UBS:
https://www.justetf.com/ch-en/etf-profile.html?isin=IE00B4JY5R22&h=2&index=S%252526P%252B500%2525C2%2525AE&groupField=none&sortField=ter&sortOrder=asc&from=search&distributionPolicy=distributionPolicy-accumulating&assetClass=class-equity (https://www.justetf.com/ch-en/etf-profile.html?isin=IE00B4JY5R22&h=2&index=S%252526P%252B500%2525C2%2525AE&groupField=none&sortField=ter&sortOrder=asc&from=search&distributionPolicy=distributionPolicy-accumulating&assetClass=class-equity)
or a full replicated one at 0.07% from iShares. They lowered their TER this July so at the moment I think this is a very good choice for the US, since is a much bigger fund and is full replicated for only 0.02% more:
https://www.justetf.com/ch-en/etf-profile.html?isin=IE00B5BMR087&h=2&index=S%252526P%252B500%2525C2%2525AE&groupField=none&sortField=ter&sortOrder=asc&from=search&distributionPolicy=distributionPolicy-accumulating&assetClass=class-equity (https://www.justetf.com/ch-en/etf-profile.html?isin=IE00B5BMR087&h=2&index=S%252526P%252B500%2525C2%2525AE&groupField=none&sortField=ter&sortOrder=asc&from=search&distributionPolicy=distributionPolicy-accumulating&assetClass=class-equity)
Investors from Switzerland, what strategy do you use? what ETF do you buy? How is your portfolio? How do you solve the concentration problem of Roche/Novartis/Nestlé? And currency? Do you prefer EUR since the exchange is somewhat fixed (can't go lower then 1.20)?
Post by: Astromarine on August 13, 2014, 01:51:02 AM
1) why are you so in favor of replicating rather than synthetic? The site I read with some definitions seemed more ambivalent about them, not a clear winner.
2) What about something like Zurich shares, and their 6.5% dividend? You think it has any place in a portfolio?
Post by: Grog on August 13, 2014, 04:03:20 AM
First of all, I'm not a tax expert and I my only experience in the field is by reading the tax code and compiling my own taxes. So no guarantee.
Second: as already mentioned multiple times in this forum, there is really no difference between capital gain or dividend: either is the company buying stock back, maintinaing the stock value high, or is distributing dividend, with the consequent falling in value of the stock.
But this is an US forum, and since in the US funds MUST distribute dividend (whereas in EU and CH they can keep it and redistribute it), they are always confronted with dividend. We are not, we can decide not to receive them. And this for us is better, tax-wise. Why?
In the rest of Europe, they have taxes on capital gain. That means that in the end, you are taxed if you recive income or you are taxed if you have capital gain and sell your stock. So no big difference.
In Switzerland, we don't have capital gain taxes. The accumulating fund in which we invest MUST still pay dividend taxes, obviously, but if we invest in a low-yield, high growth index, the fund must only pay taxes for 1.8-2% dividend yield they have.
To be more clear, let's look at an example:
Citizen A has 1 million francs in a dividend strategy portfolio with an annual yield of about 4%.
Citizen B has 1 million francs in a broad diversified accumulating index fund with a yield of 2%.
To keep it simple, let's assume both fund had the same final growth of 104%. That means that fund A at the end of the year will be 1'000'000 chf + 40'000 of distributed dividend, while fund B have 1'040'000 in stocks value.
For another simplification, let's say that both dividend, for the investing fund and your own, are taxed at 10%. That means that since fund B must pay tax on 2% yield, the real final value after taxes is 1'020'000 + 90% of 20'000 chf of yield = 1'038'000 chf of stocks value.
Citizen A will receive at first only 26800 chf: withholding tax of 33%! After tax declaration and so on he gets the difference back. A 40'000 chf income taxed @10% is 4000 chf of taxes, so in the end he will have 36'000 chf (40'000 of dividend yield minus 4000 for taxes).
Citizen B instead will sell 38'000 chf of shares, pays a transaction costs of ~40 chf (including swiss federal stamp tax of 0.075%), and will end up with 37960.- chf
He will never be required to declare the capital gain on the selling of stocks as income.
So to resume:
Citizen A: 36000 chf after taxes + 1 million of high-yield fund
Citizen B: 37960 chf after taxes + 1 million of broad based fund
That's almost ~2000 more for Citizen B, also his portfolio had an yearly performance of 3.8% compared to 3.6% for the high yield one.
Of course there are a lot of assumption in this example; if you own an house, for example, you have to declare as Vermögensertrag both dividend and eigenmietwert, causing your taxable income to skyrocket to 60'000 chf.
So it really depends on many factors: in which tax bracket are you, your personal situation and so on.
But one thing is clear: by selling stocks and never receiving dividend you'll never have the problem and the bureocracy of the withholding tax @33% :D
Post by: samuck on August 14, 2014, 12:47:05 PM
Start from here:
Investors from Switzerland, what strategy do you use? what ETF do you buy? How is your portfolio? How do you solve the concentration problem of Roche/Novartis/Nestlé? And currency? Do you prefer EUR since the exchange is somewhat fixed (can't go lower then 1.20)?
Hi Grog, it's great to share:
This is my main ETF (roughly 70% of equities): Vanguard FTSE All-World UCITS ETF for TER 0.25
http://www.six-swiss-exchange.com/funds/security_info_en.html?id=IE00B3RBWM25CHF4
Then I add emerging markets (15%):
Vanguard FTSE Emerging Markets UCITS ETF for TER 0.29
http://www.six-swiss-exchange.com/funds/security_info_en.html?id=IE00B3VVMM84CHF4
And SPDR® S&P Emerging Markets Dividend UCITS ETF for some extra dividend but I think I'll stop with it even though it developed nicely (TER of 0.65)
http://www.six-swiss-exchange.com/funds/security_info_en.html?id=IE00B6YX5B26CHF4
And finally, I add some Swiss companies (15%) with this SPI ETF (not SMI because I want to include smaller caps even though the effect is probably rather small):
iShares SPI (CH) for TER 0.16
http://www.six-swiss-exchange.com/funds/security_info_en.html?id=CH0237935652CHF4
Besides that, I have been using the Postfinance Funds Global for a longer time. It has a very high TER of 0.79, but allowed me to also invest smaller sums consistently.
https://www.postfinance.ch/en/priv/prod/invest/fund/offer.html/feed/fragment/postfinance/fragment/funds/fundDetail.jsp?valor=1493319&market=190¤cy=CHF
Post by: Grog on August 17, 2014, 11:57:20 PM
For the swiss companies: the SPI suffers fro mthe same problem (54 % of the index are three companies), so I find the SLI betther, since Roche, Novartis and Nestlè makes only 28% (is not cap-weighted but limited to 10% for the largest company). The impact of the other 17 companies is much more impactful, and I'm tilting it even more with the SPI-Mid ETF from UBS (80 swiss mid cap companies). In this way I work around the concenctration problem.
Why Vanguard and a distributing ETF? I still think that even with an higher TER, the accumulating CHF-Hedged funds from UBS are slightly better because you can purchase shares directly in CHF and the currency conversion happen in the fund, with bank rate and not with our piss-poor exchange rate. I should do the math and see what is best....
A question to all the swiss investors: I did some math and I imagined a swiss worker starting investing in the summer of '71 (when the gold standard for currency was dismissed) both 100 chf monthly in the MSCI Switzerland index and 100 chf (converted in dollar) in the MSCI USA index. This contribution will go up with swiss-inflation every month, since the summer of 2014, 43 years later, to 279 chf monthly.
In total he invested almost 111'000 chf in both indexes over 43 years. The MSCI USA had an average return of 9%, the MSCI Switzerland (in chf) of about 5%.
But in the end, with both account converted in CHF, he has a final 514'944 chf in the swiss account and only 324'271 chf in the US account. The increased return of US equity was destroyed by the continous loss of value of the dollar compared to the swiss franc.
Since I plan to invest for 40+ years, I don't know if I'm comfortable in betting that the US dollar will stop this erosion of purchasing power versus the swiss franc. If we looked at inflation, it doesn't look good since we are in a 10 year period with almost no inflation, compared to the US. This directly impact the currency conversion, as we have seen it in the last 10 year. I can very well imagine that in 40 years you could buy 2/3 dollars with one franc.
So for the moment I'm building my stache with mostly swiss equity, but I don't know what to do to diverisfy internationally (but is it really necessary for us swiss investors? Our top 30 companies are huge multnational conglomerate that aren't really linked to the economic situation in Switzerland) . I'm thinking that the next best thing could be investing in Europe/world index with EUR instead of USD since the Euro has a fix lower limit (1.20 chf/eur, maintained by our central bank) and this makes the CHF and the EUR much more stable than CHF/USD.
What are your thoughts on this?
Post by: Astromarine on August 18, 2014, 01:54:59 AM
I had a previous question that you missed, I think. why are you so in favor of replicating rather than synthetic? The site I read with some definitions seemed more ambivalent about them, not a clear winner.
Cheers
EDIT - nevermind, I'm a moron. The VUSA is just as unhedged as S5USAS, the only difference is the trading currency (does that matter?) The cheapest SP500 fund I can find that's hedged to CHF is IUSC, but that's 0.45% TER.
Post by: Grog on August 18, 2014, 02:15:01 AM
www.justetf.com
For synthetic vs full replication:
http://www.bogleheads.org/wiki/Synthetic_ETF
Another difference is that since synthetic don't have to pay taxes for index they are tracking, they usually take out from the dividend a synthetic withholding tax of 33%. Comstage do that very often for they Total Net Return index. Since usually you can retrieve the diffrence between withholding tax and usual taxation in the long run you are slightly better off with a full replicating fund that retrieve the withholding tax and reinvest it. This is not the case for all synthetic fund, I know Comstage suffer from this.
On the other hand, synthetic ETF are usually cheaper, because of less transaction....so it boils down to you if you are ok with the swap-risk described in the wiki above.
Post by: Astromarine on August 18, 2014, 02:23:48 AM
Post by: Svarto on August 18, 2014, 02:27:14 AM
Changing wouldn't help since the fund's currency is still dollars. That's what important, not the exchange where is listed.
I will need to verify this, but keep in mind that the exchange rates we as a private investors pay is usually a lot worse than the banks get. So ceteris paribus, it will matter if we buy a fund in our own functional currency compared to a foreign currency.
Really enjoying the discussion here, thanks a lot!
Post by: Grog on August 18, 2014, 02:34:38 AM
Changing wouldn't help since the fund's currency is still dollars. That's what important, not the exchange where is listed.
I will need to verify this, but keep in mind that the exchange rates we as a private investors pay is usually a lot worse than the banks get. So ceteris paribus, it will matter if we buy a fund in our own functional currency compared to a foreign currency.
Really enjoying the discussion here, thanks a lot!
that's why currency-hedged ETF might be interesting: you pay an higher TER, but the currency conversion is done by the bank at a way better rate, and the fund's currency is CHF.
I'm not so interested in the hedging part, since the hedging is over 1 month and is only useful for active trader that speculates on countries' momentum, but for buy and hold investor is the one-month hedging is irrelevant. What's interesting is that the currency is bought by the bank and not by you. This is very relevant even in the withdrawal phase, when you take out money: if you retrieve 40'000 chf to live for one year, the difference between the bank currency conversion rate and your private investor rate could amount to several hundreds chf.
Another ETF that track the MSCI USA index (first 600 companies, so very similar to the S&P500) and there is a CHF-hedged ETF at 0.30% TER:
https://www.justetf.com/ch-en/etf-profile.html?query=msci+usa+chf-hedged&isin=IE00BD4TYL27&from=search (https://www.justetf.com/ch-en/etf-profile.html?query=msci+usa+chf-hedged&isin=IE00BD4TYL27&from=search)
Post by: Astromarine on August 18, 2014, 03:10:50 AM
Post by: Grog on August 18, 2014, 03:35:41 AM
Hey Grog, since you seem to be the most knowledgeable guy here, can you look into VUSA a bit more? It seems to be a weird case. It's NOT hedged. But on Swissquote, at least, it's traded NOT USD like S5USAS is. So I'm not buying USDs to trade it, the bank isn't hedging it, so where exactly is the currency risk expressed? I'm confused.
mmm I've missed this particularity. In this case the fund's currency is still USD, but Vanguard take care of the currency conversion at a better rate. That's cool and is probably one of the motive why Vanguard is so highly regarded. Nevertheless, they distribute dividend in dollars, so if you want to reinvest it, you have to go through currency conversion and buy some francs with your dividend's dollars to reinvest it in the ETF. This is not so practical, but is up to the single investor to decide what to do.
But all of this doesn't solve the basic problem (even by chf-hedged funds): if the dollar in the next 40 years will lose so much as it did in the last 40 years (versus swiss francs), all the ETF based on dollars risk to see the total profit halved. One-month hedging doesn't help.
Post by: Astromarine on August 18, 2014, 05:02:31 AM
Post by: Astromarine on August 18, 2014, 06:54:20 AM
For people like us, that (mostly) eschew individual shares, it seems like a fantastic deal. Anyone confirm, or am I reading things wrong and being a moron again?
https://premium.swissquote.ch/sqw-static/savings/fees/transaction_fees.jsp
Post by: Grog on August 18, 2014, 07:29:23 AM
I've just noticed this:
Ces prix n'incluent ni le droit de timbre fédéral, ni un éventuel droit de timbre étranger, ni les taxes boursières.
That means it will costs slightly more but the 9.- per model looks fantastic. I will try to open an account, see how much choice do we have in ETF.
Post by: Astromarine on August 18, 2014, 02:04:06 PM
Post by: Grog on August 18, 2014, 11:25:38 PM
Grog, can you explain this post (http://forum.mrmoneymustache.com/investor-alley/tax-free-self-dividend/msg370680/#msg370680) a bit here?
Well in my journey to try to understand this world, I studied a little bit more the dividend taxation in Switzerland. Since 2011 the companies can distribute money from their cash reserve, and not from the profit. When they do that, the distributed money is not called dividend but "Kapitalrückzahlung", although they work almost identical. The only difference is that the second one is not taxed. So there is not withholding tax and you don't have to declare it in your tax declaration.
This made so that some companies are now "hot" because of this free-tax "dividend".
Here ist something from a swiss forum:
http://www.trader-forum.ch/topic/2270-steuerfreie-aussch%C3%BCttung-schweizer-unternehmen/ (http://www.trader-forum.ch/topic/2270-steuerfreie-aussch%C3%BCttung-schweizer-unternehmen/)
You can even see it here on the distribution of one SLI ETF from UBS:
https://www.ubs.com/ch/fr/asset_management/etfs/etf-private/etf_products/etf_product_detail.ch.fr.CH0032912732.distribution.html (https://www.ubs.com/ch/fr/asset_management/etfs/etf-private/etf_products/etf_product_detail.ch.fr.CH0032912732.distribution.html)
there are the two column that indicate which "dividend" from the fund is tax-free and which one is taxed with the withholding tax.
Post by: samuck on August 19, 2014, 03:23:31 PM
The three best options I've found so far:
1) Swisscanto BVG-45 R, a passive index fund ("retrozessionsfrei") with maximum equity (45%) with a TER of 0.35%. It's easily accesible through Bank Coop that requires an annual deposit fee of 0.5%. Total cost: 0.85% yearly.
2) Postfinance Pension 45, already mentioned: TER of 0.88%, identical stock/bond composition as the one above.
3) Build your own ETF portfolio through Vermögenszentrum: the annual deposit fee is 0.6%, plus ETF TER. The very limited choice of ETF (all around 0.3 % TER) make it around 0.85-0.90%.
Hi Grog, I think I just found a significantly better option for the 3a pillar: Swisscanto 45 through ZKB. They ask for a one-off transaction fee of 0.65% and add yearly fees of 0.3%. In the first year, it compares to other 3a pillars with a quite high TER of 0.95, but from year 2 onwards, you only pay the yearly fee of 0.3%. That seems to be the best 3a pillar deal in Switzerland currently. Check out the info on their website: https://www.zkb.ch/de/pr/pk/vorsorgen-nachfolge/saeule-3-a/sparen-3-wertschriften.html
Post by: Grog on August 19, 2014, 11:53:42 PM
- The swisscanto funds are not passive, but active and we don't want manager choosing for us, right? The TER is not bad at 0.65% for the 45 one (maximum equity)
- The passive funds of ZKB have a TER of 0.79%. More than the active one of Swisscanto:crazy.
On top of that, you pay 0.3% annually for your fonds, so ZKB passiv fonds come out at 1.09% annually, and Swisscanto at 0.95%.
And the 0.65% is not one-time off. This happens every time you move cash to the fund, so if you contribute your maximum for employee of 6739.- you pay annually 44 chf just to put your cash there. Postfinance and bank coop don't have this kind of transaction fee.
All in all, you could do worse, but they still are 0.10 % worse than bank coop/postfinance, they have active management and a transaction fee that the other don't have...
Post by: Father Dougal on August 20, 2014, 06:01:45 AM
In Switzerland the big banks are going to really soak you for fees. They will charge high custody fees, insane trading charges and ludicrous TERs. So I avoid them now, but not after some expensive lessons.
If you want to buy ETFs, as well as Swissquote, there's an outfit called Saxo Bank that seems pretty good value (0.1% commission trading and no custody fees). It's execution only, more or less, but we all know the value of "expert" advice, don't we, fellow Mustachians?.
Also, PostFinance charges no custody fees (although transaction costs are a bit higher). That can make a big difference compared to the traditional banks.
One other thing on ETFs ... once you start getting in to tax considerations, things can get complicated. A Swiss based ETF will pay you a dividend net of 35% withholding tax. As you are Swiss resident, this will be a credit on your tax bill, so you will end up paying tax at your normal rate. So no problem there! However (and this is where it gets tricky), an ETF holding foreign investments (by which I mean foreign to the country in which the ETF is based) may suffer WHT itself on the income it receives. This could mean that you will suffer this "invisible" tax through your ownership of the fund and will not be able to claim it back.
For example, let's say you have an Irish resident, Swiss-listed ETF (like a Vanguard fund). If that ETF receives dividends from US companies, it will suffer WHT (at either 15% or 30% depending on its status with the US authorities). When that ETF pays you a dividend (with no WHT, as it is paid from Ireland) you will have no tax credit for the US tax, as it will not be shown in your dividend from the Irish ETF.
Having said that, exactly the same thing would happen with mutual funds, so this is not an argument against holding ETFs. It might be an argument in favour of holding individual stocks, but this has to be weighed against the ease of diversification you get with an ETF.
As a result of history, I have a mixture of individual shares and ETFs. I have bought them all through low cost brokers. It is sometimes tempting to try to get the best solution. But there isn't one, and this can mean getting paralysed by inaction. It is better to invest something than leave all your money festering away in cash, and if you stay low cost, you can't be far wrong. As a wise Chinese fella once said, "better a diamond with a flaw than a pebble without".
All the best.
FD.
Post by: Grog on August 20, 2014, 08:01:27 AM
You are right about dividend distribution: but as far as I know, the "cumulating" ETF that do not distribute very often, depending on countries and legislation, manage to get this withholding tax back, and reinvest it in the fund.
That's why, just from a pure bureocracy point of view, I prefer cumulating ETF, at best fully replicated (because then they can really get this withholding tax back, while synthetic one must add a virtual tax since they do not invest in the target country).
Today I received confirmation of my new "ETF Savings" Account from swissquote: it looks veeeery promising, as Astromarine pointed out. As far as I've seen you can build a "basket" of xx ETF (I don't know which one are at disposition, and if there is a mayimum number of position) and then you could pay 9.-+Stamp Tax to add any amount of money, like you would with a normal saving account. No deposit fee. You pay slightly more to sell, but theorethically in the accumulation phase you never sell.
And you could build a portoflio with different position, covering everything yuo want (world ETF, emerging markets, etc)
Tonight I'll play with it and tomorrow I'll post a full review, including all the available ETF/fund
Post by: samuck on August 20, 2014, 12:30:07 PM
Tonight I'll play with it and tomorrow I'll post a full review, including all the available ETF/fund
Looking forward to your assessment, Grog. And thanks for the advice on the ZKB 3a pillar, I did miss a few (costly) elements of the equation, will stay away from it and stick to straight-forward Postfinance solution with 45% equities.
Post by: Grog on August 21, 2014, 12:53:32 AM
When you open an account you receive a normal saving account (interest is credited monthly! this is unusual for CH) and an ETF saving account.
The concept is fairly simple: you build your own "fund of funds" using certain active managed funds (cheapest are 1% TER, I didn't really look into them)and other passive ETF. You put togethere a list, selecting all your desired etf from a table, and the share prices sums up together and determine the percentage a certain ETF occupy in your portfolio. You can add shares to modify the percentage, but then your total price of your fund of funds grows up.
Example of one ETF basket:
2 shares of ETF Swiss Leader Index at 15 chf/share
1 share of MSCI USA at 70 chf/share
1 share of swiss bonds 3-5 years 100 chf/share
You now have a total price for your funds of 200 chf, with following percentage: swiss bonds 50%, CH-SLI 15%, USA 35%.
