Starting with IBKR

[OxygeN]

Hi all.
Just opened my IBKR account and put CHF 10k on it - it's still in the cash account. I have much more capital invested at UBS, which I will transfer over to IBKR.
Is it OK to put the 10k on VT? And then, after my holidays, I would take a look at how my UBS strategy looks like so that I could "reproduce" it when transferring it over to IBKR. AFAIR it's 75% stocks and 25% bonds.
I'm 45 and each year I fill up my 3A (which I'm moving to finpension in the next weeks). I'm also adding some money (10-15k) into my second pillar for tax reduction.

Any suggestions/recommendations/feedback are welcome.
Thanks!

 

[Baptiste Wicht]

Hi @OxygeN

Your strategy seems more than reasonable. I am not sure you really need to replicate your UBS strategy. Or at least, you should think hard about what you need and what the strategy does. In most cases, VT plus optionally a home bias covers most needs. And then, adding bonds of course depending on your asset allocation.

Is it OK to put the 10k on VT?

Why wouldn't it be? If VT is good for your strategy, then you should be able to invest it. But I may be misunderstanding your question.

 

[OxygeN]

Thanks for your reply. In fact, after reading it again, the question about "10k on VT" doesn't really make sense. I'll be anyway moving everything else over as well...

What's the purpose/use of a "home bias"?

 

[OxygeN]

Oh, and I forgot: investing 10k CHF into VT means that a currency conversion has to be done. Is it better to let the system do it, or should I control it manually?
I think I've read something about the fact that having to convert more than a defined amount of CHF (don't remember how much) is better done manually... If so, why?

 

[Baptiste Wicht]

What's the purpose/use of a "home bias"?

The idea of a home bias is to protect you against events in other countries but do not affect your own country and also ensures that some part of your portfolio in your home currency, allowing some flexibility in case of bad currency exchange rates.

Should You Have A Home Bias In Your Portfolio In 2024? - The Poor Swiss

Many investors invest more in domestic currencies than in foreign currencies. Should you do the same? Should you have a home bias?

thepoorswiss.com

Oh, and I forgot: investing 10k CHF into VT means that a currency conversion has to be done. Is it better to let the system do it, or should I control it manually?
I think I've read something about the fact that having to convert more than a defined amount of CHF (don't remember how much) is better done manually... If so, why?

The threshold is about 6600 CHF. If you are converting more, a manual conversion is cheaper and if you are converting less, an automatic conversion is cheaper. They both use different pricing models.

 

[OxygeN]

The threshold is about 6600 CHF. If you are converting more, a manual conversion is cheaper and if you are converting less, an automatic conversion is cheaper. They both use different pricing models.

Thanks for confirming. Are there any references to this? I just found this: https://www.interactivebrokers.com/en/pricing/commissions-spot-currencies.php

 

[Baptiste Wicht]

@OxygeN Both models are present on the page you are linking. In the footnote, you can find:

• For currency trades executed under the auto currency conversion service, IB will typically add or subtract (at its discretion) 0.03% to the exchange rate that would otherwise apply. Please note that IB does not separately charge a commission on these auto-conversion trades.

 

[OxygeN]

Thanks, didn't see it at first... #facepalm

 

[OxygeN]

I did my first action yesterday evening: I manually converted from CHF to USD my initial 10k and then bought some VT. This morning I saw a bulletin alert like this in my account:

I looked up my portfolio and I still have my VT stocks there... so: what does that bulletin indicate? Could it be related to my initial conversion I wanted to do, where I was being notified that I couldn't convert the whole CHF cash amount, because I wouldn't have any CHF left to pay the fees?
Sorry if it's a dumb question... still learning to get around on IBKR...

 

[Baptiste Wicht]

You indeed need some margin to be able to pay fees. But with that little information, we don't have much to guess.

I have never seen that in my case, but I always keep a little in CHF.

 

[OxygeN]

You indeed need some margin to be able to pay fees. But with that little information, we don't have much to guess.

