Investing with private banking worth the fees?
- Thread starter thequestionistgirl
- Start date
@thequestionistgirl I am curious regarding point 3.
On IBKR there are FX futures (from CME). Has anybody hedged their FX exposure using them? Imagine I’m 100% invested in an ETF tracking the US markets and I now want to hedge my USD exposure. Is it correct that I have to buy the FX futures on margin, which I assume is costly?
Assuming it is on margin, can I circumvent the issue by simply buying (for example) S&P 500 futures. Thanks to the leverage of the future I don’t have to invest 100% as is the case for an S&P500 ETF. I could then use the rest of my cash to buy FX future.
Regarding question 1: I seriously doubt ZKB or Alpenpartners will pay of. Most of the time you end up paying fees (advisory ans trading fees) for the personal touch and the entertainment factor and not necessarily for outperformance.
On IBKR there are FX futures (from CME). Has anybody hedged their FX exposure using them? Imagine I’m 100% invested in an ETF tracking the US markets and I now want to hedge my USD exposure. Is it correct that I have to buy the FX futures on margin, which I assume is costly?
Assuming it is on margin, can I circumvent the issue by simply buying (for example) S&P 500 futures. Thanks to the leverage of the future I don’t have to invest 100% as is the case for an S&P500 ETF. I could then use the rest of my cash to buy FX future.
Regarding question 1: I seriously doubt ZKB or Alpenpartners will pay of. Most of the time you end up paying fees (advisory ans trading fees) for the personal touch and the entertainment factor and not necessarily for outperformance.
crrysstaall
New member
@oaken Yes, you can use equity futures to reduce the FX exposure associated with foreign equity exposure, compared to a direct investment. (With a futures contract, you limit the FX exposure to the collateral plus the mark-to-market changes, which normally is significantly lower than the notional amount.) However, you among others need to consider the associated roll return of equity futures, which is negative if the respective markets are in contango and you are long. Another consideration are the dividends.
Perhaps more importantly, although generalizations are difficult, the long run benefits of FX hedging are less clear for equities than for fixed income. One way to look at this is to consider that a weakening foreign currency in a market you are invested in can support exports for firms operating in that currency, and it can be beneficial for their currency translations if they operate globally. This may drive nominal valuations in the foreign currency.
If you want to hedge on IBKR, I would compare the effective cost of a CFD position and an FX futures contract.
Edit: added clarification on why the FX exposure is lower than the notional amount with futures, typo
Perhaps more importantly, although generalizations are difficult, the long run benefits of FX hedging are less clear for equities than for fixed income. One way to look at this is to consider that a weakening foreign currency in a market you are invested in can support exports for firms operating in that currency, and it can be beneficial for their currency translations if they operate globally. This may drive nominal valuations in the foreign currency.
If you want to hedge on IBKR, I would compare the effective cost of a CFD position and an FX futures contract.
Edit: added clarification on why the FX exposure is lower than the notional amount with futures, typo
@thequestionistgirl 99% of funds managers do not better than a world ETF.
So just buy VT etf on a less fees broker ( ibkr for a exemple ) and chill
So just buy VT etf on a less fees broker ( ibkr for a exemple ) and chill
@thequestionistgirl !remindme
@thequestionistgirl Do not invest through a bank! Either IBKR, or if you want to keep it local, swiss quote.
@thequestionistgirl Not worth it. Go with IB or Schwab (I think FX fees are higher at Schwab).
Personnally, to avoid a bit of withholding tax and limit dividends, I would select the following funds:
VTI + Xtrackers MSCI World ex USA UCITS ETF 1C + an emerging fund based in LU or IE
You can also add a tilt fund like VUG
Personnally, to avoid a bit of withholding tax and limit dividends, I would select the following funds:
VTI + Xtrackers MSCI World ex USA UCITS ETF 1C + an emerging fund based in LU or IE
You can also add a tilt fund like VUG
evietheturtle
New member
@thequestionistgirl No.
Best case you get something very close to an index fund for +1% fees. Worst case they gamble away your money.
Best case you get something very close to an index fund for +1% fees. Worst case they gamble away your money.
@thequestionistgirl "Do not invest through banks"... Yep that's what Poor's would say...
It hinges on your definition of a significant amount. If it's below 1 million, opt for ETFs and self-manage. If it exceeds that, you can still use ETFs but through a bank, ensuring you don't incur additional fees while having personalized account management.
It hinges on your definition of a significant amount. If it's below 1 million, opt for ETFs and self-manage. If it exceeds that, you can still use ETFs but through a bank, ensuring you don't incur additional fees while having personalized account management.
@thequestionistgirl I think yes, but I'll be in the minority. 
The main thing that they give you is piece of mind: you do not need to think about investments and how it reacts to world news. Sure, others recommending just buy&hold with VT are mostly correct: it's a solid strategy. However, it's very boring. Then you turn into options and you just can't stop, and you start getting 100% a year, ... it's very addicting. But I digress.