If you change the configuration (for example add one SLI shares) the percentage varies accordingly. So the cheaper the ETF, the more playing room you have with the percentage without having a fund of funds that costs 2000 chf to buy.
Keep in mind that if your index grows over time, your total costs grow too.
Then, you can link this "portfolio" to your swissquote normal saving account
and automatize the transaction, configuring things like "everytime there is sufficient money, buy a share of your portfolio" or "every two weeks put 1800 chf and buy as many shares aspossible of your fund of funds". you can always edit your basket, even before every transactiom, to try and keep things balanced.
Then Swissquote receive the order from all their ETF savings accounts and make bulk buy/sell orders the day after. They even look for the price and avoid to make the spread to large, moving the buying/selling point up to a couple ofday after your order.
Cost and condition: no custody fee and only 9 chf per portoflio! that means that if you build a portfolio of 9 ETF and you invest every month you pay only 1 chf per ETF, + naturally the 0.15% of swiss stamp duty.
I still have to purchase something, so for the moment I cannot give you "real money costs". Will do in the next few days. Selling instead is 9 chf per ETF contained in your portfolio.
The interface is quite easy to use, but most of the datasheets of the ETF are wrong (like datasheets of Credit Suisse ETF linked to UBS one!!) or really old (more 1 year). I had to pull out every ISIN number and go look for actual TER as of today. This was quite bad and didn't give a professional impression, but is probably not so relevant once is done.
I attach the excel list with all the 72 ETF proposed by Swissquote. Is focused on swiss, european equity and it lacsa a generic "Emergency Markets Fund". Most of them can be bought directly in CHF but have dividend in another currency. They are an average mix, with TER ranging from 0.09% for EURO STOXX 50 ETF up to 0.85% for some emerging markets country. Most of them are in the 0.4% range.
So far my impression is that you can really build a nice, simple, diversified portfolio, set it up automatically and then forget about it.
You have to accept that your average portfolio costs is in the 0.25-0.30% TER range, and that you receive a lot of different dividends (a pain for taxation), but you have the possibility to buy quite cheaply 9-10 ETF every month, all automatically.
It looks fantastic for bonds: there are a lot of cheap ETF, well diversified, and you can really build your own "Total bond fund"
I invite everyone of you to try it out, open an account costs 1 chf of postmark and it gives a good interests, you could keep your emergency fund in EUR at 0.65% which is better than most banks here.
There is no custody/opening fee whatsoever.
Now I just have to study and adapt my Asset Allocation to this ETF and I'll give it a try. The simple, automatic aspect and the diversification provided appeals to me.
Attachment :ETF list
Post by: Astromarine on August 21, 2014, 02:37:34 AM
Post by: Grog on August 21, 2014, 03:18:56 AM
awesome to hear, but shame about the ETF list. There's really only 2 funds targetting the US market, and none of them on S&P500? weird.
Remember that the MSCI USA is practically the S&P 500 (it contains the first600 us companies). I think it performs even better on the long run than the S&P 500, since has 100 mid-cap companies more.
I've come up with a list of 8 ETF as an example. The total is around 1800 chf, which is how much I want to contribute every month: the Total TER is 0.287%, which for me given the semplicity of the setup is probably not so a bad deal:
Dev World:
36.47% SLI, swiss equities weight capped at 10%
26.34 % MSCI World
10.47 % Euro Stoxx 50
10.21 % SMIM (Mid cap Switzerland)
5.37 % STOXX Small Cap
5.64 % STOXX Mid Cap
EM (very limited choice, but I wanted to include some of the more economically stable EM countries):
3.22% Turkey
2.28% South Africa
Plenty of diversification, focus is on the Swiss and Euro Market (because of currency fluctuation/risk) and tilted towards mid-cap/small euro/swiss equities.
I'll give it a try for the next time. Since normally swissquote Trade charge you 0.1% for custody account, this here is a sweet deal at a great trading price. Starting from 200'000 chf, when swissquote limits the 0.1%, it could be better to switch from this to Swissquote trade.
Post by: Astromarine on August 21, 2014, 03:40:09 AM
Post by: Grog on August 21, 2014, 04:57:43 AM
Post by: tensile on August 22, 2014, 09:00:52 AM
Post by: Father Dougal on August 22, 2014, 02:36:24 PM
You are right about dividend distribution: but as far as I know, the "cumulating" ETF that do not distribute very often, depending on countries and legislation, manage to get this withholding tax back, and reinvest it in the fund.
Thanks for the all the research you have done, Grog. I've just got one follow up to your quote above. I asked Vanguard whether their funds could reclaim withholding tax on dividends the fund receives. The reply was as follows:
"Thanks for your patience. Vanguard's U.S. funds and ETFs that invest in non-U.S. securities may be subject to local withholding tax on any dividends and interest they receive from those non-U.S. securities. In some cases, a fund or ETF can reclaim a portion of the amount withheld. As to the portion that can't be reclaimed, a U.S. fund or ETF can elect to pass along a tax credit (but the tax credit would only be for investors who are U.S. taxpayers). Because the underlying withholding tax is treated as a tax paid by the fund or ETF—and not the investor—no portion of it can be reclaimed directly by the investor. For more information, check out Vanguard's Tax Center: http://vgi.vg/1q5iOuz. Hope this helps! -Van"
So it looks like ETFs that own shares will suffer some WHT. I asked about US funds and also Irish resident, Swiss listed funds, but I don't think the tax consideration is going to be different (apart from the obvious that US funds will not suffer US WHT). The WHT is not going to be a large amount, but it is good to know. I guess it is a price of easy diversification.
FD
Post by: Grog on August 23, 2014, 08:44:54 AM
With accumulating ETF the only taxes are the taxes you mention inside the fund, since cumulating ETF doesn't suffer from tax in Switzerland.
Personally I'm building my portfolio such as the only dividend I receive are from Swiss ETF (SLI/SPI/etc) or swiss bond ETF.
A couple of word about the ETF dynamic savings from Swissquote: some of my TER were taken from SIX website and are wrong. For instance the DAX db-tracker as a TER of 0.09% and is cumulating, no dividend. That's interesting since the DAX is one of the best european index.
Tuesday I'll do my first transiction, but anyway the more I play with it the more I've the feeling that there is really no anaylsis/chart for your "model". The model seems to work just like a shopping basket in which you can put up to 7 ETF from that list and swissquote will buy it for you at discounted price, the day after, and everything can be automatised.
I've changed my "shopping basket" with two swiss ETF (that are the one with best TER available anyway for their index):
UBS SLI @0.20%, dividend
iShares SMIM @0.45%, dividend
And internationally:
The DAX instead of the Eurostoxx, since is cumulating @0.09%
And a more risky choice, in smaller fraction:
The db x-tracker S&P Global Infrastructure, a cumulating fund very diversified globally (not sectors but countries) @ 0.60%
There are other choice but I'm very lazy and I'm ok in higher TER for cumulating funds since I want to keep the money in the fund (exchange rate to reinvest) and the tax as easy as possible, but everyone has his own methods and priorities.
Anyway I'll get back to you after tuesday and the first transaction.
Post by: Grog on August 26, 2014, 05:32:30 AM
It is quite easy. I've made my own model of 5 ETF, then I activate an investment strategy. You can have only one investment strategy active. In this case mine was simple:
"invest 1 time 1800 chf in GrogModel"
Be careful: the amount to invest (1800 chf) must at least be 10% more then the minimal value of the model. In my case, GrogModel was a basket of 5 ETF totalizing 1600 chf (so to speak one share of my model was worth 1600 chf), so 1800 chf was ok.
But in the future, when I'll automatize everything, I'll probably make a smaller basket and simple buy more "shares" of the model.
Now to the transaction costs: they are quite easy and very transparent. You pay one time 9 chf, + 2 chf for every different ETF (stock fees) in your basket + 0.075% (swiss securities) or 0.15% (international securities) os swiss stamp tax.
In the end under "Transaction" you see 5 different transactions, one for every security, with the total costs. Only one of my 5 ETF had the 11.5 chf cost (the most expensive), the others only reported 2.70 chf etc.
In total for 5 ETF, 1650 chf of securities I paid 20.85 chf.
I have to say the 2 chf stock fees were to expect but I thought (stupidily) they were only one, instead it was factured 5 times.
Buying 5 etf for 1600 chf in postfinance will costs you 28*5=140, so it is cheaper, but still I find 20 chf expensive (for a 1600 chf investment). It was a lesson and a test.
Personally, I'll be using this system, the whole automatization and transparency convinced me but I'll adopt a three month strategy and invest only every quarter.
It's not perfect, is not ideal but is the best I can find at the moment in Switzerland...
Post by: Astromarine on August 26, 2014, 06:07:42 AM
Post by: Grog on August 26, 2014, 07:52:48 AM
So if you have a very large basket, they require at least a 10% marge, as in my case with a 1600 chf basket, in case your model increase of 2-3% before the exchange go down (around 11.30 AM, is fixed)
If I had instead a 100 chf basket, and wanted to invest all the 1800 chf, they would have bought 18 times my model and I would have never seen the warning requiring me to have at least 10% margin. And if the price would have changed very much, they would have bought only 17.
It would have been better, the problem is that is difficult to make small models since all the ETF have already a large price....
Post by: Grog on August 29, 2014, 12:31:35 AM
there are some ETF sparpläne out there in europe:
https://www.justetf.com/ch-en/etf-sparplan/sparplan-vergleich.html
some even with a swiss portal and very attractive conditions:
https://www.dab-bank.ch/Anlegen-Sparen/Sparplaene/Sparplaene-nach-Gattungen/ETF-Sparplan.xhtml
worth look into it......
Post by: econberkeley on September 08, 2014, 09:11:45 AM
Post by: Stashing Swiss-style on September 16, 2014, 03:47:43 AM
Post by: Grog on September 16, 2014, 08:35:20 AM
What did Grog mean when he said "it seems that we were going at this completely wrong....". I've just got some funds together, around CHF7000, to start my investment adventure and was planning to follow the advice that has come out in this journal thread. I have only 10 years in mind as I'll be retiring (not early) in that time-frame. Should I start or is there a warning triangle in the road ahead?
what I meant was that maybe the best option is not to go through a real-time stock brocker platform like Swissquote or Straeto or Postfinance eTrading, that have high trading costs and usually a yearly deposit fee, but instead to go through the "ETF-Sparpläne" that are offered by many german banks. In Switzerland only the "Dynamic Saving Account" of Swissquote offer something similar.
I meant simply this: mabye here are better this ETF-Sparpläne, with limited ETF choice, that the Stock broker option.
I questioned the mean/account, not the instrument (ETF)
Post by: Stashing Swiss-style on September 16, 2014, 08:48:24 AM
Post by: Younes on October 14, 2014, 04:57:50 PM
I just discovered this amazing thread ! Thanks for all for the invaluable information. I also read investment books but having difficulties applying the logic to this beautiful country.(After all everything works differently here :) )
@Grog I'm just starting investing (and still don't have a lot of cash for now) do you think it is best for me to open a swissquote dynamic savings account? And then I would buy some ETFs later on a quarterly basis?
@econberkeley From what I understood, the problem with low cost us account is 1) the currency 2) the 33% withholding tax that is hard to get back and takes time before you can reinvest it.
Post by: dmn on October 15, 2014, 12:35:23 AM
Yeah the problem I see is that if you receive dividend from such a fund you get the Withholding tax from Switzerland too, until you get it back so you really are taxed twice.
With accumulating ETF the only taxes are the taxes you mention inside the fund, since cumulating ETF doesn't suffer from tax in Switzerland.
Are you really sure about that? I have read several times that you must pay Swiss taxes on dividends even for cumulating funds - you must declare them in your tax return and they are taxed like any other income. If you do not declare your cumulating fund capital income, you might be commiting tax evasion.
It is true that the 35% Swiss withholding tax is only applied when you receive the dividend payout, but that is not a final tax anyway, it is just a prepayment on your personal income tax intended to prevent you from not declaring your dividend income. For investors in Switzerland, the withholding tax is completely refunded when you correctly declare your capital income.
Some random source (emphasis added):
http://www.10x10.ch/die-rendite-nach-steuern-zaehlt/
Quote
An in der Schweiz ansässige Privatanleger ausgeschüttete sowie thesaurierte Vermögenserträge von ETF unterliegen der Einkommenssteuer. Bei Schweizer ETF wird auf diesen Vermögenserträgen zusätzlich die Verrechnungssteuer erhoben. Davon zu unterscheiden sind vom ETF generierte Kapitalgewinne. Diese sind steuerfrei, sofern sie dem Privatanleger separat ausgewiesen werden.Translation of main parts:
[...]
Den allgemeinen steuerlichen Grundsätzen folgend, sollten Zahlungsflüsse aufgrund der synthetischen Replikation als derivativer Ertrag qualifiziert werden, der systematisch einem Kapitalgewinn gleichzustellen ist. Dies würde bedeuteten, dass in der Schweiz ansässige Privatinvestoren anstatt einer einkommenssteuerpflichten Ertragskomponente einen steuerfreien Kapitalgewinn erzielen würden. Die Steuerbehörden folgen jedoch in ihrer Praxis nicht dieser Interpretation und verlangen trotz derivativer synthetischer Replikation die Besteuerung einer Ertragskomponente, welche der Ertragsrendite des zugrundeliegenden Indexes/Produktes entspricht.
For private investors in Switzerland, income from capital [i.e., dividends and interest] must be taxed if it is payed out to the investor or accumulated in the fund. Different from that are capital gains [i.e. rising stock prices]: those are tax-free if the fund declares them separately. [...] With synthetic replication, there should be only capital gains, but tax authorities nevertheless demand that taxes are paid equivalent to the capital income of the underlying index.
[Edit:]
I just wanted to add that for some ETFs, it is not trivial to find separate data on capital income and capital gains. I actually sold some ETFs last year when I realized that I could not find out exactly how much capital income I had to report in my tax declaration.
Post by: Grog on October 15, 2014, 04:06:00 AM
The main points for me of the article are these:
- The verrechnungsteuer, while fully refunded after tax declaration, can represent a cash-flow problem and can slow down reinvesting velocity, if you have to wait for the refund. So there are some opportunity cost there.
The great news is that this "tax" is only for fund with domicile in Switzerland (Isin starts with CHxxxxxxx) so fund with domicile somewhere else (Lux/Ireland) are not subject to it, so you receive your full dividend. This could allow you to reinvest it immediately 100%, instead of 65% as in swiss-based ETF, and reduce Cash-flow problems.
The downside is that for every transaction on the stock market you have to pay 0.15% of swiss federal duty tax, while swiss-based ETF only require a 0.075% Stamp duty tax.
So it is up to you to decide: less transaction costs, and a delayed 35% on the dividend, or more transaction costs and a full dividend.
- Second point, very important: you have to pay taxes on the cumulated, not distributed dividend too!! I had it wrong (in my excuse, I still have to compile a tax form with any kind of investment in it...and it doesn't help that the praxis is different that the theory) and I feel ashamed for it. Thank you dmn for pointing it out.
In this case, I have to say that my perspective changes: since accumulated, synthetic ETF requires you to alittle bit more of work (you have to dig in the paperwork of the ETF to search for the taxable part and declare it), distributing etf where the two component are clearly defined become much more attractive, paperwork-wise. Since usually synthetic are cheaper then fully replicated, is up to you to decide if you want more TER and dividend, or less TER without dividend and then do the necessary legwork.
thank you again dmn for pointing this article out.
Post by: samuck on November 10, 2014, 01:58:04 PM
Have you guys tried it?
Post by: Grog on November 10, 2014, 11:24:14 PM
Interesting, but 0.5% is too much. Including TER and wealth tax, you reach 1% annual cost. And you are not better off than with a simple 1 or 2 or 3-fund portfolio with minimal transaction costs.
After continoous research and the last post about taxes I think I found my ideal one-fund portfolio: I'll be buying only Vanguard all-world ETF, every 6 months, using Corner Trader (no deposit fee, and for capital starting from 75k+ transactions are "only" 0.12%, so 12 chf for 10k (without exchange fee)). The adantage compared to swissquote is the no-deposit fee. In 10 year time, when I'll want to add some bonds, we will have so many possibilities, maybe even access to vanguard mutual fund, that really for the moment I stick to this simple one fund portfolio.
Post by: samuck on November 11, 2014, 02:35:19 PM
Post by: Grog on November 12, 2014, 05:59:31 AM
Hi Grog, it's great to share:
This is my main ETF (roughly 70% of equities): Vanguard FTSE All-World UCITS ETF for TER 0.25
http://www.six-swiss-exchange.com/funds/security_info_en.html?id=IE00B3RBWM25CHF4
Then I add emerging markets (15%):
Vanguard FTSE Emerging Markets UCITS ETF for TER 0.29
http://www.six-swiss-exchange.com/funds/security_info_en.html?id=IE00B3VVMM84CHF4
And SPDR® S&P Emerging Markets Dividend UCITS ETF for some extra dividend but I think I'll stop with it even though it developed nicely (TER of 0.65)
http://www.six-swiss-exchange.com/funds/security_info_en.html?id=IE00B6YX5B26CHF4
please remember that the FTSE All-World is not like the MSCI World, that includes only developed countries.
In FTSE all-World you invest in 90% of all the global market, including Emerging Markets (around 15%).
So it seems to me that buying the other two EM funds is a little bit redundant and leave you overconcentrated in EM, and it even increase your TER.
And forget about dividend (that are taxed as regular income) and focus on growth (alas the normal Vanguard All-world index). There are no difference between dividend and capital gain, but dividend are taxed and capital gain not, so the best solution is a fund with as little dividend as possible, like the msci world/ftse all-world etc and leave the high-yield dividend ETF alone (if you are in the accumulation phase!!). My 2 cents.
For the moment I concentrate myself with Vanguard All-world, since the third pillar has already a significant portion of Swiss equities.
But I do think that right now one of the best lazy portfolio for swiss investors (only equity part):
75-80% Vanguard All-World (that already includes 3.5 % of Switzerland)
20-25% SPI or evtl SLI
Right now this is unbeatable, given our limited options. Cheap, easy, diversificated. It's a pity Vanguard is not on the Swissquote dynamic saving account.
Post by: samuck on November 13, 2014, 11:54:08 AM
I'm investing 70% in all world, and each 15% in SPI and Emerging markets, overexposing my portfolio to Switzerland and EM as a conscious decision (the first one for a home bias, the second one as a bet for additional growth, will see how that plays out). Couldn't agree more with your comment on dividends: this dividend ETF was actually the first I ever bought and I would not do it again, even though it has developed nicely since then: will be the first thing I sell in case I have to one day. Good luck with your lazy portfolio! Sam
Post by: Grog on November 13, 2014, 12:52:30 PM
Not really a good deal.
Post by: AndyT on January 06, 2015, 06:42:03 AM
As a total newbie investor I've been reading this thread with growing interest.
I wish to begin investing in ETFs and have a few questions. First of all I'm only here in Switzerland on expat assignment (for another 2 years) am presently tax domiciled in Japan, but a British national and likely to end up retiring in UK.
So my questions, given I'm likely to begin the investing journey here in Switzerland but move back to UK in the long run:
1. Any recommendations on Global Equity and Government Bond ETFs and sensible portfolio split for 25 year investment plan horizon?
2. Should I buy ETFs in GBP - as I'm likely to end up back in UK over the long run?
3. Recommendations on a decent, easy-to-use, cheapish online broker from here in Switzerland or elsewhere?
Any help and guidance very very much appreciated!
Post by: Grog on January 15, 2015, 04:17:20 AM
Stock exchange in free fall, exchange rate crazy as shit
And although I've "lost" 15% in one day I'm stuck at work with a grin on my face....time to rebalance!!
It helps probably that I don't have that much invested :D and most of what I had had already made +15%/year so I'm actually back at square one
Òne thing is worrying me: I work in an heavy export industry for us will be probably the end, layoff incoming? suddenly all our product are 15% more expensive, is this the end for export-heavy industries? Only time will tell.
Post by: Astromarine on January 15, 2015, 04:30:24 AM
I think I "lost" about 20k today.
Not gonna lie, it stings a bit
Post by: Grog on January 15, 2015, 05:02:28 AM
On the other hand, is not like the world is collapsing: keep the course, wait a couple of days to see how and if stabilizes a little bit and then buy everything you can....S&P500 ETF, world ETF....is a new era for us.
But losing 12% in one day is crazy:
https://www.google.com/finance?q=INDEXSWX%3ASMI&ei=46S3VLGrFuGOwAPYq4CgAg
Post by: ScroogeMcDutch on January 15, 2015, 05:50:36 AM
Any cash that you have or will receive in the next periods is worth 15% more though! I am bummed that the Euro dropped as much as it did lately, as it means I am getting less foreign stock per hour worked than I did before.
Post by: Grog on January 15, 2015, 06:26:45 AM
Post by: samuck on January 15, 2015, 06:33:53 AM
Post by: Grog on January 15, 2015, 07:54:43 AM
The only thing one should do is stick to his investment plan. If this drop moved your asset allocation out of your rebalancing limits, then rebalance.
