ETF choice (world index - accumulating - fee max 0.25)

[ugojesus]

Edit* thanks for all the feedback. I will go for VT

Hi SwissPersonalFinance Community,

I have tried to search around in this group to find a solution, but could not really find, what I was looking for, so I seek your expertise.

I would like to invest in a ETF, with following criteria:

- World index

- Accumulating (reinvestment/no dividend payments)

- Currency: CHF

- Total fees: maximum 0.25

- Available on IBKR

Thanks in advance!

 

[tobiahjude99]

@ugojesus Why?

Buying VT is more efficient. You can activate dividend reinvestment on ibkr.

Currency of the etf doesnt matter, only when it is hedged.

 

[ugojesus]

@tobiahjude99 Awesome! I did not know, that I could activate a dividend reinvestment. Then it is fine, I am just too lazy to do it my self.

I would like to avoid currency exchange costs, can I get the VT in CHF? I also saw quite a few people in this sub going for VWRL in CHF

 

[letthrmusixsaveyourlife]

@ugojesus Currency matters….don’t listen to this sub.

 

[sm412]

@letthrmusixsaveyourlife

Currency matters….don’t listen to this sub.

Why does currency matter?

 

[letthrmusixsaveyourlife]

@sm412 If you buy it in usd the Value of the usd will change…

 

[violet181]

@letthrmusixsaveyourlife This is a misunderstanding - the value of the ETF is denomiated in a currency but the underlying assets are the same. So let’s say the ETF goes up by 8% in USD but you hold the same ETF denominated in CHF, and USD loses 3% to CHF - well then your CHF denominated ETF will go up by only 5%.

What you are saying is true only if you are holding cash positions.

 

[sm412]

@letthrmusixsaveyourlife If you don't buy it the value of the usd will also change

Why does the value of the usd changing matter?

 

[tobiahjude99]

@ugojesus If you activate recurring investments and set a schedule, ibkr auto-converts tge currency for you for free.

VT has lower TER and you can get back withholding taxes you lose out on with vwrl.

Effective cost of vwrl is ~0.5% higher then VT

 

[ugojesus]

@tobiahjude99 Thanks for elaborating. But I also mean the currency exchange cost in the first place, when I transfer my CHF salary to IBKR, then I would like to keep investing in CHF. Otherwise I would have to exchange my CHF to USD to invest, and then again exchange from USD to CHF once I wish to withdraw my money again. Or am missing something?

 

[tobiahjude99]

@ugojesus The currency conversion works automatically from chf -> usd, when setting up recurring investments with ibkr. You deposit chf as normal and it just pulls those chf and buys VT with it.

Of course if you want to pull out money after selling you have to convert yourself then. But I dont see a problem with that?
It‘s 2CHF for a conversion to the current spot rate. Super cheap.

Way cheaper then having VWRL and losing ~10% of your dividends (and the 3x higher TER) to withholding taxes every year.

 

[onewayjesus]

@tobiahjude99 Dont forget auto invest only works in the currency you are buying.
If it is a USD fund, you have to set auto purchase in USD and not CHF.
You will always have an amount of CHF in your IBKR

 

[tobiahjude99]

@onewayjesus I mean you can only set it to buy in usd? You cant buy VT in chf. So not sure what you are trying to sY here

 

[onewayjesus]

@tobiahjude99 Thats what I mean, you cannot set IBKR to buy in USD for how much CHF you want.
For example I transfer 3k CHF every month to IB.
I set auto invest to 1k CHF to the 3 ETFs I have in USD.
IB converts the CHF to the current exchange rate of USD and invests the full amount -fees.

You know what I mean?

 

[tobiahjude99]

@onewayjesus Ahhh, yes now I get it. And true definitely, good point to keep in mind.

One definitely has to adjust the amount to be invested every now and then. As CHF tends to aplreciate, you otherwise start piling up unused CHF in the account.

You could also invest that separately like every 6 months or log in every couple months to adjust the values. I have an google sheet with a function that displays me how much usd I need to invest in what etf for my monthly rate. Once set up, I just look into it and quickly adjust the value in ibkr.

Not 100% automated then of course, but this tiny amount kf work should be worth it for 0.5% extra cost you would otherwise have. At 100k invested in VWRL, it already costs 500 CHF more a year than equivalent in VT.

 

[onewayjesus]

@tobiahjude99 Exactly my point! )

Yeah auto invest is nice, but I am not sure if its such a hustle….manually converting is like what, 1-2CHF? Times 12 months is really nothing.

And than I have time to see what the market does and if I should buy or maybe hold 1-2 days…

Now I didnt get it, what do you mean with the extra 0.5%? A hedged version or?

 

[kapp]

@tobiahjude99 Hi there, I dont have much experience with IBKR but I tried this today. I had something like 870$ from earlier accumulated dividends I did not reinvest and made a recurring investment plan to buy 1000$ worth of VT every month. Today this was executed for a total of 999.99 or something like that.

But for the life of me I dont know where it took the remaining 130$ from. I had a few CHF (maybe like 20.-) which I see were partially converted to USD but it doesnt explain the whole gap.

Any idea where it could have taken it from?

 

[tobiahjude99]

@kapp Do you have a margin account and your currency is no in minus?

 

[kapp]

@tobiahjude99 I honestly dont know if I have a margin account. How can I check? The mobile app is terrible.

Currency is not in minus, no.

 

[tobiahjude99]

@kapp You can check under account settings, but if you are not in minus, you probably dont have a margin account.

Super strange. Check all your transactions again. You can check on the ibkr web page under reports.

I cant imagine you got money out of thin air