Author Topic: Investment from in Switzerland? (Beginner)  (Read 1148 times)

Rogethepoge

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Investment from in Switzerland? (Beginner)
« on: November 16, 2018, 06:48:52 AM »
Hi,

I am a newbie; I am living Switzerland and I am looking to get started on investing. My goal is to buy a small house in the country side and have a regular income stream from investments which would allow me to live a simple life - I would like to achieve this goal within the next 8-10 years.

Over the past few months I have tried everything to educate myself on investing and honestly I have just been overwhelmed with information - I feel like I am getting nowhere.  I have come to the conclusion that I just want a really simple investment - having read the MMM blogs I know that it is recommended for a beginner like me to invest in index funds such as vanguard index funds. I checked out the vanguard website and found that there are lots of different index funds available; needless to say I was/am completely lost as to which index fund is the best one for me; besides I wouldn't even know how to go about buying the index funds which are available (I have a SaxoBank Trader Account but I find that platform so confusing I am a danger to myself when I use the thing!). So I began to research services like Truewealth (which, seemingly, is similar Betterment, but has received mixed reviews) that will do the selection of ETFs for me and rebalancing etc. but since the company is Swiss based there is a lot of focus on Swiss index (I am not convinced that is good).

I really don't know what is the best way for me to get started on investing? Should I just buy an index fund myself and just leave it sit there for a few years; or would it be better for me to use the services of a Company like Truewealth? If the former then exactly what index funds should I buy to start? and how do I go about buying those index funds from Switzerland?

I am very frustrated because I have put some much effort into trying to learn about how to invest, but I just feel like I am getting nowhere. Ideally I would love to have some coach or mentor who I, a complete beginner, could learn from (any recommendations?).

I would greatly appreciate any any advice on how I can best get started from Switzerland?

(I do have quite a bit of savings which I could invest, but obviously since I am just a beginner I wanted to start small until my confidence and experience grows)

Thanks

Andy R

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Re: Investment from in Switzerland? (Beginner)
« Reply #1 on: November 16, 2018, 07:11:10 AM »
It is certainly not recommended just for a beginner to invest in index funds. The smartest people I know invest in them.

I'm not sure what you are reading to continue to feel confused after some months, but I suspect you were just not fortunate enough to find the good articles and books and when you don't know what you are looking for it can be impossible to even know where to ask to find it. May I suggest some reading resources?
https://jlcollinsnh.com/stock-series/
https://www.bogleheads.org/wiki/Getting_started
https://www.bogleheads.org/wiki/Main_Page
https://www.bogleheads.org/forum/index.php

This is the EU specific page including what funds are available for indexing
https://www.bogleheads.org/wiki/EU_investing
The sample portfolio points out low cost indexes covering all markets around the world (developed, emerging, small companies) as well as bonds fund. Honestly that is all you should ever need. Investing is not complicated, it is just that a lot of companies make it seem that way to convince you to pay them to do it. It takes 10 minutes a year to manage an all world fully diversified portfolio of these 4 funds, but you should spend maybe 20 minutes a day over a few weeks or months reading up starting with the above links, until you get a good understanding of some underlying concepts, in particular that the long term return is high only because of volatility and you need to understand the basic idea of volatility and the methods to deal with it (by deciding on an appropriate equities to fixed income allocation for you).

As the first line in the second link I gave you said - Don't panic! There's a lot of information available to help. You were just unlucky not to find it previously.

RWD

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Re: Investment from in Switzerland? (Beginner)
« Reply #2 on: November 16, 2018, 07:12:56 AM »
Vanguard has a Swiss version of their site. The options don't seem to be the same, but the expense ratios are still quite low. There are S&P 500 funds available.
https://www.vanguard.ch/privateinvestors/indv/home.jsp

Another link:
https://jlcollinsnh.com/2014/01/27/stocks-part-xxi-investing-with-vanguard-for-europeans/

In general you should be looking for broad market index funds with the lowest expense ratios. In your shoes I would probably try to roughly match my exposure to the world market and then maybe throw in some bonds (10-20% tops) for balance. The easiest way to do this looks like the Vanguard FTSE All-World UCITS ETF (VWRL), expense ratio 0.25%. If you wanted to focus on the US market then there is the Vanguard S&P 500 UCITS ETF (VUSA), expense ratio 0.07%.

