Buying Swiss ETFs

[jaylyn]

Hoi zäme! I have been actively investing in US ETFs through IBKR which works out quite cheap. Since I was getting started a year ago I didn't pay so much attention to either consistent investing or designing a fixed portfolio. At the moment I have 80% US(VTI, VO, VUG and VTV) and 20% non-US(IXUS) distribution. I do see the relative depreciation of USD against CHF for the last year and a lot of people talking about that lurking on this forum. Also, since I have somewhat of a stable income stream from my job now I want to nail this down(some version of VT and chill) and I am thinking of adding some home-bias in CHF to my portfolio.

The swiss market is quite small and I want to go with about 15% Swiss bonds too, to have a 45% US, 25% Swiss equities, 15% ex-US, and 15% Swiss bonds distribution in the end which in my opinion is a diversified portfolio and fits well with my risk appetite. That being said, buying Swiss equity or bond ETFs on SIX is very expensive with all Swiss brokers(0.3-0.5% per transaction?) and only slightly cheaper on IBKR(CHF 4-8 for 2-3 ETFs every time).

The other option I see is looking at EUR(on European exchanges, e.g. EXI1) or USD denominated alternate index funds (FLSW, EWL) that can be traded with relatively lower costs on IBKR circling back to the problem of currency value depreciation. Does anybody have a good illustration of how this option(investing in non-CHF with lower TER and exchange costs) weighs against performance from investing on SIX with CHF? The major, difference if any should come from the mid-cap industries in these indexes, right? What do I do with my insistent allocation to Swiss bonds?

TLDR: Does buying Swiss market ETFs in CHF work better than buying Swiss market ETFs in foreign currencies?

 

[melinda2022]

@jaylyn Swiss stocks: If you want to invest in for example CHSPI you will need to bite the bullet and pay the high transaction cost. You can just buy a larger amount less frequently to minimize the overall cost.

Alternative: put your home bias in your 3rd Pillar and keep the allocation at an aggregate between your IBKR and 3rd Pillar

Thoughts on bonds: I don't think it's worth chasing CHF bonds. You can consider your 2nd Pillar as a bond allocation. If you want more fixed income in CHF, I would suggest just find the best savings account and put it there. You will get about 1-1.5% currently, high liquidity up to a certain point, and no transaction costs.

 

[thenewmanng]

@melinda2022 I vote for home bias in the 3rd pillar

 

[jaylyn]

@melinda2022 This is indeed one of the options I had considered since I end up paying brokerage/custody fees one way or the other. Not forgetting the tax benefit that comes with it!

 

[letthrmusixsaveyourlife]

@jaylyn It’s a question of volume and currency risk.

Also you usually get nothing from GOV Bonds, you buy enterprise bonds, or the national bank stock for dividend payments.

The national bank is working different than any other.

Which brings it to the simple point maybe just buy Roche, Novartis, Nestle, sika, Zürich and Swiss RE
as 100% of swiss Funds/ETF and as the same companys provide the interessting bonds.

 

[tobiahjude99]

@letthrmusixsaveyourlife Just buy SPICHA at that point, it‘s already more than 50% of your mentioned stocks.

 

[jaylyn]

@letthrmusixsaveyourlife Buying stocks would be costlier since each transaction costs a fixed fee over a percentage cost depending on the broker to go to. Plus the hassle of trying to rebalance it only after getting the distribution right(followed by self doubt of having done it correctly). ETFs are just more convenient!
I do agree with most opinions here on bonds though!

 

[tobiahjude99]

@jaylyn I dont see value in swiss bonds. The return is below inflation level and you are actively losing money on them.

Only value is as a rebalancing tool in a downturn and to reduce portfolio volatility. You still lower your overall expected return.

And yes swiss market etfs should be bought at six and in CHF. They have favorable tax treatment.

 

[jaylyn]

@tobiahjude99 Exactly the reason I want to go with a small percentage of bonds. I like the stability it brings looking at it more as a portfolio that has lower returns but low volatility too

 

[tobiahjude99]

@jaylyn Then it‘s fine of course, if you accept the lower returns.

 

[labryan]

@jaylyn I would buy Swiss ETFs in CHF at SIX and US ETFs in USD ar SIX, because hedged ETFs contain fees for currency conversion.

I have my portfolio at Swissquote. I'm invested in iShares S&P 500 in USD (CSSPX or CSSPX.SW at SIX) and in iShares Swiss Dividend in CHF (CHDVD at SIX). CHDVD had bigger growth than Vanguard FTSE All-World over the past 3, 5 and 10 years.

ETF trading fee at Swissquote is only CHF 5. As long as you're under 1% with the fee, you're fine. The difference will be irrelevant in the long run.

I also have a Swiss stock portfolio that was put together by a friend who's an investment advisor. It contains the following Swiss stocks (some of them have fairly high dividends): NESN, NOVN, ROG, ABBN, ZURN, SREN, VACN, KNIN, STMN, SCHP, GALE, SCMN, SIKA, GEBN, BARN, LOGN.

 

[melinda2022]

@labryan This is valid advice if you are fixated with having a Swiss broker, and it's a questionable portfolio (why only US and Swiss Dividend payers?).

Personally, 1% of a trade is not a price I am willing to pay

IBKR trading fee is 0.35 USD for US ETFs and about 4 CHF for Swiss ones.

 

[labryan]

@melinda2022 Instead of investing in an MSCI World or FTSE All-World, I decided to just invest in S&P 500. Whenever the market crashed, the world ETFs usually took a bigger hit than the S&P 500. The continuous devaluation of the USD compared to CHF is another problem. With the S&P 500, I'm confident that the growth over the next 20 years will be much bigger than the devaluation of the USD. And tbh, I don't believe any other country will become a bigger world economy than the US in the next 20 years. Therefore, 80% of my ETF portfolio is S&P 500.

The remaining 20% are in CHDVD because I wanted some protection against USD devaluation, and some dividends as emotional support during bad market times.

 

[smta276603]

@jaylyn As others have said, pillar 3 is you Swiss allocation and pillar 2 is your fixed return. Don’t overcomplicate your investments outside of those.