If not, then do nothing.
Post by: robotclown on January 15, 2015, 08:10:27 PM
Post by: samuck on January 15, 2015, 11:08:52 PM
I notice the ADR is up 6% (the Swiss-listed one is down 6%) I assume this is because of exchange rates?
Yes. The Swiss National Bank abandoned the Swiss Franc's peg to the Euro (in a surprise act), sending the franc soaring against the euro.
Post by: SwissMoustache on February 12, 2015, 11:21:52 AM
Fatastic input here, keep the discussion going.
I'm another newbie who wants to start investing boglehead style soon. I've been doing a lot of research for the past few weeks and I'm tempted to give TrueWealth a try. Yes the 0.5% pa is a bit hard to swallow but it's all costs included and you get all of the diversification and rebalancing with none of the work and none of the hard decisions.
Let's do some back of the envelope math. Assume you want 5-10 positions including a few bonds, you'll easily end up paying a couple hundred swiss francs in transaction costs each year even with the cheapest broker (buying positions, selling positions for rebalancing, stock fees, stamp costs, etc). Let's say you hold 6 ETFs + a government bond that you'll buy every 3 months. You'll spend roughly a 100 bucks for each investment (ok, less with the swissquote ETF saving plan, but that seems to be somewhat inflexible). That's 400.- every year! On top of that we can add another 100.- for rebalancing, tax statements (those alone are 100.- at swissquote), etc. Plus there's the 0.1% custodial fee if you want anything that cannot be held in the ETF savings account (e.g. govt. bonds).
For 500.- at 0.5% pa you can invest roughly 100k with TrueWealth, you get a lot more diversification, less work, and more flexibiliy (e.g. monthly transactions). Granted, after 100k it gets more expensive but not crazily so IMHO. I did the math for a 10y time span investing 7.5k quarterly. Notwithstanding any yields, I ended up with total costs of 5400.- for swissquote and 7700.- for TrueWealth. The difference is 230 CHF per year which I might actually be willing to pay considering the benefits mentioned above.
...on the other hand, holy crap 7.7k just to invest my money for a couple of years. Why is everything so freaking expensive here? I really wish we had something like vanguard in Switzerland. Let's hope MoneyVane will announce something good soon.
Thoughts? Any other new ideas/findings for investing on the cheap in CH?
Post by: tensile on February 13, 2015, 04:44:47 PM
Post by: samuck on February 13, 2015, 11:46:37 PM
For 500.- at 0.5% pa you can invest roughly 100k with TrueWealth, you get a lot more diversification, less work, and more flexibiliy (e.g. monthly transactions). Granted, after 100k it gets more expensive but not crazily so IMHO. I did the math for a 10y time span investing 7.5k quarterly. Notwithstanding any yields, I ended up with total costs of 5400.- for swissquote and 7700.- for TrueWealth. The difference is 230 CHF per year which I might actually be willing to pay considering the benefits mentioned above.
...on the other hand, holy crap 7.7k just to invest my money for a couple of years. Why is everything so freaking expensive here? I really wish we had something like vanguard in Switzerland. Let's hope MoneyVane will announce something good soon.
Thoughts? Any other new ideas/findings for investing on the cheap in CH?
Personally, I'm not willing to pay 0.5% pa just so they hold my money for me. This is why I stayed with Postfinance (changing to Saxo Bank would admittedly reduce my fees somewhat). As a consequence, I'm trying to limit the number of ETFs I invest in (currently 3) and the number of investments per year (currently monthly ie. 12, and just in 1 ETF at a time, which means I pay CHF 300 plus stamp fee per year). Also like the fact that I could just leave me portfolio for some time without having to pay any extra fee on top of the TER.
Post by: Grog on February 14, 2015, 02:38:54 AM
Keep it simple: buy Vanguard all-world, which includes 46 countries and 3000 stocks, and maybe a Swiss bond ETF (although since we have now negative interest I'm keeping cash at the moment instead of bond fund, to avoid transaction costs), and start to worry about other tilt (small value, etc) when you have 500k invested. You'll do fine, it will be less stressfull, and you'll keep costs low.
Don't forget that we have wealth tax, so in top of the 0.5% you get 0.15-0.3% of taxes (depending in which canton you live)..... it starts to add up.
Post by: SwissMoustache on February 14, 2015, 09:39:36 AM
Equity
1) 25% Vanguard FTSE All-World
2) 25% UBS ETF (CH) - SLI (CHF) A-dis
Bonds
3) 20% iShares Core CHF Corporate
4) 20% iShares Swiss Domestic Govt. 3-7 (or cash for now)
REIT
5) 10% UBS ETF (CH) - SXI Real Estate Funds
Here's my reasoning behind each of the above:
1) There are cheaper all world ETFs but from what I can tell those are either synthetic or don't trade in CHF which would add currency conversion spread. Of course I also thought about a hedged world ETF but according to Credit Suisse's widely cited "Global Investment Returns Yearbook 2012" it's probably not worth the costs for long term investments.
2) I'm overemphasizing the home market since I'm a bit uncomfortable with the currency risks in 1). The iShares Core SPI is much cheaper (0.1% instead 0.2%) but less diversified.
3/4) I'm probably going to need some of the money in 8-10 years so I think 40% bonds might be a good idea. Probably not govt. bonds though at the moment. I could keep the money in cash like Grog suggests. Or buy more corporate bonds. Or buy foreign (hedged) govt. bonds. Not sure.
5) REITs for even more diversification.
What does everyone think? Does that sound reasonable?
Now I only have to decide between swissquote, saxo and postfinance. Does anybody know if the above are available in the swissquote ETF saving plan?
Post by: Grog on February 15, 2015, 05:27:37 AM
http://forum.mrmoneymustache.com/investor-alley/switzerland-how-should-i-buy-index-funds-here/msg377035/#msg377035
you could switch Vanguard All-World with UBS Msci World (traded in chf) and you have a couple of bond funds and the UBS SLI fund (I agree about diversification, 50% of SPI or 50 % SMI are only Roche, Novartis and Nestlé!).
Be careful about the UBS REIT funds: one is a ETF of real estate companies (like SwissPrime), and another is a fund od Real Estate funds, so it's different, in the second you are going through al ot of overhead from the funds and it has done quite worse that the pure real estate companies fund.
This is the companies fund:
https://www.justetf.com/ch/etf-profile.html?isin=CH0124758522&h=3&from=search&assetClass=class-realEstate
this the fund of reit funds (almost identical correlation but with worse return):
https://www.justetf.com/ch/etf-profile.html?assetClass=class-realEstate&isin=CH0105994401&from=search
I personally would avoid them in the accumulation phase but I would love to have 10% in my portfolio during retirement, since it does not correlate so strongly with our equity market. But is an ETF with low volume, high spread I wouldn't want to do that much transaction into buying them. Not in the accumulation phase.
If I were you, I would avoid Swiss and swiss corporate bond, interest are really too low. You could buy a fund of international bond emitted in CHF (yep other countries sometimes emit bond in a foreign currency):
https://www.justetf.com/ch/etf-profile.html?isin=LU0879399441&tab=chart&h=2&from=search&assetClass=class-bonds¤cy=CHF
you get some more return due to the presence of AA, A and BBB graded borrower.
Post by: SwissMoustache on February 16, 2015, 10:51:43 AM
Strateo also looks pretty good by the way with a custodial fee of 0.02% per quarter (max CHF 25), CHF 9 for Leader ETFs and a much nicer website than swissquote ;-)
edit: CHF 9 is only for ComStage ETFs, so swissquote still wins.
The UBS Foreign AAA-BBB does indeed look like the best bond option. But even this ETF probably made most of its past returns due to ever decreasing interest rates. Since interest rates can't go much lower from where we are now, I'm not sure I want to invest in bonds at all at the moment.
Post by: Grog on February 16, 2015, 11:36:08 PM
If you add the transaction costs involved in buying bonds/bonds fund in chf, you can see a good solution is to simply keep the money in cash, ready to rebalance in stocks falls a crash is coming. Since I'm using cash instead of bond, I eliminate the emergency fund since if necessary I can draw down my cash.
I've used strateo: it looks nice but I didn't like using it. And they do not sell Vanguard ETF.
For the moment I'm using CornerTrader and I'm happy with it. Starting from 75k total capital you pay only 0.12% a transaction, and no deposit account. For my 4 yearly purchase (one after every dividend) is more than enough. And differently to postfinance they directly convert the US dividend in CHF at a good rate.
Post by: Astromarine on February 18, 2015, 06:35:09 AM
Post by: Grog on February 18, 2015, 08:07:56 AM
grog, can you talk a bit about corner trader? Last I knew, you were on Swissquote, is there a benefit to switching? Or do they do different things?
I've used, in order:
a) Postfinance etrading
b) Strateo
c) Swissquote
d) Swissquote Dynamics Saving with ETF
e) CornerTrader
At the beginning I was very enthusiastic, I wanted to have an equal-weight world portfolio, then I discovered the Swissquote dynamic saving andwanted to switch...I've played around a lot ('I'm lucky that we had a bull market, always selling with a capital gain, that is not taxed here) and in the end the enthusiasm was fading and I noticed that too much trade were detrimental and it really wasn't that funny and I had better things to do with my life. So I've switch to CornerTrader in november, bought only Vanguard All-World and since then I didn't make a single trade. I'm waiting for the march dividend, plus adding my saving, to buy again.
With this strategy (4 purchase per year) all the options with a custody account fee didn't make any sense (so options b and c were out since they would require to pay a custody fee).
Strateo doesn't offer Vanguard ETF, I've asked and they told me that wasn't possible to buy them.
So it remained CornerTrader and Postfinance E-Trading as options. I've chosen the first one because:
- it costs less (20.- + swiss stamp duty tax of 0.15%) vs the (25 + 2 + tax of Postfinance)
- the price doesn't change as in postfinance, so you don't have to worry to buy always exactly 5000chf, because if not you change category of fee).
- starting from 75k it will costs even less
- they auotmatically change your dividend in chf with very good rate, unlike Postfinance
In the end it all boils down to a personal decision. Corner Trader has a pretty good tool, although to open an account you had to receive some information telefonically (like the password for first login) and there is no electronic device/ sms identification. You can login with your account number and your password. The cool thing is that you can do it everywhere, the bad thing is that is probably not so safe. Anyway the risk are minimal since transfer the money outside to another bank is not so easily done like in Swissquote. Which for me is kind of good: once inside and invested, never to be touched. there is no "temptation" to transfer it somewhere else.
If you need to access the money you can order a TraderCard and then you can take out the cash on your account at every ATM. I didn't do it for the moment.
I hope it helps if you have any questions just ask.
Post by: Lemanensis on March 08, 2015, 05:29:17 AM
I consider myself to be counting down to FI - month by month!
Post by: Lemanensis on March 08, 2015, 05:36:59 AM
1) I've always been a 0-debt person. Having seen my parents struggle unnecessarily (my mother was a money-sink!), I was determined it would never happen to me.
2) I've always had two jobs, investing everything from the second freelance job.
3) Any debt I do have must earn me more than it costs: mortgage never repaid (investing instead earns more); maximize credit-card use, but pay off every month; collect all points available on CC; and finally use a low-cost investment loan to boost all income from investments.
4) Bond-heavy investments. While this may seem counter-intuitive, and may mean higher taxes, I have optimized as much as possible. To sum it up, it's basically the 'bird in the hand' policy.
5) All investments are buy-and-hold: I refuse to keep paying commissions. Day-trading looks crazy to me.
Post by: swisstash on March 08, 2015, 01:51:01 PM
Just wanted to report that the solution I ended up being happy with is to use Swissquote to buy a two-fund portfolio of VWRL and IEAG on the Euronext exchange in my taxable accounts.
Post by: tensile on March 08, 2015, 03:09:36 PM
Although I have to say I recently started selling some stuff. I know market timing is bad etc but I feel the market is high and I'll buy back when it dips...
Post by: dmn on March 09, 2015, 04:14:39 AM
I'm still here! I think one of the problems is that if you only buy index funds every month there isn't a lot to talk about :)
Although I have to say I recently started selling some stuff. I know market timing is bad etc but I feel the market is high and I'll buy back when it dips...
What do you do with the money in the meantime? Will you let it sit around for a few years if the stock market does not crash soon, earning no interest? Overvaluations can go on for a very long time, and central banks may be forced to keep interest rates near zero for many more years to come.
Post by: SwissMoustache on March 09, 2015, 06:46:05 AM
But seriously, from what I've read Postfinance is taking this step because their own trading platform hasn't been a big success so far. There will be a complete overhaul and I guess the result will be more attractive than what they offer at the moment. Otherwise there wouldn't be a point.
Post by: tensile on March 10, 2015, 03:11:31 PM
What do you do with the money in the meantime? Will you let it sit around for a few years if the stock market does not crash soon, earning no interest? Overvaluations can go on for a very long time, and central banks may be forced to keep interest rates near zero for many more years to come.
Well I want to buy some property back home and it's hard to get the mortgage because I live here and I'm self-employed so maybe I'd save with a view to paying cash (annoying) or maybe use the money towards some side hustles I've started. Or just wait. I dunno. Are you buying at present valuations?
Post by: dmn on March 10, 2015, 04:26:13 PM
Are you buying at present valuations?
Yes, because in my opinion an earnings yield of 5% (i.e. P/E around 20) beats an interest rate of 0% easily. I understand that stock valuations will go down when interest rates rise again, and then the prices of my stocks will decline. However, that could still be 10 years or more out in the future (see Japan for an example of decades of zero interest). In that case, the currently available 5% earnings yield will be fabulous, and will earn me more than I will lose later when valuations go back to historic levels.
On the other hand, if interest rates should rise very soon and stock valuations contract, my net worth takes a hit in the near future. However, in that case I can invest future paychecks at higher yields, so I will be fine anyway.
Post by: Okanager on July 18, 2015, 04:13:30 PM
Questions:
1) Withholding on Dividends
I don't think I've ever had any Swiss withholdings on my ETFs' dividends -- neither the Irish Vanguard ones, nor my Canadian-domiciled fund. In the S&P500 and TSX cases, only the expected 15% was withheld by the fund for the source country. Is it only Swiss-domiciled ETFs that are subject to 35% withholding? If that's the case, it would alleviate the delayed reinvestment concern for many ETFs.
2) Pillar 3a Funds
For those with 0.60% TER SwissCanto 3a funds, where do you hold them? My understanding is that you need to purchase them through banks (usually cantonal or small local ones), which then add additional fees that put the funds more or less on par with any other indexed offerings (from PostFinance, CS, etc).
Do-it-myself investment strategy:
1) Max out pillar 3a account (PostFinance Pension 45 fund).
2) Max out pillar 2 extra-mandatory contributions
3) Anything else goes to a handful of diverse ETFs
1) and especially 2) (given low interest rates) aren't great long-term investments growth-wise, but I view them as safe short-mid-term investments that have quite good short-term "performance" given the tax deductions. I expect to use these to buy a place to live, or to cash out if I start my own business or move out of country.
The ETFs are all equities (stocks; pillars 1 and 2 are bond-ish enough for me right now). I approximate VEVE (Vanguard Developed World) with the following Irish-domiciled funds and a few others (TER: ~0.10%):
- VUSA
- VEUR
- VAPX
- VJPN
I then home-country/currency tilt a bit with ZCN (Canada, my other home) and CHSPI. I hesitate to invest too much in the latter because 50% of its value is in just 3 of the 200 or so constituents (Novartis, Roche, and Nestlé are huge) and I already have exposure via the 3a fund.
My broker is BCV's TradeDirect. I'm happy so far and fees are good by Swiss standards. One slight annoyance is that I can't buy the LSE-listed, USD-denominated version of VUSA through them (ticker "VUSD"). They don't seem to find it for whatever reason. Perhaps I'll try PostFinance's e-trading once they've moved on to SwissQuote's platform this fall.
Most people I know use Interactive Brokers instead. They'd be a bit cheaper for my use case, and their FX trading sounds great (I've used CurrencyFair thus far instead), but I like keeping the business local.
Post by: Grog on July 19, 2015, 04:13:31 AM
For ETF quoted on the Swiss Exchange, this tool can be most useful when declaring taxes:
https://www.ictax.admin.ch/extern/de.html
It tells you exactly how much of your distributing (or accumulating) fund has gained as taxable income and how much was subjected to the withholding tax.
2) Now it exist a Retrozessions-frei Swisscanto with a TER of only 0.30%. You can buy it via Kantonal Bank Luzern which has a depot annual fee of 0.22% and a purchase fee of the shares of 1%. If you do the math, it's the cheapest options. 1% to buy (so since is capped at 6500 chf per year it is "only" 65 chf) plus 0.52% of global annaual TER, which is the cheapest possible in Switzerland for 3a pillar
I'm curious to about the future switch of Postfinance, I use Cornertrade because it is cheaper then Postfinance and has a great currency exchange for dividend that appear directly as swiss francs and with an almost markt-like exchange. Postfinance is horrible in comparison the exchange rate are always the worst.
Post by: raxx on July 24, 2015, 09:28:32 AM
Everything you all have discussed is straightforward, and I would have no problem implementing straightaway, but i have one major humungous roadblock. I work for "the largest bank in switzerland" and due to compliance/policy issues, I am not permitted to hold any trading accounts with any other entity. *BAM!!*
In return, i get a 50% discount on the safekeeping price, and 100% discount on the safekeeping of instruments issued by my bank.
The bank does offer a couple of attractive ETFs, so I could be persuaded. My main gripe is the transaction costs!! I currently invest in 3 indices monthly, i.e. 3 trades per month. Trading cost is CHF20 per order!!! CHF 30 for non-Swiss exchanges!!! That would cost me CHF60 monthly! OK - i could do one per month and rotate, but still....CHF20 a month to execute a transaction of say CHF1000-1500 is highway robbery.
So.... I would like to see if you guys might have any ideas. My only other option would be to open a fund-only account with another provider. I´m allowed that - i just cannot have an account which has capability to trade other instruments apart from funds. So far, i have not found such an account. Many providers offer "fund accounts" but this is only to invest into their set list of funds.
And no, leaving my job is not an option.
Thanks to all of you in advance!
Post by: samuck on July 24, 2015, 11:03:44 AM
Post by: Grog on July 26, 2015, 02:38:26 AM
Hello Swisstaches! I am new here, just moved back from the UK a couple of months ago and looking to restart my index fund investments. In the UK, i invested in index mutual funds, very low TERs, no transaction costs. Now I am trying to replicate the model here to no avail. Thank you to you all for this thread, and for giving me some very good ideas how to start.
Everything you all have discussed is straightforward, and I would have no problem implementing straightaway, but i have one major humungous roadblock. I work for "the largest bank in switzerland" and due to compliance/policy issues, I am not permitted to hold any trading accounts with any other entity. *BAM!!*
In return, i get a 50% discount on the safekeeping price, and 100% discount on the safekeeping of instruments issued by my bank.
The bank does offer a couple of attractive ETFs, so I could be persuaded. My main gripe is the transaction costs!! I currently invest in 3 indices monthly, i.e. 3 trades per month. Trading cost is CHF20 per order!!! CHF 30 for non-Swiss exchanges!!! That would cost me CHF60 monthly! OK - i could do one per month and rotate, but still....CHF20 a month to execute a transaction of say CHF1000-1500 is highway robbery.
So.... I would like to see if you guys might have any ideas. My only other option would be to open a fund-only account with another provider. I´m allowed that - i just cannot have an account which has capability to trade other instruments apart from funds. So far, i have not found such an account. Many providers offer "fund accounts" but this is only to invest into their set list of funds.
And no, leaving my job is not an option.
Thanks to all of you in advance!
Ohy! If I were you, I would invest in the Postfinance SPI funds (0.5% buying if you are over 25'000chf in you post accounts using their depot for funds (not postfinance etrading), then every six month you could sell (no fee by selling) and you buy cheaper ETF with your bank.
Or you just buy every 6 months, like I do :)
Post by: raxx on July 26, 2015, 01:52:54 PM
Brilliant idea, Grog! That Postfinance fund account is exactly what i need! Thanks!
Post by: Ralph on July 30, 2015, 04:53:53 AM
I use PostFinance, because they don't charge account fees as Swissquote does. On the other hand, their transaction fees are a bit higher.
But independent of the broker you use: the strong (overvalued) Swiss Franc gives us great investment opportunities in foreign stocks (which are almost all stocks, anywhere, from our point of view :)).
Best, Ralph
Post by: Grog on July 30, 2015, 05:24:40 AM
Thanks Samuck - Swissquote and Saxobank are trading accounts, so are a no go.
Brilliant idea, Grog! That Postfinance fund account is exactly what i need! Thanks!
Still, the SPI funds of postfinance (or the global one) have an high TER (0.59% for SPI, 0.79% for global) so do the math. Maybe it costs you less to just wait and lose the opportunity gain in those 6 months between payment
Post by: Shef on August 01, 2015, 04:22:58 PM
If you need to access the money you can order a TraderCard and then you can take out the cash on your account at every ATM. I didn't do it for the moment.
what are the fees for the TraderCard? I'm specially interested in the Processing surcharge for foreign currencies and the ATM fees. On their website, I just found the annual fee of CHF 40 but not the rest. Doesn't seem to be much transparent either...
