Keeping VT-chill strategy during wild times?

[Michael]

Hi @Baptiste Wicht,

Due to some of the unexpected and often irrational/outrageous (from a non-US perspective) moves from the current US administration, did you ever think about adapting the VT-chill strategy?
There is currently a lot of discussions ongoing on other forums about whether some future moves might impact this strategy (e.g. not being able to withdraw when investing in VT at IBKR etc.). There are alternatives which are less exposed to good-will/rational behavior of this administration, but they come with higher fees (e.g. FWRA at Swissquote). The question is, when does this risk become larger than the fees you save with IBKR/VT?

As you recently mentioned, moving CH-ETFs out of IBKR (e.g. to Saxo) might be one step in that direction, but the majority of your (and mine) investment are still in VT/IBKR currently.

Looking forward to your opinion

 

[Baptiste Wicht]

Hi

No, I did not think about that. There will always be outrageous people somewhere and I don't want my strategy to depend on them. In the next 30 years, they will not be here anymore (good riddance...).

If you are worried about a US broker, you could get VT at Swissquote or Saxo. Or if you are really worried, you could get a EU UCITS ETF. But as you said, there is a price to pay.

I think the US want people to invest in their stocks and in their funds because it helps their economy. If they were to block this (even for withdrawing), influx would stop.

Overall, I am not worried. The idiot in chief will probably ruin the country, but in the long-term, I do think it matters much.

 

[Omainec]

Actually I have started to diversify a bit into a Neon Saving plan (Invesco FTSE All-World UCITS ETF Acc) ... I was considering a second broker already before Orange-Man, just to not have all egs in one basket, though

 

[OxygeN]

I'm interested in this topic as well.
As of today, I got all my investments in VT via IBKR UK - I max out my 3A with Finpension every year in January (second year this time), with global allocation on 2 portfolios (60% and 99% stocks). I still have 20 years to go before retirement, thus my investment horizon is 20 years.

A couple of things I am wondering and asking you all:

1. Does it make sense to add a different broker (maybe CH-based)?
   1. If yes: still buy VT or buy some CH-ETF?
2. Does it make sense to DCA like CHF 500.- each month into VT/IBKR? What about the fees (CHF-->USD conversion and VT purchase ones)? Wouldn't it be better to have like CHF 7'000.- and then invest?

Thanks for your thoughts.

 

[Baptiste Wicht]

Does it make sense to add a different broker (maybe CH-based)?

1. If yes: still buy VT or buy some CH-ETF?

It may make sense depending on you This is not a question that can be generalized.

Personally, I started a second broker last year but this has nothing to do with the current market state. I simply felt I had enough money to want to diversify. And I chose to split my portfolio to keep VT at IB where it's incredibly cheap to buy and CHSPI at Saxo where it's fair to buy. The reason was to avoid having all my money being blocked in case of a regulations or bankruptcy issue.

You should choose your portfolio based on your requirements, not on your brokers. So, you can either split your portfolios between brokers or replicate it entirely.

Does it make sense to DCA like CHF 500.- each month into VT/IBKR? What about the fees (CHF-->USD conversion and VT purchase ones)? Wouldn't it be better to have like CHF 7'000.- and then invest?

Yes, it makes sense. If you have a cash account, the conversion will be insanely cheap for small transactions and you will pay something like 0.35 USD for each VT buy, no point in waiting.

 

[FIRE]

I'm thinking about moving my VT share portfolio from IBKR to Saxo Bank.

1. Has anyone here had experience with this process?
2. Would it be cheaper to keep investing on IBKR and just transfer my current portfolio to Saxo, or do you need to sell and buy again?
3. What are the costs associated with transferring VT shares from IBKR to Saxo?

 

[Baptiste Wicht]

Would it be cheaper to keep investing on IBKR and just transfer my current portfolio to Saxo, or do you need to sell and buy again?

It depends on the size of your portfolio and the number of positions you have

What are the costs associated with transferring VT shares from IBKR to Saxo?

It depends on the transfer method. IB has different charges based on the transfer method.
Saxo itself should not charge anything for an inbound transfer.

 

[FIRE]

It depends on the size of your portfolio and the number of positions you have

It depends on the transfer method. IB has different charges based on the transfer method.
Saxo itself should not charge anything for an inbound transfer.

Thank you for the info.

I only hold VT. Do you know where I can find the info about the charges?

 

[Baptiste Wicht]

I think that would be here: Other Charges, under Security Transfer Fees.

 

[OxygeN]

The reason was to avoid having all my money being blocked in case of a regulations or bankruptcy issue.

I understand the "regulations" part, but if IBKR or any other broker goes bankrupt, what are the implications with your assets? They belong to you, right? Is it only because eventually the process of transferring your assets from one broker to another could take time?

Yes, it makes sense. If you have a cash account, the conversion will be insanely cheap for small transactions and you will pay something like 0.35 USD for each VT buy, no point in waiting.

It'd be interesting to do the math - can you help?
CHF 500/month - it appears that the conversion fee amounts to CHF 1.81 (which today corresponds to the minimum 2 USD fee). In addition to that, you state that buying VT costs 0.35 USD per transaction (not related to the amount of VT shares I buy - just "per transaction").
CHF 7000/year - I'd still pay only 0.35 USD when buying VT (a greater amount as with CHF 500/month) and the conversion fee is still 2 USD (which is the minimum).

From the above, I understand that if I do 12x500 CHF I'll be paying 12x0.35 USD = 4.20 plus 12x2 USD = 24 USD in one year --> which yields to a total of USD 28.20 in fees.
If I do 6000 CHF once, I'd be paying way less fees: 1x0.35 + 1x2 = 2.35 USD

Now the above is a pure math/calculatory analysis - what would be the driver to invest every month (and pay more fees) compared to investing once per year (way less fees)?

 

[Baptiste Wicht]

I understand the "regulations" part, but if IBKR or any other broker goes bankrupt, what are the implications with your assets? They belong to you, right? Is it only because eventually the process of transferring your assets from one broker to another could take time?

Correct, assets are yours, but it could take months to get back access to them. Even for a "small" broker like FlowBank, it took a long time.

FlowBank Bankruptcy 2024: What Happened To Customers? - The Poor Swiss

FlowBank declared bankruptcy on June 13th, what happened to their customers after that? I have followed with some of them to find out.

thepoorswiss.com

It'd be interesting to do the math - can you help?

Your math is correct, but you are forgetting one thing: automated conversions are cheaper.

If you have a cash account, you can let IB do conversions automatically for 0.03%. So, if you do a conversion of 500 CHF it will cost about 0.15 USD. So, this gives us 0.50 USD per month and only 6 USD per year in total instead of 28.20 in your example.

Now the above is a pure math/calculatory analysis - what would be the driver to invest every month (and pay more fees) compared to investing once per year (way less fees)?

The driver is to get your money invested as soon as possible. You want your money in the market, not in cash.