Grog

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Re: Investment from in Switzerland? (Beginner)
« Reply #3 on: November 16, 2018, 10:47:53 PM »
There was a Swiss based thread but now most of us is over to
https://forum.mustachianpost.com

There will be an answer for all your questions

Sent from my Hisense A2T using Tapatalk


PDXTabs

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Re: Investment from in Switzerland? (Beginner)
« Reply #4 on: November 16, 2018, 11:04:00 PM »
I would seriously consider any of the ones with the MCSI World Index as their benchmark:
https://api.vanguard.com/rs/gre/gls/1.1.0/documents/14500/ch

Rogethepoge

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Re: Investment from in Switzerland? (Beginner)
« Reply #5 on: November 17, 2018, 05:24:26 AM »

Thank you for all the replies I really appreciate it.

Based on the replies I understand that the best option is that I invest in an index fund (which is what I expected and what I intended to do); and most recommend the Vanguard FTSE All-World UCITS ETF. This leads me to some more questions:
There seems to be many different Vanguard index funds available (e.g. index fund focused on US market; an index fund based on European market; an index fund based on World market); for example what is the difference between the “Global stock index fund”, the “Vanguard FTSE All-World UCITS ETF (VWRL)”, the “Vanguard World Total Stock ETF” (and I’m sure I could add any other few to the list)? 

So how do I go about selecting the best fund to invest in? (I assume that you have recommended the Vanguard World market index fund because is spreads the risk – i.e. has stocks from many companies from each market worldwide, and so is not dependent on the performance of the market in any one country (@RWD I guess this is what you mean when you say “broad market index fund”)

When selecting an index fund what are the most important points to consider? (E.g. in the world index fund do you check which countries are covered in the index fund? which currencies are the stocks and dividends paid in?). What are the important factors which influence your decision when selecting which index fund to invest in?

Also, would it be a good idea to invest in more than one Vanguard index fund? Or is it better to focus all investment on one single index fund? If the former, then which mix of Vanguard index funds would you recommend?

Next, after I have selected which Vanguard fund I want to invest in (which will probably be the Vanguard world index fund) then how do I go about actually making my investment in that index fund? It seems since I am in Switzerland I cannot have an account in Vanguard directly and so I cannot invest my money directly into the fund at Vanguard – so am I correct to say that I order to invest I would need to go to some trading platform (such as Saxo Bank Trader or Degiro) and buy shares in the “Vanguard World Total Stock ETF” myself?

Would there be any differences between having an account in Vanguard where I would have my money directly invested with Vanguard in their world index fund, versus, using an online trading platform to buy shares myself in the in the “Vanguard World Total Stock ETF”?

Do you think it would be good to have the Vanguard index fund as my main investment? The strategy I had originally intended to follow was to put most of the savings which I have now into one single Vanguard index fund; and simply leave it there; and hopefully over time it the index fund will provide an annual return which would allow me to achieve my goal of retiring; do you think this strategy is sound?

@PDXTabs you mention “I would seriously consider any of the ones with the MCSI World Index as their benchmark: https://api.vanguard.com/rs/gre/gls/1.1.0/documents/14500/ch »; is there more than one world index fund to choose from, or is there just the one fund? I don’t have any experience to go on, but to be it looks like a good index fund to have as my main investment.

Thank you again for all your helpful advice.

Rogethepoge

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Re: Investment from in Switzerland? (Beginner)
« Reply #6 on: November 17, 2018, 05:27:21 AM »
Thanks Grog! - i didn't know that there was a specific forum for CH

flipboard

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Re: Investment from in Switzerland? (Beginner)
« Reply #7 on: November 17, 2018, 08:51:23 AM »
A few notes:
- Don't use Swiss domestic brokers: they tend to have higher pricing, but more significanty they _have_ to charge stamp duty.
- Interactive brokers are generally the best place to invest: you can get cheap access to ETF's around the world, they tend to be the cheapest. US markets tend to have the lowest commissions, hence the best place to buy. (And you can buy all the same ETF's as anyone in the US.)
- Ignore the S&P 500 advice earlier in this thread. Buying US-only (which S&P 500 is) is insane advice for anyone not based in the USA.
- Switzerland isn't in the EU. A lot of Europe-specific advice doesn't apply due to different laws, tax-handling, etc.

Vanguard don't directly serve customers in Switzerland. You can however buy their funds or ETF's through Swiss brokers (as explained, not the most cost effective option), or other international brokers. But you can buy other providers ETF's too.

