EUR accumulating ETF

[justatreeinthesea]

I'm currently based in CH and have a few stacks of EUR sitting in a savings account, earning 3.3% interest, but I'm thinking I could make them work harder if I invested them in an ETF in EUR (I do not want to change the currency, because these were bought at a higher exchange rate).

I'm thinking I could pick any accumulating World or Euro ETF in EUR and not have to worry about dividends (taxes). Since the fund would be located in Ireland, the TER would be higher than a US ETF and it will probably be currency hedged, but overall, I should be able to generate more returns than what I get now and it will be even more important in the future as the ECB lowers their rate.

I've been looking at:
- iShares MSCI World EUR Hedged UCITS ETF (Acc), good returns, but expensive
- iShares Core MSCI Europe UCITS ETF EUR (Acc), OK returns and cheap

There are more, of course, but I'd rather pick one that's been around for a while.

Any good recommendations?

 

[Baptiste Wicht]

Hi

I'm thinking I could pick any accumulating World or Euro ETF in EUR and not have to worry about dividends (taxes)

Keep in mind that there is no difference in taxes in Switzerland between distributing and accumulating ETFs.

As for Europe vs World, it will likely depend on the rest of your investments. Investing only in Europe is not very diversified. But if you already have other diversified investments, you should be good. Also, I would personally not opt of a hedged ETF, but that is up to you of course. And I am not sure your argument of "bought at a higher exchange rate" is really important. If it is more efficient to keep it in USD, then you should convert regardless of when your converted it to EUR.

 

[justatreeinthesea]

Thank you Baptiste. I did not know that it made no difference in terms of taxes if the ETF was accumulating or distributing. I believed that it was only considered income if it was paid to your account .

I was thinking Europe if there was a way of getting a fund which isn't hedged since I have the EUR already, but I wasn't able to find one in my quick search.

When you're talking about efficiency, it's about the TER and the lost 15% on dividends? If that's the case, then I'll dig deeper, because it may take decades to fill the gap/loss from the FX whereas by keeping everything in EUR, I could switch to USD as soon as the currency recovers, if it ever does.

 

[Baptiste Wicht]

I was thinking Europe if there was a way of getting a fund which isn't hedged since I have the EUR already, but I wasn't able to find one in my quick search.

I think that VWRL has a version in EUR, not hedged. But then of course, you are susceptible to EUR/USD exchange rate since the fund holds USD.

When you're talking about efficiency, it's about the TER and the lost 15% on dividends? If that's the case, then I'll dig deeper, because it may take decades to fill the gap/loss from the FX whereas by keeping everything in EUR, I could switch to USD as soon as the currency recovers, if it ever does.

Yes, that's what I am talking about.

But make sure that your strategy makes sense. Will it ever recover? Does it matter?

 

[justatreeinthesea]

I think that VWRL has a version in EUR, not hedged. But then of course, you are susceptible to EUR/USD exchange rate since the fund holds USD.

Absolutely and that's the reason I was thinking I would need to pick a pure Euro stock based ETF if I wanted to keep everything in EUR, but then the performance wouldn't be as good.

But make sure that your strategy makes sense. Will it ever recover? Does it matter?

Indeed. This is unrelated to my main strategy. I just started to wonder why I was holding bags of EUR in a savings account when I could maybe invest them instead. Thanks for the feedback!