1, the tax office cannot classify you if you don't manage your trading. period.
2, 100% of my portfolio is in USD. I don't hedge, because my return is way higher for me to care about hedging. Historically the CHF/USD hedge was not a good bed, and I don't know what the future brings.
The main thing that they give you is piece of mind: you do not need to think about investments and how it reacts to world news. Sure, others recommending just buy&hold with VT are mostly correct: it's a solid strategy. However, it's very boring. Then you turn into options and you just can't stop, and you start getting 100% a year, ... it's very addicting. But I digress.
1, the tax office cannot classify you if you don't manage your trading. period.
2, 100% of my portfolio is in USD. I don't hedge, because my return is way higher for me to care about hedging. Historically the CHF/USD hedge was not a good bed, and I don't know what the future brings.
thequestionistgirl
New member
@growth_17 Thanks for your reply, and yes, boring is good!
@thequestionistgirl yeah then nothing easier, just do VTI/VOO and I think you're good. I've calculated a couple years ago how much it costs to hedge the portfolio for such a simple case (just buy 12 month PUT and roll every 3 months) and it seemed to be around 9%. if you want to hedge the CHF/USD you could get a forward as well, but that is not _that_ easy (I don't think you can do this with IB/Schwab online).
@thequestionistgirl No.
I'm lazy and trust a roboadvisor (TrueWealth/BLKB). There's quite a few options out there for passive investments through ETFs / mutual index funds. Also, you get a tax form to upload with bar code.
I'm lazy and trust a roboadvisor (TrueWealth/BLKB). There's quite a few options out there for passive investments through ETFs / mutual index funds. Also, you get a tax form to upload with bar code.
yhwh_will_uplift
New member
@thequestionistgirl It depends. If you ask questions like how to hedge against usd it would be smart to choose professionals. 1% is not that much if you think e.g. about the tax adavantages if you put your pensions account there aswell id you have any additional (überobligstorisch). In the end it also depends on the support and overview you need.
ronnec1208
New member
@thequestionistgirl My brother is rich and does the following:
He has got a private bank (fee 0.8%) that manages his wealth:
He keeps 200-300k in cash/cash équivalent for his "mental health". From this cash he gets 10k a month on his bank account to live
The other millions the bank invests in different strategies (all etf based). Some of these strategies are 100% equities others 40/60,..
The bank keeps fueling his 200-300k cash requirement for "living" (yearly 120k)
When markets go down his cash melts down since the bank avoids selling when markets go down.
The 200-300k allow him to live up to 3 years without touching the strategies.
Thus far all strategies recovered (strongly) within 2-3 years after "major downturns".
He will consume his wealth but bank told him.that kids will still inherit a lot...
I dont have détails on the strategies but it's all etf mixing bonds/equities mainly.
On top he owns a couple of houses with minor rent income and he is having a larger amount in a PE, where you dont see theomey for 5-6 years and returns are uncertain.
He has got a private bank (fee 0.8%) that manages his wealth:
He keeps 200-300k in cash/cash équivalent for his "mental health". From this cash he gets 10k a month on his bank account to live
The other millions the bank invests in different strategies (all etf based). Some of these strategies are 100% equities others 40/60,..
The bank keeps fueling his 200-300k cash requirement for "living" (yearly 120k)
When markets go down his cash melts down since the bank avoids selling when markets go down.
The 200-300k allow him to live up to 3 years without touching the strategies.
Thus far all strategies recovered (strongly) within 2-3 years after "major downturns".
He will consume his wealth but bank told him.that kids will still inherit a lot...
I dont have détails on the strategies but it's all etf mixing bonds/equities mainly.
On top he owns a couple of houses with minor rent income and he is having a larger amount in a PE, where you dont see theomey for 5-6 years and returns are uncertain.
deserthiker24
New member
@thequestionistgirl I do have investment funds at ZKB and a private bank. I didn’t inherit anything, therefore i am building up the capital myself. However i earn well and currently (at a lower level in my career) can already funnel 2k a month into the funds.
Time will tell whether its going to work. The ZKB fund i have set up not knowing what to do, so ill continue it for a bit more.
The private bank fund is performing really well at the moment. I also like that they have themes you can choose from such as energy revolution, strong brands, robotics etc.
I also have a few thousand penny stock shares in quantum computing start ups, curious whats gonna happen to those over the decades.
Time will tell whether its going to work. The ZKB fund i have set up not knowing what to do, so ill continue it for a bit more.
The private bank fund is performing really well at the moment. I also like that they have themes you can choose from such as energy revolution, strong brands, robotics etc.
I also have a few thousand penny stock shares in quantum computing start ups, curious whats gonna happen to those over the decades.
@deserthiker24 You‘re already losing money by using those funds with high fees.
evietheturtle
New member
@deserthiker24 Don't drink the banks Kool-Aid...