The absolute simplest cheapest option is to buy VT (Vanguard total world ETF) at Interactive Brokers - it includes Developed and Emerging markets, and is All-cap (as opposed to things like VWRL - the default ecommendation for European investors - which excludes small-cap). You'll pay approx 2 USD to convert CHF to USD, and approx 1 USD commission per 15k of VT that you buy.

That other forum has a lot of Switzerland specific advice, but you'll need to take care with some of the advice there.

RWD

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Re: Investment from in Switzerland? (Beginner)
« Reply #8 on: November 17, 2018, 09:11:01 AM »
- Ignore the S&P 500 advice earlier in this thread. Buying US-only (which S&P 500 is) is insane advice for anyone not based in the USA.
No one in this thread has recommended buying only the SP500. Though I don't see how it would be any more insane for non-US residents to purchase US index funds than US residents.

flipboard

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Re: Investment from in Switzerland? (Beginner)
« Reply #9 on: November 17, 2018, 09:34:40 AM »
- Ignore the S&P 500 advice earlier in this thread. Buying US-only (which S&P 500 is) is insane advice for anyone not based in the USA.
No one in this thread has recommended buying only the SP500. Though I don't see how it would be any more insane for non-US residents to purchase US index funds than US residents.
Arguable... Single-pair currency risk on top of single-country risk makes it more risky for a non-US resident to only buy US stocks. (Not that I'd support buying just US as a US-resident either...)
« Last Edit: November 17, 2018, 09:36:29 AM by flipboard »

PDXTabs

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Re: Investment from in Switzerland? (Beginner)
« Reply #10 on: November 17, 2018, 10:04:17 AM »
@Rogethepoge ,

I've never had to invest other than in the US. If what flipboard says is true, I would just do this:

The absolute simplest cheapest option is to buy VT (Vanguard total world ETF) at Interactive Brokers - it includes Developed and Emerging markets, and is All-cap (as opposed to things like VWRL - the default ecommendation for European investors - which excludes small-cap). You'll pay approx 2 USD to convert CHF to USD, and approx 1 USD commission per 15k of VT that you buy.

But to answer your question, this page show several MSCI world Index based funds, and I could not tell you what makes them different without really digging into them:
https://www.vanguard.ch/privateinvestors/individual/investments/en/product.html#/productType=indexfunds

I own VT (actually the mutual fund equivalent, VTWSX).

Andy R

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Re: Investment from in Switzerland? (Beginner)
« Reply #11 on: November 17, 2018, 08:55:55 PM »

Thank you for all the replies I really appreciate it.

Based on the replies I understand that the best option is that I invest in an index fund (which is what I expected and what I intended to do); and most recommend the Vanguard FTSE All-World UCITS ETF. This leads me to some more questions:
There seems to be many different Vanguard index funds available (e.g. index fund focused on US market; an index fund based on European market; an index fund based on World market); for example what is the difference between the “Global stock index fund”, the “Vanguard FTSE All-World UCITS ETF (VWRL)”, the “Vanguard World Total Stock ETF” (and I’m sure I could add any other few to the list)? 

So how do I go about selecting the best fund to invest in? (I assume that you have recommended the Vanguard World market index fund because is spreads the risk – i.e. has stocks from many companies from each market worldwide, and so is not dependent on the performance of the market in any one country (@RWD I guess this is what you mean when you say “broad market index fund”)

When selecting an index fund what are the most important points to consider? (E.g. in the world index fund do you check which countries are covered in the index fund? which currencies are the stocks and dividends paid in?). What are the important factors which influence your decision when selecting which index fund to invest in?

Also, would it be a good idea to invest in more than one Vanguard index fund? Or is it better to focus all investment on one single index fund? If the former, then which mix of Vanguard index funds would you recommend?

There are a couple of different categories of index when talking about global indexes.

1. developed vs emerging
developed has 23 countries and are politically and ecomonicall stable
everging has 23-24 countries that are still emerging (China, Thailand, Philippines, etc)
deveoping is 90% of the market by capitalisation (by valuation of the market), and emerging is 10%

2. company size: small, mid, large size by capitalisation
large makes up 70% of the investable marekt, mid is 15% and small is 15%
large are companies that are more stable, have estblished themselves, and have slighlty lower return and volatility. smaller companies have more room to grow (or collapse) and have slighlty higher return and volatility.

The global funds pretty much all have developed large and mid caps, so they all cover at least 76.5% of the investable market and this is the more well estalished companies and you could comfortably be ok with that just.

