Alternate between 2/3 ETFs (FTSE/MSCI World)

[crunchtime89]

Hi all!

Probably stupid question, but i've been thinking about it and decided to ask for all your opinion.

I don't have tax on capital gains if i hold the asset for at least 6 months. The 6 months arw calculated from the last share bought of that asset.

Would it make sense to invest in 3 different ETFs and rotate every 6 months in order to withdraw without tax inpact from one of them at any point?
E.g. 6 months in VWCE, then 6 months in SWRD, then 6 months in IWDA (at this point i would withdraw from VWCE)

If the above make sense, do you have any suggestion regarding the ETF to choose beside VWCE? I need accumulating ones and the other FTSE all-world that i found (Invesco) seems quite small in size (68m).

Thanks all for the help!

EDIT: just clarifying one point. The goal would be to have one ETF at all times which can be withdrawn (partially or entirely, without triggering tax con CG), but just in case (if needed for other projects in top of my emergency funds). I don't plan to sell the full investment after 6 months in order to buy it again.

 

[lisek]

@crunchtime89 I think Inveso is fine. PensionCraft has created about all-in-one ETFs that I quite likes - "one etf to rule them all" or something like this - you can take a look for inspiration.

 

[crunchtime89]

@lisek Will check that, thanks!

 

[wrennelson143]

@crunchtime89 Can anybody share a link to this?

 

[snoopy90]

@crunchtime89 I think it makes sense for you to do this to some extent in that it allows you to capitalize gains tax free (should the mechanism change later on), but every 6 mo seems really excessive.

Why not every 5 years or so, as a one off? Buy VWCE for 4 years, then accumulate a different ETF for a year, then sell off the VWCE for the new ETF, repeat. Should be very simple to follow, minimal extra costs, etc.

If you really want more often, then you could accumulate for 2 years, switch and hold 6mo, sell/swap, repeat. But it's just more work.

 

[realist1981]

@crunchtime89 Are you sure you understand your taxation rules correctly? If yes it's a very strange system, which country is this?

Note that VWCE and IWDA are not equivalent as IWDA doesn't cover emerging markets.

• VWCE "equivalents":
  • iShares MSCI ACWI (IE00B6R52259)
  • SPDR MSCI ACWI IMI (IE00B3YLTY66)
  • Invesco FTSE All-World (IE000716YHJ7)
• IWDA "equivalents":
  • SPDR MSCI World (IE00BFY0GT14)
  • Xtrackers MSCI World (IE00BJ0KDQ92)
  • UBS ETF (IE) MSCI World (IE00BD4TXV59)

 

[crunchtime89]

@realist1981 Thanks a lot for the list of "equivalents". That's very useful.

The country is Luxembourg, here's a link to PWC (there'ae other sources as well). If the asset is held for more than 6 months (with exceptions not applicable to me) there's no tax on CG. While there's still tax for interests and dividends:

PwC (section on Capital Gains)

 

[realist1981]

@crunchtime89 An old thread claims the system in Luxembourg is FIFO (first in, first out) and not LIFO as you reason. FIFO also seems more logical in the case where holdings above 6 months are tax exempt.

https://www.reddit.com/r/eupersonalfinance/comments/n4u542

If that's correct, you can keep buying only 1 ETF, there would no difference regarding the 0% tax benefit vs buying multiple ETFs.

Or do you have a source claiming LIFO applies in Luxembourg?

 

[crunchtime89]

@realist1981 That would indeed change everything.

The LIFO was confirmed on other post (Lux community) and word of mouth. However, no official confirmation or source. So I will check with a tax advisor in a few weeks.

Thanks again for the help!

 

[lovelygrace]

@crunchtime89 Do you mean less than 6 months?

 

[crunchtime89]

@lovelygrace Nope, if the asset is held dor more than 6 months no CG tax is applied. Let's say i bought last month VWCE, then for the next 6 months i only buy SWRD (monthly investments) and after those 6 months switch to IWDA. At the first month of buying IWDA i should be able to sell VWCE without taxes in CG. Then after 6 months in IWDA, switch again to VWCE and start over.

I'm not actually planning on withdrawing at the same time of investing. It would be to have the chance of selling (in case of need) from one ETF.

 

[lovelygrace]

@crunchtime89 Why not invest in one fund forever? Why the need to rotate?

 

[crunchtime89]

@lovelygrace Because by investing monthly, any withdrawal on said asset before the 6 months (from the last buy) is triggering the tax on capital gain.