Post by: Grog on August 01, 2015, 11:34:22 PM
Fee structure is actually quite simple: to buy ETF at the Swiss exchange it costs you 20 chf +0.15% federal tax (up to 10'000 chf) after that is 0.2%+0.15%=0.35%.
You don't have any kind of deposit fee (differently from SQ), you have access to numerous ETF both listed in Switzerland and elsewhere and you receive your dividend directly exchanged in CHF with a very very good exchange (which is practical for me since I've a one-fund portfolio consisting in Vanguard All-world).
Other than that, you could experiment with leverage by buying CFD (contract for difference) of Total world ETF and kind of create a variable leverage, margin interest is around 3.5%. But I'm still waiting for a larger drop to use leverage, and it will be very little (like1.2-1.5x)
So it is true, it costs you 8.15 chf more than Swissquote per transaction, but you have no deposit fee, and it costs you less then Postfinance (7 chf less for transaction up to 5000 chf, + much better currency exchange then Postfinance).
But the interface is thought for active daytrader and is really not that simple for buy and hold investors. If you really want cheap, simple and easy, go for a Dynamic SQ banking account, but accept the reduced number of ETF at disposition. I'm not there only because they don't offer a really global ETF or an emerging markets ETF. If they had the ishares ACWI or an emerging markets ETF I would invest only in SQ dynamic savings account.
Post by: tensile on August 02, 2015, 10:19:29 AM
Hello Swisstaches! I am new here, just moved back from the UK a couple of months ago and looking to restart my index fund investments. In the UK, i invested in index mutual funds, very low TERs, no transaction costs. Now I am trying to replicate the model here to no avail. Thank you to you all for this thread, and for giving me some very good ideas how to start.
raxx, are you allowed to keep trading on your UK platform? I don't see how your employer could possibly stop you. You can (surely?) invest in Swiss ETFs via whatever platform you use there. Just a thought!
Post by: raxx on August 02, 2015, 11:35:42 AM
Post by: lukipuki on November 09, 2015, 03:54:05 AM
I'm going to move to Switzerland soon and I'm actually selling my current portfolio in order to optimize my taxes. Time for a rebuild!
I'm very curious about the absence of withholding tax on Ireland/Luxembourg domiciled ETFs. Can someone point me to an official document confirming that? I want to make sure before making any rash decisions. The thing is, justetf.com indicates that Vanguard doesn't report to Swiss tax authorities: https://www.justetf.com/ch-en/etf-profile.html?isin=IE00B3RBWM25&tab=details&h=2®ion=World&ic=iShares&from=search&assetClass=class-equity
However, ComStage does (ESTV reporting): https://www.justetf.com/ch-en/etf-profile.html?isin=LU0488317024&tab=details&h=2&ic=Comstage&from=search&assetClass=class-equity
db x-trackers too: https://www.justetf.com/ch-en/etf-profile.html?ic=Comstage&ic=db+X-trackers&sortField=ter&groupField=none&sortOrder=asc&from=search&isin=IE00BJ0KDR00&assetClass=class-equity&tab=details
So the lack of taxes on Vanguard funds might be just an underreporting issue which sounds to me like a tax fraud :/ Does anyone own ComStage, db X-trackers or iShares fund domiciled in Ireland/Luxembourg? Do you pay taxes on those?
Post by: lukipuki on November 10, 2015, 01:55:17 AM
Post by: dmn on November 10, 2015, 02:58:56 AM
You can find the correct taxable gains for ETFs and stocks on the Swiss government's website https://www.ictax.admin.ch/extern/de.html. I usually check whether an ETF is listed on that website before buying it.
Post by: lukipuki on November 10, 2015, 05:28:43 AM
If you have an accumulating ETF that does not pay the 35% Verrechnungssteuer, you still have to declare the ETF's reinvested dividends in the tax declaration. The only benefit is that you pay the taxes later, when the tax authorities send you a bill, so that the money remains invested for longer.
You can find the correct taxable gains for ETFs and stocks on the Swiss government's website https://www.ictax.admin.ch/extern/de.html. I usually check whether an ETF is listed on that website before buying it.
Thanks!
This is a good article http://geldberg.com/etf-steuern/ if anyone is interested in knowing more about ETF taxes.
Post by: Dago on December 08, 2015, 01:58:00 PM
I am happy to meet Swiss fellows on this forum !
I discovered mmm blog quite recently and am reading through it from start to end.
This swiss thread is very interesting and I was wondering if you could help me sort out how to invest my money.
Being eco-conscious I have actually been applying most of the frugality principles in my 10 years of work. As a consequence (not the aim) I have set aside some money. After learning hard lessons by 1. letting others manage my money (AWD argh) and 2. trying to outsmart the market, I would now like to invest in index based funds that would ultimately make me financially independent.
Let me just say a word about my financial situation :
- half a flat in Geneva bought 1150000, 20% paid. 35000 of mortgage at 2% for 10 years with 1% amortization, 100000 at 1.2% ending next year
- 80000.- randomly thrown in various stocks and bonds, mostly swiss
- 50000.- cash
- 65000.- available, were invested by AWD in various funds
- 3 Piliers 3b, life insurance
To be noted that I don't pay taxes on my main revenue as I work for an international organization.
My aim is not to retire super fast, just to know that I am safe and I can continue to do what I want of my life.
I had in mind to progressively invest the 65000 + a part of my cash + the 80000 in index funds :
| ETF | % |
| iShares SMI (CH) | 10.0% |
| iShares SMIM (CH) | 15.0% |
| iShares Core CHF Corporate Bond (CH) | 20.0% |
| iShares Core MSCI World UCITS ETF | 10.0% |
| iShares Swiss Domestic Government Bond 7-15 (CH) | 25.0% |
| Amundi ETF MSCI EMU High Dividend UCITS ETF | 15.0% |
| iShares Core MSCI World UCITS ETF | 7.5% |
| iShares Core S&P 500 UCITS ETF | 7.5% |
Moreover, how fast do you think that I should invest ? I don't want to throw 100k and the next day the market collapse. I did it in 2007, I learned my lesson. Still, I don't want to wait 10 years to invest all this money. By the way, I can set aside 3000-5000 per month in addition.
Last question : should I reimburse part of my mortgage ?
Thank you in advance !
Dago
Post by: lukipuki on December 08, 2015, 03:13:51 PM
75% of iShares Core MSCI World UCITS ETF 0.2% TER
13% of iShares Core MSCI Emerging Markets IMI UCITS ETF 0.25% TER
12% of SPDR MSCI World Small Cap UCITS ETF (IE) 0.45% TER
My goal is to recreate the MSCI ACWI IMI index which covers developed and emerging markets from large to small cap, so about 99% of the global stock market. There is one fund that tracks MSCI ACWI IMI, but it's TER is 0.4% and the above mixture is around .23%.
When it comes to bonds, I haven't made my mind yet. They are more complicated to invest in and the available ETFs in Europe are not that great. I might buy the US-domiciled Vanguard Total Bond Market and add in some domiciled in Europe.
Post by: Stashing Swiss-style on December 09, 2015, 03:52:07 AM
So can you tell me a bit about iShares and how that works etc?
Post by: Dago on December 09, 2015, 05:51:25 AM
@lukipuki
Thank you for sharing your future portfolio, it is always valuable to see what others are doing.
@Stashing Swiss-style
My wife has a taxable income, therefore the 3rd pillar has still a small advantage. The other reasons are that I am not sure if I will always be working in international organizations and that I wanted a life insurance for my family. I might not make the same choice today, but I am ok with it.
iShares are "a family of exchange-traded funds (ETFs) managed by BlackRock". I did not choose them because of the brand, but I happened to choose funds that it provides. To choose funds, I went to justetf.com and played around for some time.
Not sure what is the exact scope of your question, but if you also wonder how to buy index fund you should see for example with Swissquote. I have a trade account and just opened a saving account (the one described earlier in this thread).
Let's see what others have to say about my portfolio and I will share any ways the final choice.
Post by: Dago on December 11, 2015, 06:11:35 AM
@Grog ? :)
Post by: Micks on December 13, 2015, 06:52:21 AM
I want to have little risk and to be diversified. This being said, I realize that there are overlap between these ETFs and that it is maybe a too wide range. I would be very interested to hear your advises or remarks on this subject.
ETF % iShares SMI (CH) 10.0% iShares SMIM (CH) 15.0% iShares Core CHF Corporate Bond (CH) 20.0% iShares Core MSCI World UCITS ETF 10.0% iShares Swiss Domestic Government Bond 7-15 (CH) 25.0% Amundi ETF MSCI EMU High Dividend UCITS ETF 15.0% iShares Core MSCI World UCITS ETF 7.5% iShares Core S&P 500 UCITS ETF 7.5%
I think you are on the right path and that it is a good thing to have learned those valuable lessons in market timing and experiencing a full-on market crash relatively soon in your investment career.
As you ask for some thoughts, I do not mind to share a few. Personally, I would prefer a simple worldwide market weighted portfolio for equities like the one lukipuki mentions or the Vanguard All-World ETF held by Grog.
The percentages do not add up to 100% in your post and you have the iShares MSCI World ETF in there twice, so I am not sure on your precise allocations. On the stock portion of your portfolio, you say you have 25% in Swiss companies by holding SMI and SMIM. That is a pretty heavy allocation to your home country (and a heavy weighting to the probably riskier smaller companies in the country) as the Swiss equity market is a little under 3% of the weighting in the FTSE Global All-Cap index. With SMI having +-60% in Nestle, Novartis and Roche, it is not a very diversified option too. The Amundi ETF does not physically obtain the shares but replicates its index synthetically, which is more complex and possibly more risky. If you want to hold synthetic funds, read up on things like the type of swaps used and the collateral held. Personally, I think physically replicating funds are a better option for the majority of personal investors.
I think that a good amount of bonds/fixed income is wise too smoothen the ride. Your previous experience in '08-09 would be helpful in determining that amount for you. Do realize that corporate bonds behave more equity-like and reduce the diversification benefit that high quality short-term government bonds do have. Still, I would prefer to hold short term government bonds because I want fixed income purely as short term downside protection. You might have a different objective for your bonds. Reaching for yield should not be one of them in my opinion (which I think that buying high dividend yield funds is an example of as well). The yield is part of the total return and that is where my focus would be. Holding bonds in your home currency is a good thing in my opinion, as it eliminates currency risk (which is quite big for bonds on the short term).
As the stock market is on average trending up, throwing it all in at once would have the highest chance of success. But that also increases the risk that you have your timing wrong, like you already experienced. I think averaging in is a good solution, which is mostly advised to be done in a maximum of one year. If you choose your portfolio in the way that it suits your willingness, ability and need to take risk you should not have to worry much about what happens in the short term. You will encounter market crashes in your investing career so you should be prepared for that. Of course the money you already have invested can just be transferred to the index funds of your choice, you already are taking risk and want to be. Does not make much sense to me to first sell out of the market and then gradually buy back in.
Good job on converting your existing shares/bonds to index funds and for viewing all your assets as part of one big portfolio. Best of luck.
Post by: lukipuki on December 13, 2015, 07:24:38 AM
As you ask for some thoughts, I do not mind to share a few. Personally, I would prefer a simple worldwide market weighted portfolio for equities like the one lukipuki mentions or the Vanguard All-World ETF held by Grog.
The percentages do not add up to 100% in your post and you have the iShares MSCI World ETF in there twice, so I am not sure on your precise allocations. On the stock portion of your portfolio, you say you have 25% in Swiss companies by holding SMI and SMIM. That is a pretty heavy allocation to your home country (and a heavy weighting to the probably riskier smaller companies in the country) as the Swiss equity market is a little under 3% of the weighting in the FTSE Global All-Cap index. With SMI having +-60% in Nestle, Novartis and Roche, it is not a very diversified option too. The Amundi ETF does not physically obtain the shares but replicates its index synthetically, which is more complex and possibly more risky. If you want to hold synthetic funds, read up on things like the type of swaps used and the collateral held. Personally, I think physically replicating funds are a better option for the majority of personal investors.
I think that a good amount of bonds/fixed income is wise too smoothen the ride. Your previous experience in '08-09 would be helpful in determining that amount for you. Do realize that corporate bonds behave more equity-like and reduce the diversification benefit that high quality short-term government bonds do have. Still, I would prefer to hold short term government bonds because I want fixed income purely as short term downside protection. You might have a different objective for your bonds. Reaching for yield should not be one of them in my opinion (which I think that buying high dividend yield funds is an example of as well). The yield is part of the total return and that is where my focus would be. Holding bonds in your home currency is a good thing in my opinion, as it eliminates currency risk (which is quite big for bonds on the short term).
As the stock market is on average trending up, throwing it all in at once would have the highest chance of success. But that also increases the risk that you have your timing wrong, like you already experienced. I think averaging in is a good solution, which is mostly advised to be done in a maximum of one year. If you choose your portfolio in the way that it suits your willingness, ability and need to take risk you should not have to worry much about what happens in the short term. You will encounter market crashes in your investing career so you should be prepared for that. Of course the money you already have invested can just be transferred to the index funds of your choice, you already are taking risk and want to be. Does not make much sense to me to first sell out of the market and then gradually buy back in.
Good job on converting your existing shares/bonds to index funds and for viewing all your assets as part of one big portfolio. Best of luck.
+1 on everything Micks says, in particular the worldwide diversification and holding government bonds.
Bonds are complicated to invest in. Some good information is on the Bogleheads wiki: https://www.bogleheads.org/wiki/Bond_basics
Unfortunately the ETF offering is not that great in Europe, so I'm leaning towards owning "Vanguard Total Bond Market Index Fund ETF", even though it comes tax complications later.
Post by: Dago on December 13, 2015, 01:28:20 PM
Thank you very much. Here is what I get from your post :
1. Extraneous line "iShares Core MSCI World UCITS ETF 10%"
-> removed
2. Lack of diversification in the stock portion of the portfolio because of SMI and SMIM.
-> SMIM is more diversified than SMI
-> Holding foreign currencies is a problem for a Swiss. If the Swiss franc stays strong or get stronger it would be a problem to have foreign currencies. If it gets weaker, well, it does not change anything for me as I pay in Swiss francs for my living. Is hedging a solution to my fear of conversion rate risks ?
3. Amundi synthetic replica of index
-> I was not aware of this. I need to read more on the subject. I think that I will follow your advise and stick with physical replicas. The aim of this fund is to have some european equities in euro.
-> Maybe use buy "iShares STOXX Europe 600 UCITS ETF (DE)" ?
4. Bonds ratio
-> the more I think about it, the more I feel that I should shift a bit the ratio toward stocks. I think that I might move 5% in favor of international stocks reaching 60% stocks 40% bonds.
5. Corporate bonds behave more equity-like
-> true, I just saw the very good results of this fund and thought that it was safer than stocks :)
-> I will read a bit more about it and perhaps shift a few percents from corporate bonds to other assets (see point 4.)
6. I will invest the cash over a year, and all the already invested money at once.
New portfolio :
| iShares SMI (CH) | 10% |
| iShares SMIM (CH) | 15% |
| iShares Core CHF Corporate Bond (CH) | 15% (-5%) |
| iShares Swiss Domestic Government Bond 7-15 (CH) | 25% |
| iShares STOXX Europe 600 UCITS ETF (DE) | 15% |
| iShares Core MSCI World UCITS ETF | 10% (+2.5%) |
| iShares Core S&P 500 UCITS ETF | 10% (+2.5%) |
Post by: tj on December 13, 2015, 02:48:00 PM
Quote
-> Holding foreign currencies is a problem for a Swiss. If the Swiss franc stays strong or get stronger it would be a problem to have foreign currencies. If it gets weaker, well, it does not change anything for me as I pay in Swiss francs for my living. Is hedging a solution to my fear of conversion rate risks ?
Do you have any international hedged funds available? That you could diversify globally across foreign companies, but you would minimize the effect of the currency fluctuations....
Post by: Micks on December 13, 2015, 03:44:50 PM
New portfolio :
iShares SMI (CH) 10% iShares SMIM (CH) 15% iShares Core CHF Corporate Bond (CH) 15% (-5%) iShares Swiss Domestic Government Bond 7-15 (CH) 25% iShares STOXX Europe 600 UCITS ETF (DE) 15% iShares Core MSCI World UCITS ETF 10% (+2.5%) iShares Core S&P 500 UCITS ETF 10% (+2.5%)
Thanks for clarifying and already some good changes in your portfolio. I put the equity funds in the morningstar instant x-ray to see how diversified you are geographically. With your allocation you have about 40% of your equities in the Swiss stock market, I still think that is a very heavy overweighting of your home country (which is approximately 3% of world market cap). Overall, you have 70% in Europe as a whole and almost 30% in the US, leaving a tiny percentage to Asia. This could be what you are aiming at, but I would prefer that my results were not that depending on my home country's stock market.
2. Lack of diversification in the stock portion of the portfolio because of SMI and SMIM.
-> SMIM is more diversified than SMI
-> Holding foreign currencies is a problem for a Swiss. If the Swiss franc stays strong or get stronger it would be a problem to have foreign currencies. If it gets weaker, well, it does not change anything for me as I pay in Swiss francs for my living. Is hedging a solution to my fear of conversion rate risks ?
Hedging could indeed be an idea to reduce/eliminate currency risk in equities. Hedging does have its costs, as it increases the management needed and adds transaction costs for the hedge. Over long periods of time the assumption is that currency hedged and unhedged returns would be the same as the major currencies converge to purchasing power parity, so you would not get better returns in the long run by hedging. If you are not investing for the long run, I think you are holding too much risky assets with 60% in stocks.
In the short run however, I very much see your point (although a hedge could also increase volatility of returns). Due to globalization the major currencies correlate heavier and companies have less straight forward currency exposure as they used to. The hedging benefits have decreased quite heavily. The global investment returns yearbook of 2012 by Credit Suisse calculates the risk reduction in hedging global stocks as about 20%. If that is a reduction worth the costs of hedging or increasing home bias, that is up to you. I view stocks as risky on the short run and do not think I can avoid the volatility of stocks enough other than by adding fixed income.
Fund managers cannot predict future market movements, so do not expect that they can hedge 100% of the currency risk effectively.
I think you would have some good options if you do want to hedge the currency risk (the iShares MSCI world ETF also has a version hedged to CHF I believe). Would be preferable over a heavy allocation to your home country in my opinion.
3. Amundi synthetic replica of index
-> I was not aware of this. I need to read more on the subject. I think that I will follow your advise and stick with physical replicas. The aim of this fund is to have some european equities in euro.
-> Maybe use buy "iShares STOXX Europe 600 UCITS ETF (DE)" ?
Yes, that is a better option for market weighted European equities. It has about 30% in the UK and 15% in Switzerland, so it is not just Eurozone equities. Would suggest to figure out first if you want to hedge currency risk though.
5. Corporate bonds behave more equity-like
-> true, I just saw the very good results of this fund and thought that it was safer than stocks :)
-> I will read a bit more about it and perhaps shift a few percents from corporate bonds to other assets (see point 4.)
With bonds, there are two main risks impacting the returns: credit risk and interest rate risk. Both risks are not very well rewarded if you increase them, so if your objective is to reduce the impact of equities in the short run you would be best off with short term (+-3yr duration) high quality (rating of AA and higher) bonds. Corporate bonds are indeed most often safer than stocks of the respective companies, as stock holders are usually last in line in receiving money if a company is liquidated. The increased credit risk makes them more behaving like equities and thereby less of a downside protection for equities. You can assess the interest rate risk by looking at a fund's duration. As a rule of thumb, a fund with a duration of 1 year will fall in value with 1% if interest rates rise with 1%, similarly a fund with a duratioon of ten years may fall 10% if interest rates rise 1%.
These just being some added thoughts, be sure to do your own research. Hope this helps you somewhat.
Post by: Dago on December 16, 2015, 01:07:39 PM
| UBS ETF (CH) - SMI (CHF) (CHF) A-dis | 7.5% |
| UBS ETF (CH) - SMIM (CHF) (CHF) A-dis | 12.5% |
| iShares Core CHF Corporate Bond (CH) | 15.0% |
| iShares Swiss Domestic Government Bond 7-15 (CH) | 30.0% |
| iShares MSCI World CHF Hedged UCITS ETF | 27.50% |
| iShares Core MSCI Emerging Markets IMI UCITS ETF | 7.50% |
I have 55% stocks and 45% bonds, all in chf.
I have decreased the amount of swiss stocks to 20%.
The international stocks are hedged apart from the emerging market etf. The cost of the hedging is 0.55 TER and it will make me feel more relaxed.
I have changed from iShares to UBS for the Swiss stocks because they cost less.
Any ways, I can change the portfolio allocation in the future if conditions or my mind change.
By the way the Swissquote saving account has actually a limited number of ETFs available. Most of the ones I wanted were not included. Therefore I will be using a standard Swissquote trading account.