Some funds tend to included either emerging or small caps (but annoyingly, many leave out the other I don't know why).
developed+emerging large+mid will be 85% of the investable market
developed large+mid+small will be 90% of the investable market

Rarely, but occasionally you will get the whole lot

It's a good idea to strive for all market segments to maximise diversification, but it's really not going to make much of a difference to leave out one of small or emerging.

I saw vanguard has an all caps, which is everything and has a fee of 0.24%, but I did not see a ticker symbol so I am not sure if it is offered as an ETF or just a mutual fund.
They also have VWRL which is dev + em and is lge/mid but no small, with a fee of 0.20%, and this is not bad. If you want you could then also buy their small caps ETF and keep it in a proportion of 85:15
IShares has IWLD which is developed lg/mid, and you can buy that with their small, and also their emerging, and keep a proportion of 75:15:10 dev lg:dev small:em, or you could just leave out small or just leave out em, it's really up to you and won't make that much of a difference.

I know this seems vague, and for me I prefer the whole lot because then there is no decision left to make in a situation where there is no known right or wrong and decisions are guesses and I don't want to rely on guesses.

Also, while Vanguard is the best company in the US because it is actually set up so the customers "own" the company which is why their fees are silly cheap and the goals of the company are specifically to put the customers needs as the goal of the company, outside the US this is not the case, and outside the US, iShares is a perfectly good option, and in some cases come with cheaper fees.

flipboard

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Re: Investment from in Switzerland? (Beginner)
« Reply #12 on: November 18, 2018, 12:37:09 AM »
@Rogethepoge ,

I've never had to invest other than in the US. If what flipboard says is true, I would just do this:

The absolute simplest cheapest option is to buy VT (Vanguard total world ETF) at Interactive Brokers - it includes Developed and Emerging markets, and is All-cap (as opposed to things like VWRL - the default ecommendation for European investors - which excludes small-cap). You'll pay approx 2 USD to convert CHF to USD, and approx 1 USD commission per 15k of VT that you buy.


But to answer your question, this page show several MSCI world Index based funds, and I could not tell you what makes them different without really digging into them:
https://www.vanguard.ch/privateinvestors/individual/investments/en/product.html#/productType=indexfunds

I own VT (actually the mutual fund equivalent, VTWSX).
There are two major issues with that Vanguard list:
1. They have higher commissions to buy anywhere in Europe (compared to 1 USD for VT). Same with the equivalent ETF's, that trade on European exchanges: higher trading fees. (And stamp duty if bought at a Swiss broker.) It's actually hard to find mutual fund sellers, hence ETF's are probably what most people would end up buying.
2. They seem to be Ireland domiciled, which is not advantageous for Swiss investors for tax reasons.


More on 2: approx 50% (more right now) of a total-world fund is US stocks, so approx 50% of the dividend comes from the US. For funds/ETFs domiciled in the US (such as VT): the fund receives the entirety of those US dividends, which they then pay out as a distribution. On that dividend distribution: 15% is withheld by the broker as taxes (for the IRS), but that same 15% withholding is later credited towards Swiss taxes (thanks to the Swiss-US dual tax treaty) - effectively only Switzerland is taxing those US-origin dividends.

Whereas for Ireleand domiciled funds: 15% of dividends on US stocks are withheld _before_ the dividend reaches the fund/ETF in Ireland. Switzerland then subsequently taxes you on the full dividend distribution from the fund/ETF (no credit for the prior withholding exists): In effect, the US dividends are being double-taxed by using an Ireland domiciled fund: 15% first, followed by the full dividend tax (i.e. income tax).

Hence, Swiss investors generally want to use US-domiciled funds for US stocks (or total-world funds since a large part of those are US stocks). And VT tends to be the best total-world index ETF available in the US.


One caveat: US estate taxes. The US has a racist estate (inheritance) tax where US-citizens get an exemption up to 12 million USD (as well as a limited set of US residents: they have a very arbitrary definition of "domicile" for US residents which differs from tax domicile - many foreigners in the US thus don't get this exemption), but everyone else only 60k. And US-domiciled funds are subject to this estate tax. Fortunately Switzerland has an estate tax treaty which ensures that Swiss residents get the same limit as US citizens: If your total assets are below 12 million USD (note: this total is all your assets worldwide), your funds won't be taxed on death. If your total assets are above that (which is unlikely to be the case), then it's likely to be a good idea to avoid US funds to avoid the estate tax.

