IBKR settled up and savings transferred, what's next?

[dwightw]

Hey everyone,

I've been closely following this subreddit lately as I've decided to invest some of my savings from my Italian bank account. I'm looking into a long-term investment strategy, possibly spanning 5 to 10 years. I've noticed that many people here recommend SPY or VT, but I'm quite new to ETFs and would appreciate your advice:

1) Besides SPY or VT, are there other ETFs I should consider, or perhaps diversify with a small percentage of crypto or another asset?

2) I currently reside in Zurich with a B permit. Should I start filing taxes next year due to this?

3) I've been investing through CSX (around 1K/month) using their "most risky" CSX invest plan, but I haven't seen significant gains (1.73% in the last year). Would you recommend withdrawing and moving the funds to IBKR as well?

4) Is it worthwhile to open a 3rd pillar account too? I've never quite grasped if it's advantageous as an expat, especially since I hope to return to Italy someday. If yes do you have any suggestions?

Thanks in advance for your insights.

 

[virtualhope]

@dwightw Stocks are recommended for 10+ years so make sure your horizon is long enough.

1) Just VT (only add SPY if you really want even more US exposure)

2) Not sure, wait for another reply.

3) Yes, VT made about 11% last year in CHF (22% in USD).

4) I'm not sure what the "standard" recommendation is, but as 3a with Finpension or VIAC is very closely to the performance of VT I don't see a reason why you shouldn't invest the max into a 3a once you fill taxes. You can withdraw the money once you go back to Italy or just keep it shielded from taxes and withdraw it close to retirement.

 

[william7000]

@virtualhope I agree with all of this.

The hardest part is being patient and waiting the long term.

 

[dwightw]

@virtualhope Thanks a lot!

 

[ifeadi]

@virtualhope can I ask a noob question? why did VT in USD did twice the return? because of relative currency value change? if so, are you talking in relation to CHF? meaning that if I would have bought VT traded in USD with CHF, my return would have been 22%?

 

[virtualhope]

@ifeadi Because the stocks hold in VT are mostly in USD a loss of the USD against the CHF means that the return in USD is higher than in CHF.

Because during 2023 you hold USD and when you want to return that back to CHF you get less than at the beginning of the year.

There are two ways to prevent this:

• Hedging (which isn't recommended long-term because of the high costs)
• Spending USD directly (e.g. buy a house in the US, relocate there etc.)

In which currency you buy a World ETF or in which currency the ETF reports its value doesn't matter, what (mostly) matters is the currency of the titles hold in the ETF (Apple, Nvidia, Nestle etc.) (simplified a bit, see the spoiler below for even more details).

Even more detailed it matters where the company makes their money. For example, while Apple is listed in USD and is an US company, they also make money in CHF or EUR so these revenues are affected by currency changes. Same goes for Nestle which is listed at the SMI but also makes revenue in all kinds of other currencies. At the end, almost no company is independent of currency changes, either directly as mentioned or indirectly because their supply chain is affected by it. It also means that you don't need to worry THAT much about the USD/CHF currency risk because other currencies are also important.

 

[ifeadi]

@virtualhope thank you very much!

 

[bubiboeller]

@virtualhope Which VT? As I understand it, there are several. VOO?

 

[getwisdom]

@bubiboeller VT is vanguard’s total world etf. There’s only one VT. VOO is vanguard’s snp500 etf.

 

[alanstranger1]

@dwightw Fellow Italian B-permit here.

1. Depends on your income, usually the 3rd pillar contribution (to the yearly max) helps with higher incomes, the advantage is that for the time being is really tax-efficient, but will be taxed if you get it back because you're going back to Italy.
   
   Also, if you contribute to your 3rd pillar, you'll want to do the tax declaration, otherwise you'll be missing on the most important part (tax deductions).
2. Not sure but I think so? As in Switzerland there's a wealth tax, so those assets would need to be taxed as well - if you have a high income and decide to contribute to the 3rd pillar, you'll have to do it regardless.

If you haven't already, / is a great italian-centric community based around a personal finance, passive investing creator (blog, YT & twitch - CH community is mostly his discord & there's also a whatsapp group for people in zurich, ask for it in the discord)

(Italian) -> https://mr.rip/sps

https://retireinprogress.com/swiss-pension-system/

Older:

(also in italian)

Useful: https://mr.rip/swissdoc (you guess it: also in italian)

 

[dwightw]

@alanstranger1 With my modest income, the key consideration regarding the 3rd pillar is: will the tax savings outweigh the taxes I'll pay upon withdrawal? Or will taxes only apply to the profits?

If I'm already required to file taxes to declare assets, it might make sense to start with the 3rd pillar as well.

Thanks a lot for sharing the links! I'll definitely check them out

 

[josephelizabeth]

@dwightw

1. HELL YES.

 

[dwightw]

My father has been investing in this Italian fund from PosteItaliane for a few years and it's going super well, could you explain to me the differences with the VT? Would it be possible for me to invest here and would you suggest it? If I search for the ISIN I don't find anything on IBKR

https://www.milanofinanza.it/quotazioni/dettaglio/bancoposta-az-internaz-23e04fd

 

[resjudicata]

@dwightw Compare for yourself, remember to adjust for exchange rate:

https://markets.ft.com/data/funds/tearsheet/summary?s=it0003110860:eur

https://markets.ft.com/data/etfs/tearsheet/summary?s=VT:PCQ:USD

Seems like a random overpriced fund to me with that 1.7% management fee

 

[dwightw]

@resjudicata Thanks a lot, it seems that VT is the way to go then