Thank you again for your help,
Barth
Post by: dmn on December 17, 2015, 05:59:33 AM
The international stocks are hedged apart from the emerging market etf. The cost of the hedging is 0.55 TER and it will make me feel more relaxed.
I have changed from iShares to UBS for the Swiss stocks because they cost less.
0.55% additonal TER are a high price to pay for currency hedging. In the long run, currencies tend to fluctuate around purchasing power parity, which means that in the very long run they hardly move at all if you correct for inflation.
Depending on your age you might keep the stocks for 30-50 years. In 40 years, you will have paid about 20% of your international equities' value on currency hedging (assuming a constant 0.55% TER). Even if the CHF appreciates by 25% compared to the USD, you will only break even. To me, this sounds like a very expensive form of insurance.
Post by: Dago on December 17, 2015, 12:52:17 PM
How do you compute 20% payment over 40 years ?
If I look at the historical chf vs usd it appreciated a lot more than 25%, or am I misreading it ?
http://fxtop.com/en/historical-exchange-rates.php?A=1&C1=USD&C2=CHF&YA=1&DD1=01&MM1=01&YYYY1=1965&B=1&P=&I=1&DD2=17&MM2=12&YYYY2=2015&btnOK=Go!
Post by: dmn on December 18, 2015, 02:51:10 AM
Interesting point. The 0.55 is the full TER not an addition to the "standard" TER.
How do you compute 20% payment over 40 years ?
Ah, I assumed that you had checked that the 0.55% was the price of hedging. Looking at the iShares prospectus, I get the impression that the hedging cost is not part of the TER, but that it is instead considered part of the fund's investments. I did not spend a lot of time checking, but I could not find clear indications for how much the hedging costs.
The 20% over 40 years was based on the 0.55% p.a. you stated, I calculated the fraction of your money not eaten up by the TER as (1 - 0.0055)^40 and got something close to 0.8, i.e. 80%.
Quote
If I look at the historical chf vs usd it appreciated a lot more than 25%, or am I misreading it ?
Those exchange rates do not correct for differences in inflation. The stocks you buy are real assets: factories, land, material, machines, etc. They move up with inflation: if the US had 50% inflation, then US stocks would be worth 50% more measured in USD. Thus, an un-hedged stock market fund is generally not strongly affected by inflation. For exchange rate moves due to persistent inflation, hedging is not necessary.
Please also understand that differences in inflation are not removed by hedging: hedging only removes the unexpected exchange rate changes, the expected changes are incorporated into the fees you pay. To understand whether currency hedging is useful for you, you would need to look for inflation-adjusted exchange rates, which generally move less in the long run. As I understand it, hedging mostly limits your exposure to unexpected inflation-corrected upsurges in the CHF, e.g. during the last few years. And it makes you lose money in case of anologous unexpected downwards corrections in the CHF.
Post by: SGontour on December 18, 2015, 11:53:36 AM
Looks fine for me and your targets / risks you want to take.
My current asset allocation:
- Vanguard FTSE All-World High Div Yld ETF CHF...........70%
- iShares Swiss Dividend (CH)..................................20%
- iShares Emerging Markets Dividend UCITS ETF (CHF)...10%
-> I love dividends, so I think the higher risk and the higer TER are worth it :)
-> The vanguard ETF has about 5% in Swiss companies and another 5% in Emerging Markets.
-> None of them are hedged regarding currency risks.
-> 100% in stocks, as I do have a pension account with my employer, which is a huge part of my net worth and is almost risk free (and also brings almost no returns).
Post by: Agarshaker on March 14, 2016, 02:57:19 PM
You collectively ROCK!
Post by: samuck on March 14, 2016, 03:55:03 PM
Btw did you guys know pillars 3a are actually not bound to 45% equities? I've realized just this year, not many institutes seem to bother, though. I'm contributing now to the Raiffeisen Pension Growth with 67% shares (includes also real estate, commodities and bonds) and 0.45% management fee, check it out, what do you think:
https://www.raiffeisen.ch/raiffeisen/internet/docs.nsf/$UNID/DF629972A00E2DDAC125785400388C7E/$file/PensionGrowth-d.pdf (https://www.raiffeisen.ch/raiffeisen/internet/docs.nsf/$UNID/DF629972A00E2DDAC125785400388C7E/$file/PensionGrowth-d.pdf) (German)
Update: TER is 0.9%, which is high but comparable to other Swiss 3a pillars.
Post by: Shef on March 14, 2016, 04:14:28 PM
Post by: samuck on March 14, 2016, 04:57:37 PM
Post by: Dago on March 20, 2016, 03:58:06 AM
I just wanted to share a tip.
When opening an account in Raiffeisen you become a shareholder ("sociétaire" to be precise) and you are forced to buy 1 share ("part sociale", 200 chf). I kept this one share and did not think of it till last year when I realized it was returning 6% (max, but it was the actual return in the past two years). I consider it an excellent return in Switzerland even if the value of the share is never going to increase (it is not an actual share).
You can actually buy 50 shares for a total of 10000chf (at least in my Raiffeisen in Geneva), getting 600.- every year.
EDIT: I sent this post a bit too fast. I wanted to add that the risk is linked to the inflation. As the share will not grow in value, any inflation is bad for you. If inflation comes back, I will sell the shares back to the bank.
Post by: dmn on March 20, 2016, 05:02:16 AM
ER of 0.9% (or 0.88% for the Postfinance Pension 45) for basic indexing is a rip off.
For this reason I figured it makes more sense to buy cheap ETFs in taxable accounts. The tax savings of the pillar 3a are approximately eaten up by the extra fees, so why not keep the flexibility of taxable accounts?
Post by: samuck on March 20, 2016, 03:47:35 PM
ER of 0.9% (or 0.88% for the Postfinance Pension 45) for basic indexing is a rip off.
For this reason I figured it makes more sense to buy cheap ETFs in taxable accounts. The tax savings of the pillar 3a are approximately eaten up by the extra fees, so why not keep the flexibility of taxable accounts?
I have never made an exact calculation, have you (or anyone else in that thread)? Needs to include fact that there is no wealth tax on 3a and neither on capital gains through them etc.
As long as I can contribute to both 3a pillar AND taxable saving, I decided for myself to do both and to consider 3a saving as the more conservative part of my savings. If I could save only CHF 6768/12 per month or less, I would reconsider.
Post by: boston swiss on March 25, 2016, 01:57:35 PM
Quick question - is there a link anyone can offer to the basics of the pillar investing in Switzerland and how this money is provided to a non-Swiss citizen if/when you leave the country? My company provided this info once, but my focus at the time was more trying to understand how much I was receiving vs. my old job in the US. I'd now like to maximize my Swiss retirement funding, acknowledging that most of my investment experience in such matters is limited to the US 401k into Vanguard funds and US real estate investments. I see some of the tax savings mentioned on Pillar III contributions, but would like to understand what the limits for these contributions for a US citizen living in Switzerland. Thanks for any help you can provide!
I'd look forward to joining up with some folks for a Mustachian meeeting in Switzerland.
Post by: wapiti on March 27, 2016, 06:30:16 AM
I have done quite extensive research about third pillar and index fund in Switzerland (I'm a swiss citizen)
There is currently 3 funds which offer more than 50% in equity for the third pillar:
-UBS (CH) Vitainvest 75 World, active fund, 75 % of equities, TER 1.6 %
–UBS (CH) Vitainvest 75 Swiss, active fund, 75 % equites, TER 1.6 %
-Raiffeisen Index Fonds – Pension Growth, passive fund 67 % equities, TER 0.9%
There are some passive funds with less equities:
-Postfinance pension 45
-Swisscanto BVG 3 Index 45
-Maybe others
I strongly recommend the raffeisen fund as the fund is passive, has 67 % equities and 75 % of foreign equities are CHF hedged.
"The tax savings of the pillar 3a are approximately eaten up by the extra fees, so why not keep the flexibility of taxable accounts"
it's depend of each situation and what is the ETF. I will do some calculation. If you have done some simulation, i would be happy to have an eye on it ;)
To buy index fund, I use postefinance and swissquote saving account.
My big question now: does 3rd pillard is a good investment if your take an early retirement ?
Post by: samuck on March 27, 2016, 11:17:04 AM
My big question now: does 3rd pillard is a good investment if your take an early retirement ?
Whether you take an early retirement or not is not relevant, I think. Whether you retire early or not, you can "cash" your 3a pillars only as of the age of 60 up to 65 (a split is recommended for tax reasons). Take a look here: http://www.bsv.admin.ch/kmu/ratgeber/00889/index.html?lang=en
Quick question - is there a link anyone can offer to the basics of the pillar investing in Switzerland and how this money is provided to a non-Swiss citizen if/when you leave the country?
I see some of the tax savings mentioned on Pillar III contributions, but would like to understand what the limits for these contributions for a US citizen living in Switzerland.
Check out what the Swiss government says: http://www.bsv.admin.ch/kmu/ratgeber/00889/index.html?lang=en (not in English, unfortunately).
The financial institutions that offer you the pillar 3a will certainly give you the specifics of how they cash out if you move abroad. For maximum annual contribution, it's the same amount as for Swiss citizens: 6768 CHF currently. This should save you roughly CHF 1000 per year, however, you will be taxed once you cash out.
Post by: wapiti on March 27, 2016, 11:50:57 AM
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Whether you take an early retirement or not is not relevant, I think. Whether you retire early or not, you can "cash" your 3a pillars only as of the age of 60 up to 65 (a split is recommended for tax reasons
No. You can also cash your 3a pillar if you quit switzerland, buy a house/appartement, create your own company or become freelancer.
The explanation on https://www.ch.ch/en/3rd-pillar/
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You can only withdraw money from a 3a pillar pension plan before reaching retirement age if you want to use it to buy or build a residential property, go abroad to live permanently, or set up your own business.
The law article in german on http://www.bsv.admin.ch/kmu/ratgeber/00889/index.html?lang=en
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Ein Bezug der Gelder aus der Säule 3a ist in folgenden Fällen möglich:
bei der Aufnahme einer selbstständigen Erwerbstätigkeit (für bisher Unselbstständig-erwerbende),
bei der Aufgabe der bisherigen selbstständigen Erwerbstätigkeit und Aufnahme einer neuen, andersartigen selbstständigen Erwerbstätigkeit (für bisher Selbstständigerwerbende),
zum Erwerb von Wohneigentum,
beim definitiven Wegzug aus der Schweiz,
beim Bezug einer ganzen Invalidenrente der IV,
ab vollendetem 60. Altersjahr (Frauen 59. Altersjahr); die Altersleistungen werden bei Erreichen des ordentlichen Rentenalters der AHV fällig (65 Jahre für Männer und 64 Jahre für Frauen). Weist der Vorsorgenehmer nach, dass er auch nach dem ordentlichen Rentenalter der AHV erwerbstätig ist, kann er weiterhin Beiträge an die Säule 3a leisten und es kann der Bezug bis höchstens 5 Jahre nach Erreichen des ordentlichen Rentenalters der AHV aufgeschoben werden.
Post by: Shef on March 28, 2016, 09:39:58 AM
My big question now: does 3rd pillard is a good investment if your take an early retirement ?
ER of 0.9% (or 0.88% for the Postfinance Pension 45) for basic indexing is a rip off.
For this reason I figured it makes more sense to buy cheap ETFs in taxable accounts. The tax savings of the pillar 3a are approximately eaten up by the extra fees, so why not keep the flexibility of taxable accounts?
I have never made an exact calculation, have you (or anyone else in that thread)? Needs to include fact that there is no wealth tax on 3a and neither on capital gains through them etc.
As long as I can contribute to both 3a pillar AND taxable saving, I decided for myself to do both and to consider 3a saving as the more conservative part of my savings. If I could save only CHF 6768/12 per month or less, I would reconsider.
The question whether is worth to invest in an 3rd pillar-account is also discussed in other places in the internet, e.g. http://www.obermatt.com/de/über-uns/blog/säule-3a-steuervorteil-gut-für-hausbesitzer-schlecht-für-alle-unter-55.html
In my opinion, it's worth as a substitute of a saving-account. But if you rather invest in etfs, you pay at least 0.5% higher fees every year (never mentioned here: https://www.wertschriftensparen.ch where you can buy the Swisscanto BVG 3 Index 45 R (3rd pillar fund) with a TER of 0.35%, but there's a custody fee of 0.5% (no commission at buying).
Post by: Grog on March 31, 2016, 10:27:59 PM
Since in taxable account your dividend/bond distribution is taxed as income (let's say about 1/4 of today's 2% dividend/bond dis, also 0.5% annually) and you suffer from the wealth tax (around 0.1% depending on the canton you live in), being able to invest "free of charge" (0.57%- ~0.6%) while reducing your taxable income is still very important.
But if you want to retire early, then I honestly don't know if it is the right vehicle. Since our first, state based pillar is in the red (news of days ago, half billion loss for 2015) there are already talk that want to restrict the access to 2nd and 3rd pillar to avoid having retired people on assistance because they used up their account to buy a home/start an activity.
You have to account for the risk that this money may be only accessible at 60. And maybe even later if they change the law.
Since I can save well north of 7k, I'm still using it and plan to retire at 50, but every situation is different.
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Post by: dmn on April 01, 2016, 01:44:43 AM
Since in taxable account your dividend/bond distribution is taxed as income (let's say about 1/4 of today's 2% dividend/bond dis, also 0.5% annually) and you suffer from the wealth tax (around 0.1% depending on the canton you live in), being able to invest "free of charge" (0.57%- ~0.6%) while reducing your taxable income is still very important.
Remember that you have to pay taxes later on distribution. You defer the taxation of your current income and of your capital gains. Given the currently very low tax rates in Switzerland I am not sure that the tax rate on distribution will be lower. For all I know, it might as well be higher, given the government's unfunded future liabilities.
I thus only expect permanent savings from the wealth tax, which is only about 0.1%, and from the extra compounding due to deferred capital gains taxes. An 0.5% extra TER cancels these benefits: even in your calculation, which ignores the taxes during payout, you just break even.
What remains is the greatly reduced flexibility of 3a savings. I do not know when I will be able to access them, and it is not clear how they will be treated if I should ever move to another country. (Presumably they would be taxed much more heavily in that case.) So I prefer to buy low-fee assets like the cheapest of the Vanguard ETFs traded on the Swiss stock exchange with after-tax money.
Post by: Grog on April 01, 2016, 02:41:00 AM
Since in taxable account your dividend/bond distribution is taxed as income (let's say about 1/4 of today's 2% dividend/bond dis, also 0.5% annually) and you suffer from the wealth tax (around 0.1% depending on the canton you live in), being able to invest "free of charge" (0.57%- ~0.6%) while reducing your taxable income is still very important.
Remember that you have to pay taxes later on distribution. You defer the taxation of your current income and of your capital gains. Given the currently very low tax rates in Switzerland I am not sure that the tax rate on distribution will be lower. For all I know, it might as well be higher, given the government's unfunded future liabilities.
I thus only expect permanent savings from the wealth tax, which is only about 0.1%, and from the extra compounding due to deferred capital gains taxes. An 0.5% extra TER cancels these benefits: even in your calculation, which ignores the taxes during payout, you just break even.
What remains is the greatly reduced flexibility of 3a savings. I do not know when I will be able to access them, and it is not clear how they will be treated if I should ever move to another country. (Presumably they would be taxed much more heavily in that case.) So I prefer to buy low-fee assets like the cheapest of the Vanguard ETFs traded on the Swiss stock exchange with after-tax money.
First, there are no capital gain taxes in Switzerland. Only on real estate. ETF, funds, stocks are never taxed for capital gains, period. Only dividends are taxed, and as income. That could change of course, but I don't see it happening.
The taxes are deferred yes but the percent rate increase with the account. A good solution would be to have around let's say 5 different pillar 3a accounts of 100'000 chf each. You can cash them out one at a time from 60 to 65.
Each time you pay the deferred taxes on it. A baffling ~5000 chf for a 100k account depending on the canton where you live in:
https://www.postfinance.ch/de/priv/prod/info/fincalc/cap3a.html/calculator/logicalc/tax/capitalizationtax/Index.do
In total you will pay ~25'000 chf of deferred taxes for 500k chf of capital, 5% of tax rate.
If you don't create the 5 accounts and retire your money at once (500k) you will pay double as much (56k of taxes)
Todays if you make from 80k up to 100k salary the contribution to the säule 3a of 6768 chf will reduce your taxes by an amount of ~1200 chf give or taken.
Let's say that you don't use säule 3a and you have a more aggressive allocation of 80/20 in your taxable account. You can then only invest the remaining money after taxes have been paid so 6768-~1200 = 4600 chf.
Let's assume the growth of 80/20 allocation is ~6% -0.5% of taxed dividend/distributions (1/4 * 2%)-0.1% wealth taxes - ETF costs (0.1 %) = 5.3%
To buy etf you have the swiss stamp duty tax, 0.15% at every transaction + transaction costs let's say a total of 15 chf per 4600 chf of investments, netto investments 4585 chf.
You invest for 40 years (20y to 60y) an amount of 4585 @5.3%. That's roughly 627'000 chf at age 60.
Now let's say you are more conservative and wants a 60%/40% allocation in your taxable account. That brings the rate of expected return down to 5% and a total growth expenses included of 4.3 %. Your final capital will be ~488'000 chf.
And finally let's say you want to invest with the same allocation as the säule 3a of 45% stocks/55% bonds. Let's assume 4% rate of return that goes down to 3.3% with expenses. Your final capital will be 382000chf.
On the other hand you can invest 6768 chf with a TER of 0.57 and a buying commission of 1% with an allocation of 45/55.
Rate of return assumed as 4% - 0.57%TER =3.43%. No other taxes but for the final 5-10% when you cash in the accounts.
Contributions: 6768 - 1% commission = 6700 chf
After 40 years growing at 3.43%: ~576'000 chf
Netto capital after deferred taxes: 550'000 chf.
So if you make a risk-adjusted comparison in which you keep both allocation identical (same risk) but you invest 4600 in taxable or 6700 chf in tax deferred you may get to 550k vs 380k. Thats 170k more just because you were able to invest 1200 chf more and that difference compounded over the years, amounting to much more than the deferred 25k of taxes. So you have to consider the opportunity costs of those 1200 chf lost to the government.
So while you are right that you greatly gain in freedom if you invest in taxable, at the same time you are forced to take on more risk (for instance 70/30) to barely break even with a 45/55 in tax deferred.
So what I wanted to say is that you everyone has different situations but if you make a risk-adjusted comparison it still is good to invest in the säule 3a.
You just have to accept the greatly reduced freedom, that's for sure, but everyone has different goal and different allocations.
If you want to have an aggressive allocation, then maybe the Säule 3a is not for you. If you don't make 80k of yearly salary, then the säule 3a may not be for you. There are a lot of personal factor to consider.
And by the way, I'm always using a dividend/bond distribution average of 2%. If the interest rate goes up, that can only increase and since you are paying 1/4 of taxes on that as income, it will only get worse.
If Dividend and Distribution go up to 4% annually, you have to pay 1% in taxes every year. That's an huge drag that you don't have in the säule 3a.
Post by: dmn on April 01, 2016, 03:05:05 AM
In total you will pay ~25'000 chf of deferred taxes for 500k chf of capital, 5% of tax rate.
Oh, I did not know that the 3a payout is taxed below the normal income tax rate. For people retiring in Switzerland, this makes the 3a accounts much better than I thought.
I still feel uneasy about the prospect of paying the income tax rate of whichever country I will live in at that age on the full payout amount. Other countries are less generous on deferred taxation.
Quote
First, there are no capital gain taxes in Switzerland.
Sorry, that was incorrect language on my part. I meant capital income, i.e. interest and dividends, not capital gains.
Post by: Grog on April 01, 2016, 03:09:45 AM
Post by: wapiti on April 03, 2016, 12:53:30 PM
As my current knowledged i don't see any good case to put money in a 3a with ETF if you retired before 65.
BTW: raffeisen and ubs offer ETF with more than 45% of shares.
Post by: Grog on April 04, 2016, 02:31:38 AM
I've informed myself and it seems that if you take the money to buy a home, the same tax rate is applied as for the take out at 60-65 years old.
So around 5% for 100k and around 3.5% if you take out less, around 30k (also you pay 1k of taxes).
I think if your plan to FIRE entails buying a home somewhere (and there are some surprisingly cheap ones even in Switzerland, in the forgotten valleys aways from civilization) it could make sense to stash aways in the säule 3a:
http://www.finanzmonitor.com/3-saule/kriterien-vorbezug-auszahlung/
Post by: sirde on April 21, 2016, 10:49:06 AM
I've been introduced to this blog a few month ago and have realized since then how uninformed we can be about finance and tax optimization in Switzerland. Before then in my mind tax optimization meant cheating and investment meant gambling....
After a few month of browsing the web (thanks for this excellent thread!), reading "A random walk on street" and "le capital au 21e siècle" and talking (too much) to everybody, I'm ready to start ;)
The plan:
I was thinking about transferring some money to my 2nd pillard, but have decided not to since the interest are quite low and it will most likely get harder and harder to get it.