I bring up the estate tax limit, because the limits do change: it used to be about 5 million until 2017 - and the US legislative can and does change it. Now that the democratic part in the USA seem to have more power again, there are rumours that the limit might go down again. 5 million total assets (the old limit) isn't all that unrealistic for a long-term Swiss resident who has saved a lot (especially if one takes into account housing, and possibly pensions), and it's entirely possible the US will return to that limit.
« Last Edit: November 18, 2018, 12:43:49 AM by flipboard »

Rogethepoge

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Re: Investment from in Switzerland? (Beginner)
« Reply #13 on: November 18, 2018, 05:16:24 AM »
You guys are awesome! Thanks for the brilliant feedback.

@flipboard, what you have written is a little advanced for me; I will have to read your post a few more times before I can fully understand it. I have not even begun to consider Tax issues - im still at square one just learning about EFTs etc. Honestly when it comes to Tax, I'm just like an ostrich - I'll just stick my head in the sand and hope for the best.  To summarize what you have written: am I correct to say that your advice is to buy ETF's (e.g. VTSMX) from the US stock market (using an online trading platform) because buying funds directly from Vanguard will have negative tax implications (since the fund is domicile in Ireland); and buying equivalent funds available in Europe will be more expensive due to higher fees etc?

Final question, then i will stop annoying you guys (I promise): Is now a good time to start investing? Earlier this year I did my very first investment; I invested a small amount of money in Saxo bank balanced portfolios which is managed by the Blackrock software - so far I have lost 6% of my Principle!!!! so this time I am being a lot more cautious as to when I start to invest. Im not trying to anticipate the market, but the fact is that the last recession happened 9 years ago, and given that the economic cycle is on average 5.5 years, another recession is at least due. I don't want to invest now and then a recession occurs 1 year later and I lose a big percentage of my principle (I don't mind losing profit ,but I do mind losing principle - so my investment needs to have been in long enough to have built sufficient return so that it can at least partially absorb the impact of a recession).
So I am considering (1) holding on to my money and waiting for the next recession and then invest during the trough; of course its impossible to predict when the recession is going to happen, but it is inevitable that a recession will happen eventually; so sit and wait for however long for the recession to occur and then invest; or (2) invest now and hope that a recession will not happen for a another few years so that the investment has time to built sufficient return so that it can at least partially absorb impact of a recession.

I would love to know your thoughts on this.




RWD

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Re: Investment from in Switzerland? (Beginner)
« Reply #14 on: November 18, 2018, 08:28:08 AM »
Final question, then i will stop annoying you guys (I promise): Is now a good time to start investing? Earlier this year I did my very first investment; I invested a small amount of money in Saxo bank balanced portfolios which is managed by the Blackrock software - so far I have lost 6% of my Principle!!!! so this time I am being a lot more cautious as to when I start to invest. Im not trying to anticipate the market, but the fact is that the last recession happened 9 years ago, and given that the economic cycle is on average 5.5 years, another recession is at least due. I don't want to invest now and then a recession occurs 1 year later and I lose a big percentage of my principle (I don't mind losing profit ,but I do mind losing principle - so my investment needs to have been in long enough to have built sufficient return so that it can at least partially absorb the impact of a recession).
So I am considering (1) holding on to my money and waiting for the next recession and then invest during the trough; of course its impossible to predict when the recession is going to happen, but it is inevitable that a recession will happen eventually; so sit and wait for however long for the recession to occur and then invest; or (2) invest now and hope that a recession will not happen for a another few years so that the investment has time to built sufficient return so that it can at least partially absorb impact of a recession.

I would love to know your thoughts on this.

You should read through the entire stock series by JL Collins that was linked above. But here are some select relevant posts from it:
https://jlcollinsnh.com/2012/04/15/stocks-part-1-theres-a-major-market-crash-coming-and-dr-lo-cant-save-you/
https://jlcollinsnh.com/2012/04/19/stocks-part-ii-the-market-always-goes-up/
https://jlcollinsnh.com/2012/04/29/stocks-part-iv-the-big-ugly-event/
https://jlcollinsnh.com/2013/05/22/stocks-part-xviii-investing-in-a-raging-bull/
https://jlcollinsnh.com/2014/11/12/stocks-part-xxvii-why-i-dont-like-dollar-cost-averaging/

Do not try to wait for the next recession. Invest with an asset allocation that you are comfortable with given your investment timeline, regardless of what the market does in the short term.