I just opened a 3rd pillard at banque Coop with the swisscanto ETF.
I already have a insurance 3rd pillard at Retraites populaire from a few years ago, I'll have to decide to continue or to stop it.
Finally I'm about to open an account (most likely on cornertraders) to buy ETF all-world.
If some romand want to meet I'd be interested ;)
Post by: chestwood96 on April 23, 2016, 07:43:12 AM
80% Vanguard FTSE All-World UCITS ETF @ 0.25%
20% iShares Core SPI @ 0.10%
I do know if I should add anything else, maybe some reit or something?
Just 2 funds looks kind of boring abut I guess boring is good sometimes (I am not even shure I want the SPI, I just have that for currency reasons).
Post by: wapiti on April 23, 2016, 12:05:29 PM
Vanguard FTSE All-World UCITS ETF @ 0.25% is a really good choice
For iShares Core SPI @ 0.10%,
1. a big % of equities are already included in vanguard index.
2. The 3 main position of the SPI (Nestle, Novartis, Roche) weight around 50% of the indice, not really diversify (SLI index correct this issue)
3. As the fund is swiss based, the dividend wil be cut with "impot anticipé"
Post by: Grog on April 23, 2016, 12:47:01 PM
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Post by: ecomic on April 24, 2016, 02:26:49 AM
It is not as common now than years before, to talk about taxation discounts. :) Now a days I would be more worried about making a real profit from any investment, rather than looking for the cheapest taxation product. We have seen generalised markets losing 30% of their value in less than a month. The oil problem it is still not solved, while Europe and Asia havent settled their economies in the good direction. Investing in funds seems safer, even more if its in the long run, but I dont think are the safest vehicles to invest money right now. Every country has different taxation laws, so it is not possible to have a generalised conversation about it.
Markets are tricky and my advise is to look for an independent investing advisor (or company), never a bank and look for oportunities that can bring profits around 15 - 20% without excessive risks. Sectors like oil or health/Pharm have great potencial of growing exponentially.
Post by: Expatriate on April 25, 2016, 06:37:25 AM
@Dago
Looks fine for me and your targets / risks you want to take.
My current asset allocation:
- Vanguard FTSE All-World High Div Yld ETF CHF...........70%
- iShares Swiss Dividend (CH)..................................20%
- iShares Emerging Markets Dividend UCITS ETF (CHF)...10%
Since dividends are taxed as ordinary income and capital gains are not taxed at all, is not disadvantageous to hold dividend funds? I only hold accruing funds in my taxable accounts (with InteractiveBrokers in the UK by the way). Or is there something wrong with my reasoning?
Post by: Grog on April 25, 2016, 08:44:28 AM
If you want to know how much it is, you have to look at this website (which only gives you I think the taxable income for share on the SIX)
https://www.ictax.admin.ch/extern/de.html
If you try to look for an accruing fund (no distribution) you will see that unless is a very peculiar fund (only "cash reserves distribution" or buyback shares) you will have some income to declare and be taxed upon.
If your ETF is not listed on the website and you have to decalre your income in Switzerland, then you'll have to look in the annual report and look for the taxable income generated by your ETF. It could be a pain in the ass.
This fact (you are taxed in every case) and the not-zero transaction costs you usually have in CH makes dividend itself not so bad.
What could be questionable is the fact that a "high yield dividend strategy" is not really better and usually less diversifed than a pure passive capital-weighted index ETF.
Post by: Expatriate on April 25, 2016, 10:13:22 AM
It depends where you are taxed. In Switzerland it doesn't matter if your fund distribute dividends or not, you are always going to pay taxes on the dividend, even if it stays "internal" to the fund.
That makes sense and I should've known. Only recently started investing. Agree that it could be a pain in the ass to figure out which part of appreciation was due to dividends
Thanks for the feedback!
Post by: wapiti on April 25, 2016, 01:47:14 PM
Quote
In Switzerland it doesn't matter if your fund distribute dividends or not, you are always going to pay taxes on the dividend, even if it stays "internal" to the fund.You are right.
If the fund is based in switzerland and distribute dividends, 35% will be keep by the tax administration until you have declared your investments.
This slow the reinvestment of dividend.
On my side, accumulation ETFs are better, because it's reinvest dividends for free.
Post by: Grog on April 26, 2016, 12:03:23 AM
You are right.
If the fund is based in switzerland and distribute dividends, 35% will be keep by the tax administration until you have declared your investments.
This slow the reinvestment of dividend.
On my side, accumulation ETFs are better, because it's reinvest dividends for free.
Absolutely. If you receive dividend, and then reinvest it, you are going to pay the 0.15% swiss stamp duty on the transaction. Therefore Accumulating ETF are cheaper.
On the other hand, having the cash flow from the dividend makes it easier to rebalance and to invest more money together, which drives down the total cost of the single transaction (ex: investing 1000 chf of savings with postfinance paying ~28 chf->bad, paying 29 to invest 2000 chf (1000 coming from from dividends) only half so bad ;) ).
I think in the end is a question of personal preference. Accumulating ETF are probably cheaper, but the cash flow from dividends makes it easy to rebalance, maybe even avoiding rebalance transactions sometimes. So I believe it's kind of a wash.
Just a final note: not all the dividend that you receive is subjected to the "impot anticipé/verrechnungsteuer": swiss company can distribute reserve capital instead of profit (dividend) and this capital distribution is not taxed. For instance the SPI-Mid ETF had a total distribution of 1.69 chf per share, of which 70 cts were not taxable (because capital redistribution) and 99 cts were taxable as dividend:
https://www.ictax.admin.ch/extern/de.html#!/instrument/CH0130595124/2015
so more often than not you are not "losing" the whole 35%: in this case it would be 35%*0.99/1.69 =~ 20% of the distribution.
Post by: Dubenstash on April 26, 2016, 02:50:08 AM
Long time reader - first time poster. Firstly, thank you for this awesome thread - its been hugely informative. I'm interested to know if anyone has found an advisor/tax consultant who could help create the most tax efficient strategy to create their investment portfolio. I am at the start of my journey and it seems the tax optimization/strategy for investing might almost form the foundation for an investment plan. I live in Zürich and would be very appreciative for any recommendations. I am very interested in setting up a new company and would like to know if this could be advantageous from the point of view of tax optimization.
Thanks,
D
Post by: Grog on April 26, 2016, 05:05:11 AM
Hello Everyone,
Long time reader - first time poster. Firstly, thank you for this awesome thread - its been hugely informative. I'm interested to know if anyone has found an advisor/tax consultant who could help create the most tax efficient strategy to create their investment portfolio. I am at the start of my journey and it seems the tax optimization/strategy for investing might almost form the foundation for an investment plan. I live in Zürich and would be very appreciative for any recommendations. I am very interested in setting up a new company and would like to know if this could be advantageous from the point of view of tax optimization.
Thanks,
D
Hi, I can't help you, like many others here we are at the start of our Financial journey and for the moment the cost and time involved in finding and discussing with an advisor is not worth it. I think maybe when you start going beyond 400k it could make sense, but many of us are far away. You could try on the forum of
www.cash.ch
or try to see if they published somthing here:
www.10x10.ch
Post by: chestwood96 on April 27, 2016, 05:24:07 AM
Hi chestwood96,
Vanguard FTSE All-World UCITS ETF @ 0.25% is a really good choice
For iShares Core SPI @ 0.10%,
1. a big % of equities are already included in vanguard index.
2. The 3 main position of the SPI (Nestle, Novartis, Roche) weight around 50% of the indice, not really diversify (SLI index correct this issue)
3. As the fund is swiss based, the dividend wil be cut with "impot anticipé"
If you want a more domestic bias (chf, Swiss economy) I would buy either a SMIM etf or the excellent ubs etf SPI-Mid, 80 companies of middle capitalisation and diversified. Things like Holcim, sprungli, lindt, the largest cantonal banks, etc. The SPI is dominated (50% of the index!) By Roche Nestlé novartis, that follows the global market trend already captured by the all-workd etf.
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OK so no SPI (not that I care much about the Nestle/Roche/Novartis thing because those are basically immortal evil corp)
I am actually not shure if I even need a chf fund but I still would like one.
SMIM and SPI-Mid both look very interresting but intuitively I would go for the SPI-Mid because more is better right?
So I would just swap out the 20% SPI with 20% UBS ETF (CH) – SPI® Mid (CHF) A-dis @ 0.25%? or is 20% home currency too much?
(Yay UBS, I actually have UBS stocks but I have no Idea where they are XD)
Post by: Grog on April 27, 2016, 05:41:30 AM
OK so no SPI (not that I care much about the Nestle/Roche/Novartis thing because those are basically immortal evil corp)
I am actually not shure if I even need a chf fund but I still would like one.
SMIM and SPI-Mid both look very interresting but intuitively I would go for the SPI-Mid because more is better right?
So I would just swap out the 20% SPI with 20% UBS ETF (CH) – SPI® Mid (CHF) A-dis @ 0.25%? or is 20% home currency too much?
(Yay UBS, I actually have UBS stocks but I have no Idea where they are XD)
Also I think the UBS SPI-mid is the cheapest and largest (more diversified) mid-size ETF in Switzerland. About your question: don't forget that Vanguard All-World has already 3.1 % of swiss stocks (mostly Novartis, roche, nestle)
My personal allocation for the stock side is 75% All-World ex-CH / 25% switzerland (with 12.5% SMI and 12.5% SPI-Mid). I include the swiss percentage of the All-World in my Swiss allocation, so I have an excel spreadsheet to check the percentage since they are not immediately obvious.
I think 20% in SPI-Mid and 80% in All-World is a good allocation too. It is sort like a small cap tilt, since most of the company in the SPI-Mid are relatively small, and you reduce your overall currency risk. And some year the SPI-Mid will be doing well while the all-world lags behind so there is an imperfect correlation that provides nice rebalancing opportunity.
Post by: chestwood96 on April 27, 2016, 05:49:11 AM
Also I think the UBS SPI-mid is the cheapest and largest (more diversified) mid-size ETF in Switzerland. About your question: don't forget that Vanguard All-World has already 3.1 % of swiss stocks (mostly Novartis, roche, nestle)
My personal allocation for the stock side is 75% All-World ex-CH / 25% switzerland (with 12.5% SMI and 12.5% SPI-Mid). I include the swiss percentage of the All-World in my Swiss allocation, so I have an excel spreadsheet to check the percentage since they are not immediately obvious.
I think 20% in SPI-Mid and 80% in All-World is a good allocation too. It is sort like a small cap tilt, since most of the company in the SPI-Mid are relatively small, and you reduce your overall currency risk. And some year the SPI-Mid will be doing well while the all-world lags behind so there is an imperfect correlation that provides nice rebalancing opportunity.
That makes about 23.1% CH wich seems ok if compared to your allocation. (I might retire on USD who knows)
But it is still only 2 funds I kind of think I need more than that. I am not really interrested in bonds but what about REIT and stuff like that?
Post by: Kilbim on April 27, 2016, 11:50:02 AM
I am getting crazy trying to find the best solution, maybe you have experience and you can help me out.
I am looking to invest 5000 CHF first year, then 1500 following years.
I want to invest in 3 ETF using a dollar cost averaging strategy, this means investing 3 or 4 times a year in those 3 ETFs. This makes more or less 12 investments of 150 CHF each year (apart from first year).
It seems doing this is very expensive because of the flat-fees most brokers charge. My consultant at UBS advised me that if I want to invest this way I am better off buying their funds, since they don't have flat fees.
But their funds have very expensive other fees, compared with ETFs.
Anyone knows a cheap way to buy small sum ETFs in Switzerland? If I were in the USA I'd just go with vanguard, but here it's not available for private investors.
So, anyone with experience in this?
Thank you
Post by: samuck on April 28, 2016, 02:31:57 AM
Given the relatively low figure you intend to invest per year, I'd recommend either a mutual fund (for instance, Postfinance Global Fund), where you can make monthly investments as low as CHF 100) however, with high TER. Or you give Truewealth a try, where you can build a well diversified portfolio, even with low investements
Post by: Grog on April 28, 2016, 05:22:59 AM
We have to live with this reality that transaction fee are high. Even postfinance and his funds (postfinance global) has a buy in fee of 0.5% and a TER of 0.88%.
So forget mutual funds.
Swissquote dynamic savings can buy you some etf at low costs (9 chf+stock exchange taxes, no depot fee) but you can choose only between some 80 ETF.
If I were you, I'll do a two asset location:
- cash
- Vanguard All-World ETF, cheapest (0.25 TER) all-country ETF out there, bought once per year
three ETF with rebalancing is already too much if you are investing only ~1500 chf per year. The bonus you will gain will be taken away by depot and transaction fee.
Open a POstfinance or Corenrtrader (no depot fee) and buy once per year and keep the rest as cash. Forget Swiss bonds etf: you'll pay transaction and taxes to buy it, we have negative inteterests so someday the value of the fund will decrease following rise in the interest rates. I know it's painful to leave cash at 0.1% interest but for so little money it really makes no sense to buy bond in today's low rates environment. And don't forget we have a slight deflation of around 0.5% so in reality Cash is making 0.6% a year.
Just my two cents.
Post by: Kilbim on April 28, 2016, 11:44:15 AM
if you are investing only 5000 chf and then 1500 I think you could further simplifiy your portfolio.
We have to live with this reality that transaction fee are high. Even postfinance and his funds (postfinance global) has a buy in fee of 0.5% and a TER of 0.88%.
So forget mutual funds.
Swissquote dynamic savings can buy you some etf at low costs (9 chf+stock exchange taxes, no depot fee) but you can choose only between some 80 ETF.
If I were you, I'll do a two asset location:
- cash
- Vanguard All-World ETF, cheapest (0.25 TER) all-country ETF out there, bought once per year
three ETF with rebalancing is already too much if you are investing only ~1500 chf per year. The bonus you will gain will be taken away by depot and transaction fee.
Open a POstfinance or Corenrtrader (no depot fee) and buy once per year and keep the rest as cash. Forget Swiss bonds etf: you'll pay transaction and taxes to buy it, we have negative inteterests so someday the value of the fund will decrease following rise in the interest rates. I know it's painful to leave cash at 0.1% interest but for so little money it really makes no sense to buy bond in today's low rates environment. And don't forget we have a slight deflation of around 0.5% so in reality Cash is making 0.6% a year.
Just my two cents.
How would you go about buying Vanguard?
Post by: Grog on April 28, 2016, 01:53:20 PM
How would you go about buying Vanguard?
open an account with a stock brocker that doesnt bill custody fee (like swissquote) or an inactivity fee (like Interactive brokers). As far as I know there are two: postfinance etrading (easy to use, trnasaction is 27+0.15% of tax) or corner trader (pretty complicated interface thought for stock gambler, but you can buy ETF for 20 chf+0.15%)
Open a test account gratis on cornertrader they give you 100k fake money to play with and see qhat you think of the interface and try to buy the vanguard etf.
If you are lost, go to postfinance etrading. Try to buy while keeping the transaction fee around 1% of the invested money (like 25 chf fee for 2500 chf money)
just my experience, but I can manage to invest a little more so I don't know what I would do in your situation.
Post by: wapiti on May 01, 2016, 02:58:03 AM
Post by: Kilbim on May 01, 2016, 08:48:30 AM
Since I want to invest very little sums each month and apply dollar cost averaging, this would allow me to do it.
With the other solitions listed I wouldn't be able to do it (given the costs of transactions).
Post by: wapiti on May 01, 2016, 09:30:39 AM
Of what i have understood with truewealth you choose an asset allocation, not specific ETFs.
You will need minium 8.500 to open an account :
"What is the minimum amount to open an account?
The minimum investment required for a True Wealth portfolio is CHF 8,500. This allows us to offer you a tailored portfolio with a sufficiently broadly diversified asset mix."
Post by: Kilbim on May 01, 2016, 10:39:11 AM
I inteded to divide this in 3 ETFs, and investing 4 times a year. This made investing 12 times ~400 CHF, and then each year investing 12x125chf.
The cost of buying 12 ETFs a year, even with the cheapest option, is actually 9 CHF. This would be way too much for me.
Go lump-sum investment is a no-go for me, given the current status of the market.
I can invest the 8500 required by truewealth, and if I understood correctly (I checked this with them) I will be able to use some sort of dollar cost averaging by putting the majority of the sum into the categroy "cash" and then monthly reducing my cash asset and changing them into ETFs assets.
In doing this I only pay 0.5% p.a., which is way less that what I would pay in investing in the ETFs with swissquote or others.
The only downside is that I can't pick the single ETF, but I think one can control that to some extent (they allow you to chose country % allocations within equities)
Post by: Grog on May 01, 2016, 10:27:26 PM
I calculated to start off with a 5'000 investment, to which I could add 1500 each year.It sounds like you made up your mind and for sure Truewealth can be easy ad practical, although "true" mustachians are more DIY and do not like to pay for something so easy as rebalance.
I inteded to divide this in 3 ETFs, and investing 4 times a year. This made investing 12 times ~400 CHF, and then each year investing 12x125chf.
The cost of buying 12 ETFs a year, even with the cheapest option, is actually 9 CHF. This would be way too much for me.
Go lump-sum investment is a no-go for me, given the current status of the market.
I can invest the 8500 required by truewealth, and if I understood correctly (I checked this with them) I will be able to use some sort of dollar cost averaging by putting the majority of the sum into the categroy "cash" and then monthly reducing my cash asset and changing them into ETFs assets.
In doing this I only pay 0.5% p.a., which is way less that what I would pay in investing in the ETFs with swissquote or others.
The only downside is that I can't pick the single ETF, but I think one can control that to some extent (they allow you to chose country % allocations within equities)
You speak about 12 times 9 chf (with the swissquote dynamic savings). In reality is a little different: you choose 3 ETF, build a "model" (that can contains up to 5 etf) and invest in it. The total cost is 9 chf per "model purchase" + 2 chf per each ETF, so the cost per transaction is actually 11 chf (model with one ETF) to 19 chf (model with 5 ETF).
With three ETF you would spend 15 chf per transaction, if you do it 4 times a year it is 60 chf.
Truewealth account with 12'000 chf in it@0.5%: 60 chf too of expenses.
With that said, I personally don't like the ETF offered in the swissquote dynamic saving since are amost all based in Luxembourg instead of ireland (and therefore cannot profit of a tax treaty with the US) so all indx with a majority of US funds will be losing 30 % of the US-dividends instead of 15% like the irish-based fund.
aee here:
https://www.bogleheads.org/wiki/Nonresident_alien_with_no_US_tax_treaty_%26_Irish_ETFs
Lastly, before investing in a closed platform like Truewealth I would ask the how easy is to move the ETF in another account in the future. What if a truly good option comes around and you are stuck with truewealth? Can you move the ETF out of their account and to another one?Or are you forced to sell and rebuy with already 0.30 % losses only because of the stamp duty tax?
Post by: Kilbim on May 02, 2016, 11:58:58 AM
I calculated to start off with a 5'000 investment, to which I could add 1500 each year.
I inteded to divide this in 3 ETFs, and investing 4 times a year. This made investing 12 times ~400 CHF, and then each year investing 12x125chf.
The cost of buying 12 ETFs a year, even with the cheapest option, is actually 9 CHF. This would be way too much for me.
Go lump-sum investment is a no-go for me, given the current status of the market.
I can invest the 8500 required by truewealth, and if I understood correctly (I checked this with them) I will be able to use some sort of dollar cost averaging by putting the majority of the sum into the categroy "cash" and then monthly reducing my cash asset and changing them into ETFs assets.
In doing this I only pay 0.5% p.a., which is way less that what I would pay in investing in the ETFs with swissquote or others.
The only downside is that I can't pick the single ETF, but I think one can control that to some extent (they allow you to chose country % allocations within equities)
It sounds like you made up your mind and for sure Truewealth can be easy ad practical, although "true" mustachians are more DIY and do not like to pay for something so easy as rebalance.
You speak about 12 times 9 chf (with the swissquote dynamic savings). In reality is a little different: you choose 3 ETF, build a "model" (that can contains up to 5 etf) and invest in it. The total cost is 9 chf per "model purchase" + 2 chf per each ETF, so the cost per transaction is actually 11 chf (model with one ETF) to 19 chf (model with 5 ETF).
With three ETF you would spend 15 chf per transaction, if you do it 4 times a year it is 60 chf.
Truewealth account with 12'000 chf in it@0.5%: 60 chf too of expenses.
With that said, I personally don't like the ETF offered in the swissquote dynamic saving since are amost all based in Luxembourg instead of ireland (and therefore cannot profit of a tax treaty with the US) so all indx with a majority of US funds will be losing 30 % of the US-dividends instead of 15% like the irish-based fund.
aee here:
https://www.bogleheads.org/wiki/Nonresident_alien_with_no_US_tax_treaty_%26_Irish_ETFs
Lastly, before investing in a closed platform like Truewealth I would ask the how easy is to move the ETF in another account in the future. What if a truly good option comes around and you are stuck with truewealth? Can you move the ETF out of their account and to another one?Or are you forced to sell and rebuy with already 0.30 % losses only because of the stamp duty tax?
Thank you for your feedback.
As a new investor I am just looking for information like yours.
So if I understood your correctly, I don't pay 9 CHF for each time I buy a share (or more) in an ETF.
I rather pay 9 CHF to "start" a portfolio, and then 2 CHF for each additional ETF. Making it 9+2+2+2 = 15 CHF for a portfolio with 3 ETFs.
And then I can add money to the portfolio, and spend that amount (15 CHF to add money to the 3 ETFs).
Is this correct?
But then how is the money divided between the ETFs? Do I need to add the same amount to each ETFs everytime? Or 1 month I can decide not to add to one of the ETFs?
Also, don't I also need to pay custody fees on swissquote? Their page says "0.025% quarterly (min CHF 15.00)", so it means I also pay 15 CHF * 4 times a year, = 60 CHF, on top of the price of buying the ETFs, or I am mistaken?
Nevertheless, even if it's only the 15 CHF of the ETFs, It's still more than what I would pay with truewealth, since with them I pay 0.5% p.a. and I don't account to go up to 12'000 CHF very soon. But even if I did, I still have the advantage to spend comparatively less, since with truwewealth I can buy once a month (making dollar-cost-averaging more effective), or even once a week.
To buy once a month with swissquote I would need to spend 15*12 CHF, which is way more than 0.5% p.a.. And with truwealth if I want I can also invest in more than just 3 ETFs.
It seems a good choice, but I need people more experienced than me to help me.
Am I mistaken or forgetting something here?
Thank you
Post by: Grog on May 02, 2016, 01:09:57 PM
Thank you for your feedback.
As a new investor I am just looking for information like yours.
So if I understood your correctly, I don't pay 9 CHF for each time I buy a share (or more) in an ETF.
I rather pay 9 CHF to "start" a portfolio, and then 2 CHF for each additional ETF. Making it 9+2+2+2 = 15 CHF for a portfolio with 3 ETFs.
And then I can add money to the portfolio, and spend that amount (15 CHF to add money to the 3 ETFs).
Is this correct?
But then how is the money divided between the ETFs? Do I need to add the same amount to each ETFs everytime? Or 1 month I can decide not to add to one of the ETFs?
Also, don't I also need to pay custody fees on swissquote? Their page says "0.025% quarterly (min CHF 15.00)", so it means I also pay 15 CHF * 4 times a year, = 60 CHF, on top of the price of buying the ETFs, or I am mistaken?
Nevertheless, even if it's only the 15 CHF of the ETFs, It's still more than what I would pay with truewealth, since with them I pay 0.5% p.a. and I don't account to go up to 12'000 CHF very soon. But even if I did, I still have the advantage to spend comparatively less, since with truwewealth I can buy once a month (making dollar-cost-averaging more effective), or even once a week.
To buy once a month with swissquote I would need to spend 15*12 CHF, which is way more than 0.5% p.a.. And with truwealth if I want I can also invest in more than just 3 ETFs.
It seems a good choice, but I need people more experienced than me to help me.
Am I mistaken or forgetting something here?
Thank you
It's my pleasure. I know it can be difficult to navigate our limited and obscure selection of investment possibilities.
First of all, for your situation it seems tha Truewealth is the way to go. I still would ask them if in the future you could move your etf somewhere else and how much it would cost you, just so to have all information.
Secondly, about Swissquote.
There are two swissquote account:
- The first is linked directly to the SIX stock exchange and you can buy ETF directly for 9.85 chf +2 chf of platform-fee + swiss stamp duty tax. You pay per transactions, that means that every ETF costs you as much. With the same account you can buy single stocks or future or speculate currency and so on. This is the "normal" swissquote that you see in the home page
- The second account is an ETF sparplan, you found it here (it's very hidden):
https://www.swissquote.ch/sqweb/savings/introduction.jsp?l=d
you build "a model" based up to 5 ETF, and for every ETF you decide how many shares. So example if you want a model 50% MSCI world and 50% SMI you look at the price of the ETF (in this example let's say MSCI world cost 150 chf per share and SMI ETF cost 50 chf per shares). To build a 50/50 model you chose 1x MSCI World and 3x SMI etf (so the both have more or less the same "weight") for a minimum of 300 chf, and then you can buy it as multiple of this minimum. Like you can buy one time the model at 300 chf with 9+2+2 = 13 chf commission or 3 times the model (you need 900 chf) with the commission staying at 9+2+2=13 chf.
That's what I was describing with the 9+2*nr ETF commission costs. I try to attach the EXCEL with all the different ETF offered by this account.
But as you say in your case Truewelath is a valid option, and I think it will do the job for you. The important thing is to invest.
Post by: Stashing Swiss-style on May 03, 2016, 02:38:48 AM
Post by: ace07 on May 04, 2016, 12:38:04 PM
I am someone who moved to Switzerland, managed to save 100K CHF and is just about to make the first investment.
I am planning to buy SPDR S&P Dividend ETF for about 60-80K CHF.
I cannot choose at which bank I buy my ETFs as I am limited to one specific bank.
I found two ETFs:
SPDR S&P US Dividend Aristocrats ETF in CHF
Isin: IE00B6YX5D40
symbol: USDV
Ongoing charge: 0,35%
SPDR S&P Dividend ETF in USD
Isin: US78464A7634
symbol: SDY
Ongoing charge: 0 (Can this be true?)
So which one shall I buy? I do not necessarily plan to stay in Switzerland longer than 10 years. To be honest I am a bit afraid of investing in USD as CHF is a much more stable currency. So which ETF would you guys recommend for me? Or maybe I should buy something else?
Thanks in advance for your help.
Post by: samuck on May 05, 2016, 01:21:28 PM
As a remark: Are you sure about investing such a large share of your cash in one ETF with a dividend focus? I started my investments with a dividend-focussed ETF, but was soon quite disappointed with its performance compared to the standard ETF, with bought the entire market and not just the dividend stars. Plus, in Switzerland, dividends are taxed, while capital gains are not. Give it some thought...
Post by: samuck on May 09, 2016, 02:06:14 PM
I was invested in the 45% 3rd pillar (TER of 0.88%), so I'll move that share to the new one once available. Good idea?
Check it out: https://www.postfinance.ch/en/priv/prod/bcase/fund/pension75.html
Post by: Expatriate on May 10, 2016, 12:43:09 AM
FYI Swiss mustachians, Postfinance just informed it's launching a 3rd pillar index funds with 75% equities! Highest equity share in the market! It should be available as of mid-June. And here is the bad news: TER of 0.94% :-(
I was invested in the 45% 3rd pillar (TER of 0.88%), so I'll move that share to the new one once available. Good idea?
Check it out: https://www.postfinance.ch/en/priv/prod/bcase/fund/pension75.html
Thanks for sharing! I'll definitely do the same. A shame the TER is so high but that's the reality in 10-years-backward Switzerland. The alternative is letting go of much higher (potential) tax gains.
Post by: Grog on May 10, 2016, 01:23:41 AM
FYI Swiss mustachians, Postfinance just informed it's launching a 3rd pillar index funds with 75% equities! Highest equity share in the market! It should be available as of mid-June. And here is the bad news: TER of 0.94% :-(
I was invested in the 45% 3rd pillar (TER of 0.88%), so I'll move that share to the new one once available. Good idea?
Check it out: https://www.postfinance.ch/en/priv/prod/bcase/fund/pension75.html
Thanks! Is nice to see things moving around and new products coming on the market. I hope Swisscanto will react and propose a index 75 bvg fund ;)
My general advice is to take everything globally, that is calculate his own allocation (equities/bonds) through all of your investment vehicle before deciding if it is a good idea. In general though switching from 45% equities to 75% for only 0.06 pa is a good deal considering our limited option in the pillar 3a.
EDIT: woah they screwed up big time with that PDF, am I the only one not seeing any color for the equities components? And in some plot half the percentage are wrong. Tsck poor quality review
Post by: Kilbim on May 11, 2016, 03:15:59 PM
Post by: samuck on May 11, 2016, 10:38:09 PM
Isn't it a huge risk investing in 75% equities for your 3a pillar?
More volatile, yes, but more risky, no.
And at the end of the day / working life, the return will be much higher than with the cash version. Investing the 3a pillar in equities is actually a no-brainer, as it's the perfect example of regular long-term investing: you invest on a monthly or yearly base over decades.
To reduce volatility, you can combine cash and equity 3a pillars, and you could also reduce the share of equity toward retirement.
Post by: Grog on May 12, 2016, 01:37:38 AM
Isn't it a huge risk investing in 75% equities for your 3a pillar?
it always dépends on timeframe. If you are 55 (5 years before withdrawal) or if you want to cash out to buy a home in 3 years then yes, is very risky to go with th 75%, because the higher volatility could mean that when you need the money in 3 years the fund has lower values.
But if you are 25 and don't plan to touch it for 20 years then it's the way to go.
Post by: Kilbim on May 12, 2016, 07:19:04 AM
Or even taking any risk with my 3a pillar. Given the current (and future) status of AHV, I will probably much need my pillar 3a to have a somewhat decent pension... so if for some reason it would ever go down when I need it, I would be pretty much screwed..
Do you have any resources that prove that having a pillar 3a with some equities in it is not a huge risk? (for me huge risk is also something with very very small chances of happening, but with devastating consequences for me; for example losing my pillar 3a).
For now I have the bank pillar 3a which pays the most (0.075%).
Thanks
Post by: Kilbim on May 12, 2016, 09:57:03 AM
From reading around it is for the USA and a lot of countries, but I wonder if it's needed here.
Also, do you have an emergency fund?
Post by: samuck on May 12, 2016, 02:29:12 PM
I am 28, I am still very worried about doing something like that.
Or even taking any risk with my 3a pillar. Given the current (and future) status of AHV, I will probably much need my pillar 3a to have a somewhat decent pension... so if for some reason it would ever go down when I need it, I would be pretty much screwed..
Do you have any resources that prove that having a pillar 3a with some equities in it is not a huge risk? (for me huge risk is also something with very very small chances of happening, but with devastating consequences for me; for example losing my pillar 3a).
For now I have the bank pillar 3a which pays the most (0.075%).
Thanks
Your question concerns investing in general, not just the pillar 3a. Most if not all people on this forum will tell you that investing in equities is worth it: if you stay the course with equities, you'll get more out of it over time than when you just keep cash. Reading your posts, however, i suspect the highest risk for you might be your behaviour in a correction or bear market situation. I would suggest you start investing with small amounts and see how you react to drops of 10%, 20% or even 50%. If you sell at the bottom, investing and high-equity 3a pillars are not for you.
BTW there are better cash pillar 3a than the one you mention. CIC banque, for instance, has a return of 0.65%. So if you really go for cash only, then at least choose the best one. Good luck
Post by: Grog on May 18, 2016, 05:52:41 AM
https://www.postfinance.ch/fr/priv/prod/eserv/etrade/detail/price.html
now the depot account is not free (90 chf per year) but you can use this money to buy transactions (you pay 90 chf for the depot, but you receive 90 chf credit for transactions).
Post by: wapiti on May 18, 2016, 10:44:16 AM
Post by: Shef on May 18, 2016, 11:14:09 AM
Does anyone has experience with foreign brokers? Does e.g. Germany also charge a stamp-duty? I am considering to open a comdirect-account.
Post by: Grog on May 18, 2016, 12:01:24 PM
Sent from my YD201 using Tapatalk
Post by: Kilbim on May 18, 2016, 01:57:48 PM
Thank you for the information Grog. Too bad, I have to finally sell my few UBS-shares I bought nine years ago... I think all brokers wants to encourage their customers to trade a lot. So they can also charge CHF 97.20 for the tax-receip, which is in my opinion a rip-off price.
Does anyone has experience with foreign brokers? Does e.g. Germany also charge a stamp-duty? I am considering to open a comdirect-account.
You could try www.truewealth.ch, it's some sort of robo-advisor with some ETFs.
I am in the process of starting with them, what made me choose them is that they charge 0.5% p.a., including buying fees and everything. So if you invest small sums (less than 500 a month) they are a good deal. Included in the price it's also the documents for tax declarations, it seems.
There is also a thread about truewealth on this forum.
Post by: wapiti on May 18, 2016, 02:09:30 PM
Post by: dmn on May 24, 2016, 02:16:49 AM
Does anyone has experience with foreign brokers? Does e.g. Germany also charge a stamp-duty? I am considering to open a comdirect-account.
I used comdirect and I was very happy with them. The main drawback is that your tax declarations become more complicated, because Germany will tax all dividends or distributions (at least they did for me - not sure if this is different because I am a German expat). Then you have to:
(1) Declare your capital income in Switzerland in order to correctly pay tax here. You can declare the non-refundable part of German taxes to avoid being taxed twice.
(2) Apply for getting back the refundable part of the German taxes. I believe this requires a tax declaration in Germany including some proof that you paid taxes in Switzerland.
The first one is straightforward as long as you make sure that you only buy ETFs which disclose the information required for Swiss taxes; you can check at https://www.ictax.admin.ch/extern/de.html (https://www.ictax.admin.ch/extern/de.html) whether the information on taxable income is available for the fund's ISIN.
I did not get to do the second thing yet because the amounts of refundable German tax were so small that I did not care about getting it back, so I cannot say how difficult this is.
The benefits are much lower brokerage costs and no custody fee if you also have a normal bank account at comdirect. Also, Germany does not charge stamp duty on stock transactions.
Post by: Kilbim on June 06, 2016, 11:45:18 AM
I ask this here as well to my fellow swiss.
I am in the process of building a 3-fund portfolio, which normally means:
us total stock
international total stock
bond total stock (US).
Now my actual choices for BONDS are:
Vanguard Total Bond Market ETF (BND) USD (30 billions assets)
iShares Swiss Domestic Government Bond 1-3 years CHF (60 mio assets)
iShares Swiss Domestic Government Bond 3-7 years CHF (410 mio assets)
iShares Swiss Domestic Government Bond 7+ years CHF (122 mio assets)
I want bonds for stability obviously, but Grog said swiss bonds are something different from other bonds and at the moment overpriced. Based on his feedback I also decided to ignore corporate bonds. Apart for thisI am not sure what to buy anymore: he suggests short-term bonds are riskier, and also that swiss bonds are riskier in general because their price go up in recessions and right now they might be overpriced. But USD bonds are risky because of currency-related risks.
So it seems my choices are:
iShares Swiss Domestic Government Bond 3-7 years CHF
iShares Swiss Domestic Government Bond 7+ years CHF
or
Vanguard Total Bond Market ETF (BND) USD
iShares Swiss Domestic Government Bond 3-7 years CHF
I am not sure I will hold my investment for 7+ years (I want to, but I can't be sure of that). Does this matter?
(I also don't trust buying only iShares Swiss Domestic Government Bond 3-7 years CHF and nothing else)
Any suggestions here?
Post by: EdenHazard on July 07, 2016, 02:42:42 PM
I have the accumulating ETF iShares Core MSCI World UCITS ETF, Irish based. This ETF is stored with a European (non Swiss) bank/broker.
How do I need to declare this ETF in my Swiss tax report? I read in this thread I need to go https://www.ictax.admin.ch/extern/en.html#/ratelist
I guess that returned number is the total dividends that accumulating ETF received in 2015? How is this taxed in Switzerland?
Post by: osetrix on July 09, 2016, 02:40:42 PM
Thanks for all the great info in this post. I'm just getting ready to start with investing. Have no exprience (other than avid forum reader) and don't want to invest too much in both time & investment fees. I plan on investing about 2000 CHF monthly (can of course also do it only once a year), got the recommendation to start with Avadis. What is your opinion on this fund: Avadis Growth, ISIN CH0032831841, 60% shares, 40% bonds, TER 0.62 (but no account fee, no investment fee, minimum of 50Chf gets invested monthly)? I thought of investing here for some years to get some experience / decent starting capital before switching to a trader platform.
Thanks!
Post by: wapiti on July 10, 2016, 02:46:09 AM
The dividends are taxed in Switzerland for the distributing fund and accumulating fund (http://www.taxinfo.sv.fin.be.ch/taxinfo/display/taxinfo/Anlagefonds). You will find your fund under https://www.ictax.admin.ch/extern/en.html#/ratelist and you will need to report dividend and stock value on your tax report.
@osetrix Is it for your third pillar ?
Post by: osetrix on July 10, 2016, 03:06:14 AM
Post by: samuck on July 14, 2016, 01:55:32 PM
What is your opinion on this fund: Avadis Growth, ISIN CH0032831841, 60% shares, 40% bonds, TER 0.62 (but no account fee, no investment fee, minimum of 50Chf gets invested monthly)?
Hi osetrix, TER too high and equities:bonds ratio too conservative for your age (but I don't know your ability and willingness to stomach volatility). What about Vanguard All World or iShares core msci world? Add some bonds; 20% should do it.
Post by: wapiti on July 14, 2016, 02:11:30 PM
If you have more money to invest, i would recommend, as samuck, vamguard funds.
Post by: osetrix on August 03, 2016, 12:46:09 PM
1. I'm considering cornertrader and Charles Schwab International as online brokers. What are the implications on withholding tax and Swiss transaction tax? Which one do you recommend?
2. Can someone recommend a 3 ETF investment scheme (80% stocks, 20% bonds, stock ETFs: one all world, one Swiss market, capped weighting of Nestlé, Novartis & Roche.
Post by: wapiti on August 03, 2016, 01:36:47 PM
For swiss citizen, only funds which are based in switzerland and distribute dividends have withholding tax.
2)I don't know bond ETFs, but for stocks, I would choose Vanguard all world, SMI or SPI, SLI
I would recommend to choose the all world scheme (which contain 3% of Switzerland stocks) to remove the home bias.
Post by: alexi on September 01, 2016, 01:34:13 AM
First of all, thanks a lot for a very informative discussion, I really appreciate it!
I'm looking to get started investing in ETFs with some of my excess cash savings. I would have liked to buy a single ETF (to minimize commissions), but the MSCI ACWI funds aren't very liquid on SWX. I figured I could replicate it easily as follows:
- ~90% iShares Core MSCI World UCITS ETF (SWDA), 0.20% TER
- ~10% iShares Core MSCI Emerging Markets IMI UCITS ETF (EIMI), 0.25% TER
Both of these funds are accumulating, so they'll reduce tax headaches. They are also both in USD on SWX, and I'm not sure if this is something I should worry about. I'm a Spanish citizen living in Switzerland, so I'll either retire in Switzerland or Spain. Is having these investments in USD an issue? There aren't any suitable replacements in CHF (as far as I know), but I could buy the same funds in EUR (trading currency only) on Xetra. I guess that really doesn't make a difference, though... Are there any other good options I haven't taken into account?
Post by: Grog on September 01, 2016, 01:44:43 AM
Hi all,Why do you think that will reduce tax headache? In CH accumulating and distributing are not different tax-wise. Every acc etf must report the dividend even if reinvested and you have to take the information and report it to your tax forms.
First of all, thanks a lot for a very informative discussion, I really appreciate it!
I'm looking to get started investing in ETFs with some of my excess cash savings. I would have liked to buy a single ETF (to minimize commissions), but the MSCI ACWI funds aren't very liquid on SWX. I figured I could replicate it easily as follows:
- ~90% iShares Core MSCI World UCITS ETF (SWDA), 0.20% TER
- ~10% iShares Core MSCI Emerging Markets IMI UCITS ETF (EIMI), 0.25% TER
Both of these funds are accumulating, so they'll reduce tax headaches. They are also both in USD on SWX, and I'm not sure if this is something I should worry about. I'm a Spanish citizen living in Switzerland, so I'll either retire in Switzerland or Spain. Is having these investments in USD an issue? There aren't any suitable replacements in CHF (as far as I know), but I could buy the same funds in EUR (trading currency only) on Xetra. I guess that really doesn't make a difference, though... Are there any other good options I haven't taken into account?
Sent from my YD201 using Tapatalk
Post by: alexi on September 01, 2016, 02:36:18 AM
Why do you think that will reduce tax headache? In CH accumulating and distributing are not different tax-wise. Every acc etf must report the dividend even if reinvested and you have to take the information and report it to your tax forms.
Really? I didn't know that, thanks for the information. I work for an international organization and my salary is exempt from taxes, so I assume I will get the withholding tax back when I declare it.
I guess then at least it will save on the brokerage fees of reinvesting the dividends.
Post by: Stashing Swiss-style on September 01, 2016, 03:35:57 AM
Post by: alexi on September 01, 2016, 04:02:53 AM
Post by: wapiti on September 04, 2016, 06:37:59 AM
The swiss based distributing funds have withholding tax on dividends. The taxes will be reimburse, after tax form has been filed.
For foreign distributing/accumulating fund (not sure for accumulating swiss based fund), there is no withholding tax. However, you have an higher federal tax when you buy the fund (0.075% for swiss based stock/fund and 0.15 % for foreign based)
In all cases, dividends and accumulating dividends are taxes as income.
However, fund value increases are NOT taxed. (https://www.letemps.ch/economie/2015/02/22/fiscalite-produits-financiers-suisse-se-distingue)
At the end, you have a wealth tax on your wealth (house, stock, fund, saving account)
Post by: samuck on September 04, 2016, 01:21:52 PM
Is having these investments in USD an issue? There aren't any suitable replacements in CHF (as far as I know), but I could buy the same funds in EUR (trading currency only) on Xetra. I guess that really doesn't make a difference, though... Are there any other good options I haven't taken into account?
Hi Alexi, curreny is not really an issue, because you have the conversion effect from the underlying currencies of the fund versus your "reporting" currency at some point anyway. More important, make sure the fund is UCITS - so you could transfer it freely within EU. Btw, Vanguard Wrld (ucits) is traded in USD, EUR, and CHF on the SIX.
https://en.m.wikipedia.org/wiki/Undertakings_for_Collective_Investment_in_Transferable_Securities_Directive_2009
Post by: wapiti on September 04, 2016, 01:47:34 PM
Quote
- ~90% iShares Core MSCI World UCITS ETF (SWDA), 0.20% TER
- ~10% iShares Core MSCI Emerging Markets IMI UCITS ETF (EIMI), 0.25% TER
There are multiple factors to take into account:
-The liquidity of the fund
- The size of the fund
- The currency of the fund
- TER
- In which exchange the fund is based
- Distributing or Accumulating
-The difference between index (for exemple MSCI mkt vs FTSE emerging mkt)
Like said before accumulating fund doesn't offer any tax advantage, however it's accelerate the dividend reinvestement and lower the transaction cost.
If you would like to have only one fund, I would propose Vanguard FTSE All-World UCITS ETF TER 0.25
Post by: alexi on September 05, 2016, 05:43:00 AM
Btw, Vanguard Wrld (ucits) is traded in USD, EUR, and CHF on the SIX.
That phrasing is somewhat ambiguous, I guess you mean VWRL is traded in CHF in SWX, and in other currencies in other exchanges. I was initially looking for the USD version on the Swiss exchange as well.
I had looked at VWRL before, but I discarded it because it was distributing and because it looks like the trade volume in SWX is not that high. I like the fact that I can purchase it in CHF, though, that would save me some money in currency conversions (CornèrTrader charges 0.5%). Are the dividends payed as CHF as well?
BTW, how do you guys deal with currency conversions? CornèrTrader's fee seems a bit high...
Post by: wapiti on September 05, 2016, 08:14:29 AM
You are right the fund is not very liquid.
Like you said, I advise to take a professional the first year to do your taxes.
With swissquote, you need first to exchange CHF to USD and then you can buy stock/etf. You can even directly send USD on the account.
Btw, Vanguard Wrld (ucits) is traded in USD, EUR, and CHF on the SIX. -> that's wrong on the SIX it's only CHF.
BTW, with Swissquote, you only have to pay 9.- for all ETFs on the SWX (whatever the amount invested)+federal stamp+0.85 for live info+ exchange fee. For me, it's an interesting deal.
Post by: alexi on September 05, 2016, 08:50:58 AM
Post by: wapiti on September 06, 2016, 12:59:26 PM
Post by: Grog on September 07, 2016, 12:22:17 AM
While is true that swissquote is only 9 chf, don't forget that you have to pay up to 200 chf per year as deposit fee, something cornertrader doesn't charge.
About distributing vs accumulating: while the dividend are reinvested faster and cheaper I still prefer distributing for a couple of reasons:
1) much better when you are not in accumulation but in retirement. If you need 40k and 20k come from dividend, you pay less taxes than selling 40k of shares, because 20k of income is tax free and you only pay transaction cost for selling 20k of shares, not 40k
2) since we cannot invest transaction-cost free in ch, is nice to have a cost-free cash flow from dividends to clover / replenish the emergency fund without having to sell accumulating shares.
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Post by: wapiti on September 07, 2016, 01:03:45 AM
On cornertrade side, there two points to be know: Each trade on the SIX have 20.- min fee and to withdraw the money you need to have a tradercard which cost 50.- a year (free the first year)
Moreover, i called one time the support, it was a shame for a bank.
Post by: Grog on September 07, 2016, 05:16:47 AM
Overall, the cost between Swissquote and Cornertrader is quite close. I would still recommend to a cost simulation.
On cornertrade side, there two points to be know: Each trade on the SIX have 20.- min fee and to withdraw the money you need to have a tradercard which cost 50.- a year (free the first year)
Moreover, i called one time the support, it was a shame for a bank.
Just a clarification: the tradercard is needed only if you want money from an ATM. You can always write your contact guy an email saying "I want 1000 chf from my depot to my registered bank/post account" and you receive the money the day after. I agree the support is not at a high level, but I had my problems with swissquote too. I think is a wash between them honestly. i would suggest Swissquote to people dealing with multiple currencies or people trading a lot, and cornertrader for people trading4 times a year. Maybe even the new postfinance etrading could be a solution for this last group of people.
Post by: alexi on September 07, 2016, 06:13:04 AM
The only potential catch with IB, as far as I know, is the US estate tax, but that only applies if you die and have more than 60k USD in cash.
Am I missing something else?
Post by: osetrix on September 07, 2016, 07:59:32 AM
Post by: wapiti on September 07, 2016, 02:22:19 PM
Depending the base currency chosen, conclusions between researches diverge. Moreover, the hedged contract lasts one month for most of ETFs, so a hedged ETF can't counterbalance long term trends.
UBS ETF (IE) MSCI ACWI SF has a synthetic replication, which is for me a drawback, but currently, no other CHF hedged ETF for all world is available.
Be aware, that the hedged ETF will not only hedged the base currency of the index, but all currencies of the index.
Ishares offers for developed markets: iShares MSCI World CHF Hedged .
The big issue is that the simulated data history of CHF hedged index, it's not available on Reuters or Bloomberg platform. So, it's impossible to make simulations.
Post by: Grog on September 08, 2016, 01:51:14 PM
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Post by: irishteacherinvestor on September 11, 2016, 07:02:45 AM
I am new to investing but have found this forum very useful. Here are the details, I would love some advice if you have time:
Nationality: Irish
Permit: B permit since 2013
Canton: Vaud
Age: 32
Amount to invest: 15000CHF and then 1000CHF per month
Currently: I have a 3a with BCV and Swisslife for past 3 years with approx 15000CHF in it
We recently had a talk about investing and the guy really sold me on the idea of index funds. I am looking for something easy (for dummies let say) with little time needing to be spent on it but I do not know how to even get started. The guy recommended this 3 way split for a British citizen:
- Vanguard FTSE 250 ETF Index
- Vanguard FTSE All World ETF Index
- Vanguard UK Gilt
BUT I am not a UK citizen to whom this was aimed at.
Here are my main questions:
1. How do I go about buying these Vanguard stocks listed above?
2. Should I buy a Swiss Gilt/Bond since I live here now or should I buy an Irish one?
- 2.1 If so, which Swiss one should I buy?
3. What broker platform is best to do this with?
4. Should I keep paying into my 3a pilier accounts listed above or close/transfer them somewhere else?
Thank you very much for any advice in advance
Post by: wapiti on September 11, 2016, 02:19:46 PM
Quote
1. How do I go about buying these Vanguard stocks listed above?The portfolio above is too focused on U.K.
I would go 100% Vanguard FTSE All World ETF Index
Quote
2. Should I buy a Swiss Gilt/Bond since I live here now or should I buy an Irish one?dividends.As you are still young, I would go full equities, so no bond. This also depends on the risk you are willing to take. Answer to this survey https://personal.vanguard.com/us/FundsInvQuestionnaire to find the best allocation.
Quote
3. What broker platform is best to do this with?Swissquote or Cornertrade, if you would like a swiss platform. In your case with an investment of only 1000.- a month, I would advise Swissquote, they offer a 9.- flat fee for all ETFs traded on the SIX. Why not invest 2000.- every two months ?
Quote
4. Should I keep paying into my 3a pilier accounts listed above or close/transfer them somewhere else?Check the current fee and return. Postefinance offers a passive fund with 0.92% TER with high equities allocation.
If you're planning to retire early (40-50 years old), I would not invest in 3rd pillar.
The website Obermatt has made an excel sheet to find out if the 3rd is a good investment.
www.obermatt.com/00/excel/Obermatt-säule-3a-steuer-rechner.xlsx (http://www.obermatt.com/00/excel/Obermatt-säule-3a-steuer-rechner.xlsx)
Post by: irishteacherinvestor on September 12, 2016, 01:41:34 AM
Quote
1. How do I go about buying these Vanguard stocks listed above?
The portfolio above is too focused on U.K.
I would go 100% Vanguard FTSE All World ETF Index
Yeh the guy who gave us the example said this was based on a British international teacher who was thinking of maybe retiring there. He was saying that is kind of a personal choice based on currency and where you might want to be. His key take home message was:
Quote
Create a Diversified Portfolio of Low Cost Exchange Traded Index FundsBut I am not sure about Switzerland?? Would I have capital gains tax to pay?
Example:
(British) stock index
Global stock index
(UK) bond index
Annual costs: 0.15% each year
No capital gains taxes to pay
Quote
2. Should I buy a Swiss Gilt/Bond since I live here now or should I buy an Irish one?dividends.
As you are still young, I would go full equities, so no bond. This also depends on the risk you are willing to take. Answer to this survey https://personal.vanguard.com/us/FundsInvQuestionnaire to find the best allocation.
Yes I think I would probably go 70% global stock index, 20% national stock index (BUT which one???) and 10% national bond index (but again WHICH ONE??)
If I want to go with the above allocation, what ones should I go for?
Quote
3. What broker platform is best to do this with?
Swissquote or Cornertrade, if you would like a swiss platform. In your case with an investment of only 1000.- a month, I would advise Swissquote, they offer a 9.- flat fee for all ETFs traded on the SIX. Why not invest 2000.- every two months ?
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)
Quote
4. Should I keep paying into my 3a pilier accounts listed above or close/transfer them somewhere else?
Check the current fee and return. Postefinance offers a passive fund with 0.92% TER with high equities allocation.
If you're planning to retire early (40-50 years old), I would not invest in 3rd pillar.
The website Obermatt has made an excel sheet to find out if the 3rd is a good investment.
www.obermatt.com/00/excel/Obermatt-säule-3a-steuer-rechner.xlsx (http://www.obermatt.com/00/excel/Obermatt-säule-3a-steuer-rechner.xlsx)
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?
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?
As you can see... I am a beginner here so dumb it right down for me!! Thank you
Post by: wapiti on September 12, 2016, 02:28:24 PM
Quote
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.
Quote
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.
Quote
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.
Quote
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)
Quote
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.
Post by: firereadery on October 07, 2016, 12:57:27 AM
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!
Post by: Grog on October 07, 2016, 03:32:53 AM
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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Post by: firereadery 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!
Post by: Stashing Swiss-style on October 07, 2016, 09:37:55 AM
Post by: wapiti on October 07, 2016, 12:12:41 PM
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 anticipé" 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 ?
Post by: firereadery on October 07, 2016, 02:43:22 PM
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!
Post by: Grog on October 08, 2016, 01:00:44 AM
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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Post by: wapiti on October 08, 2016, 07:44:52 AM
Quote
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.
Quote
"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"
Post by: nugget on October 12, 2016, 03:38:39 PM
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
(http://imgur.com/a/ZPkzn)
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
Post by: nugget on October 12, 2016, 04:01:43 PM
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 :)
Post by: nugget on October 13, 2016, 05:10:23 AM
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 :)
Post by: Kilbim 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.
Post by: Kilbim 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?
Post by: Grog 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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Post by: Grog 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.I still have to check your excel, but did you account for those factors:
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 :)
- 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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Post by: financialfreedomsloth 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?
I’d 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 don’t 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 …).
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.
Post by: Kilbim on October 14, 2016, 05:05:34 AM
aSo 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’d 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 don’t 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 …).
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.
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
Post by: InvestOR on October 15, 2016, 06:21:02 AM
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
Post by: nugget on October 16, 2016, 02:12:16 PM
@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
Post by: InvestOR on October 17, 2016, 03:42:36 AM
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
Post by: nugget on October 17, 2016, 09:10:58 AM
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
Post by: InvestOR on October 17, 2016, 09:31:25 AM
The only pressure is of lost investment opportunity..banks are not helping too much with the interest rates as you all know :)
Post by: osetrix on October 17, 2016, 01:31:56 PM
Post by: nugget 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" ^^
Post by: nugget on October 18, 2016, 04:28:22 PM
The Mustachian Post opened a forum for swiss mustachians:
http://forum.mustachianpost.com/
it is new and eager to be filled with content :)
Post by: financialfreedomsloth on October 19, 2016, 06:42:55 AM
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.aSo 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’d 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 don’t 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 …).
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.
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
Let’s 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. That’s 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: don’t sweat the currency risk.
Post by: Kilbim on October 21, 2016, 09:20:24 AM
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?
Post by: Grog on October 21, 2016, 03:56:32 PM
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Post by: wapiti on October 22, 2016, 11:55:02 AM
What is "3a-reduced withholding tax" in your excel ?
Post by: Grog on October 22, 2016, 10:57:39 PM
Anyway the tax you pay are so low are already offset by the savings in reduced income.
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Post by: nugget on October 23, 2016, 02:24:23 AM
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 :)
Post by: Kilbim 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?
Post by: samuck on October 23, 2016, 08:48:39 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?
I would stick to your strategy and asset allocation you have originally chosen. (Disclaimer: I have 0% bonds...)
Post by: wapiti on October 23, 2016, 09:24:03 AM
"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 ;)
Post by: financialfreedomsloth 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 aren’t 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 wasn’t really worth the hassle but now that interest rates are 0 or negative, well it’s a brand new world …
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 euro’s 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 ‘return’ 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.
Post by: extremis on November 01, 2016, 09:12:43 AM
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.
Post by: Grog on November 01, 2016, 10:56:33 AM
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Post by: extremis on November 01, 2016, 01:15:16 PM
Post by: Grog on November 01, 2016, 01:43:49 PM
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Post by: extremis on November 01, 2016, 02:51:07 PM
Post by: Kilbim on November 10, 2016, 04:21:08 AM
Post by: samuck 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.
Post by: Kilbim 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"
Post by: Maynard on December 13, 2016, 02:46:38 AM
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.
Post by: nugget on December 13, 2016, 04:08:42 AM
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
Post by: Maynard on December 13, 2016, 08:54:08 AM
Thank you very much man, you rock! I wasn't aware about the Swiss forum, on to it now.
Much appreciated!
Post by: night on January 15, 2017, 04:22:41 AM
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).
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 :) ).
Post by: Dago on January 15, 2017, 06:45:36 AM
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
Post by: FIeuropeanstyle 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.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 ?
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Post by: Grog on January 17, 2017, 04:43:19 AM
https://www.ictax.admin.ch/extern/it.html#/security/IE00B4L5Y983/20161231
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Post by: FIeuropeanstyle on March 20, 2017, 07:50:53 AM
Yes. 100% sure. Example of an acc etf:Hi Grog, thanks for your clear response. I see now that Swiss tax residents need to declare this funds on the "full tax declaration". I am "taxed at source" with a B permit. Accordingly I only make a simplified version of the tax declaration and have no place to declare any funds or etfs. That is why I believe I do not have to pay tax on the acumulation etfs. Do you happend to know if people taxed at source still need to pay taxes on accumulation etfs ? I will try to contact the cantonal tax office anyway.
https://www.ictax.admin.ch/extern/it.html#/security/IE00B4L5Y983/20161231
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Post by: nugget on March 21, 2017, 02:08:19 PM
I advise you to directly call the "Kantonales Steueramt". At least in Zurich, they are very helpful and give precize answers to such questions.
I also advise you to use the swiss mustachian forum http://forum.mustachianpost.com/
more swiss traffic there than here :D
Post by: chestwood96 on March 27, 2017, 12:17:57 PM
When I got my tax form, I logged in to my investment accounts (Tuewealth and a DIY one with Saxo) and was pleasantly surprised that they are doing way better than expected (I know short-term gains are meaningless but it still feels pretty great). I downloaded the tax thing from Truewealth as usual and inserted the values according to the instructions.
When it came to the DIY account however I was pretty overwhelmed, there are so many reports I can generate and so many numbers I can get. Luckily my portfolio is very simple 80% Vanguard FTSE All-World UCITS ETF and 20% USB ETF SPI Mid and there only were 2 transactions each. I am fairly sure it has to go into the "Wertschriftenverzeichnis" (at least the SPI Mid) but I do not know how exactly. Could somebody point me into the right direction. A censored example might help a lot.
Post by: samuck on March 27, 2017, 12:45:39 PM
Post by: chestwood96 on March 27, 2017, 01:31:26 PM
Hi chestwood96, just did my taxes, so I know ;-) Both ETFs belong in your Wertschriftenverzeichnis, at their market value per year-end as they are part of your taxable net worth. It's quite easy: you will find the ETFs by searching the ISIN number in the respective field. Enter your purchases throughout the year, and the online tax tool will even calculate dividends. These are considered income, so you will be taxed on them. Hope that helps!Well that was a lot easier than expected, thank you very much.
I definitely underestimated that tax software.
Now for write-offs and stuff, taxes are still a pain in the ass.
It is probably not going to be that expensive though since i just get paid a "big boy" salary since August.
Post by: Stashing Swiss-style on March 28, 2017, 06:07:37 AM
Post by: chestwood96 on March 28, 2017, 06:42:36 AM
Hi Chestwood96 - how are you finding Truewealth? I'm about to launch myself into the world of investing and they are my chosen target.....To be honest I stopped investing in it after I started the DIY one. The main reason for that was the lack of control(I decided to use the stocks + cash investment strategy and truewealt does not allow 100% stock).
But exept for it massively underperforming the FTSE AW it is a great platform, it also seems fairly foolproof.
On the other hand I am probably the wrong person to judge this as my decisions are based on math that is probably wrong.
I am also pretty shure I had a thread abou this last year.
Post by: Expatriate on September 03, 2017, 05:05:27 AM
Post by: Stashing Swiss-style on September 04, 2017, 12:24:37 PM
Post by: Kenyastach on September 19, 2017, 06:44:53 PM
I just discovered this forum/thread, and first would like to thank all for the invaluable discussions. Best Thread Ever. :-)
Having read the entire 300+ post thread from 2014 carefully, I have a some questions for the collective wisdom here, given my slightly different situation:
I'm a Swiss citizen (I also hold a few other passports), but I left Switzerland about a decade ago, so not a Swiss-resident currently. Currently residing in Kenya, which means most Swiss (and other OECD-based) banks/brokerage accounts won't have me as a client (deemed too risky compliance-wise or whatever), and those that do, charge insanely high custody and other fees - in the many thousands per year just to have the privilege of being able to by stocks/ETFs.
It now seems that through Soliswiss (the swiss aborad group), I can open an account with Swissquote (Yay!). Through this thread I *think* learned a few valuable nuggets of information to make the process most cost and tax efficient for my case:
1. I want to avoid the Swiss (or any country) withholding tax. Since I am not a Swiss-resident, I will not be able to offset this 35% witholding, so a clear tax for me. (Incidentally, I am legally not a tax resident of any country, since in the only place I meet residency requirements, currently Kenya, I am exempt from tax due to my employer's host country agreement, so no scope for claiming back under a double taxation treaty). If I understood correctly, this means that if I purchase ETFs that are domiciled in Ireland or Luxembourg I can avoid this withholding?
2. I am looking for a simple solution. My (financial) life is already very complicated. I am diversified through investments in real-estate, and my ETF investing horizon is around 25 years, so am not too concerned at this stage with balancing a portfolio with too many ETFs, currencies, or a balance of equity and bonds. I further believe (perhaps wrongly, happy to hear views) that today's financial markets are highly correlated, so if a major crash happens in the US (e.g. S&P 500 crashes), then all OECD markets (and even BRICS etc.) would be similarly affected. There are of course frontier markets that are less correlated, but again, too complicated (and anyway hard to find on OECD platforms) for me at this stage, and again, looking for simplicity.
3. I am not clear about other taxes involved. I am particularly thinking about the US Estate tax (which applies to US equities, and foreigners are subject to 40% Estate Tax when they pass away after only $60k - as opposed to $5m for US citizens). I assume that buying a Irish domiciled ETF that tracks S&P 500 would NOT be considered a US equity and therefore not subject to US Estate tax - does anyone know whether this is a correct assumption?
In light of the above, my current thinking is to buy a single ETF such as: iShares Core S&P 500 UCITS ETF (Acc) // ISIN IE00B5BMR087, Valor Number 10737041
I am thinking about buying around $200k worth of this ETF, and adding another $25k or so every year after that. Given that it has a TER of 0.07% and having consulted the list of ETFs available in the 'Dynamic savings ETF' of swissquote, I think I'd prefer to have the normal account, which means 0.1% more per year (initially, will decrease as I pass the $200k level), as this seems a better fit for what I'm after and even with the custody fees comes to a lower effective annual TER (0.17% and dropping as portfolio grows) for me than the funds I see in the available list elsewhere.
Any views on this? Thanks very much in advance for any insights you can offer with regard to the strategy and particularly the total cost and tax elements.