I have never seen that in my case, but I always keep a little in CHF.

OK, most probably it was in fact due to the first tentatives of currency conversion (which of course failed because I hadn't accounted for the fees)...

 

[Lelouch]

I did my first action yesterday evening: I manually converted from CHF to USD my initial 10k and then bought some VT. This morning I saw a bulletin alert like this in my account:
View attachment 35
I looked up my portfolio and I still have my VT stocks there... so: what does that bulletin indicate? Could it be related to my initial conversion I wanted to do, where I was being notified that I couldn't convert the whole CHF cash amount, because I wouldn't have any CHF left to pay the fees?
Sorry if it's a dumb question... still learning to get around on IBKR...

Keep in mind that when you manually change currency, you need to wait for the order to be processed. To know if your order has been processed, go check your balances. You may see USD in "total cash", but what you need to pay attention to is "buying power", that's your settled cash. If you only have CHF (or even nothing), that means that your order still hasn't been processed. In your case, you probably bought VT before your CHF>USD was settled.

 

[OxygeN]

In your case, you probably bought VT before your CHF>USD was settled.

This was probably it - thanks!

 

[OxygeN]

Adding to this thread, as I feel it's still part of my "starting with IBKR" journey...
I was looking at my "UBS Manage Wachstum" situation and it's like I put almost 190k in it since June 2020 and today I got 210k there. When I started, we set an "Anlageziel" of 50k with an "Zeithorizont" of 6 years. Does this mean that I just wanted to invest 50k and not touch that amount of money for the upcoming 6 years (2020-2026)?


Further questions:

• do you think it's fine to close all positions at UBS at this moment in time and move the 210k in cash over to IBKR where I would make a lump sum investment?
• at IBKR, investing maybe 90% into VT and 10% as "home bias" (100% stock), would that give me the same performance as what I got from UBS?
• how may I find out how much I paid UBS for managing my portfolio? Is it just the TER value I would need to look up, or should I be able to find evidence in CHF in some monthly or quarterly bank documents? I found "Mandatspreis" PDFs where I see quarterly deductions of 1.70% of my invested money, to which 8.1% VAT is added. It's around CHF 900.- each quarter... that's quite some money, right?

Regarding the management fees: am I right understanding that I pay these to have my portfolio actively managed? If so, this is what I would be losing on IBKR, right?

Thanks.

 

[Baptiste Wicht]

Does this mean that I just wanted to invest 50k and not touch that amount of money for the upcoming 6 years (2020-2026)?

I think so, but it is unlikely to be a contract if that's only a goal. To see if it blocks you from withdrawing anything, you would have to read the fine prints.

do you think it's fine to close all positions at UBS at this moment in time and move the 210k in cash over to IBKR where I would make a lump sum investment?

In my situation, I would do that.

But obviously, this must be adapted to your situation. Can you handle large swings in the next few months/years on that money? Can you keep that money invested for 20+ years?

• at IBKR, investing maybe 90% into VT and 10% as "home bias" (100% stock), would that give me the same performance as what I got from UBS?

This would give you the performance of 90 VT / 10 CH market. How much did you get at UBS?

how may I find out how much I paid UBS for managing my portfolio? Is it just the TER value I would need to look up, or should I be able to find evidence in CHF in some monthly or quarterly bank documents? I found "Mandatspreis" PDFs where I see quarterly deductions of 1.70% of my invested money, to which 8.1% VAT is added. It's around CHF 900.- each quarter... that's quite some money, right?

That's a lot of money indeed and it seems to be 1.7% per year, billed quarterly.
On top of that, you would have the TER if UBS uses funds for you. If they use stocks, then, there is no further fees unless they are charging your some load/exit fees.
You can probably find that out in some statements, but I have never used UBS, so I don't know for sure.

Regarding the management fees: am I right understanding that I pay these to have my portfolio actively managed? If so, this is what I would be losing on IBKR, right?

These fees are to get your portfolio managed indeed. But even if it was passively managed by UBS, you would pay a management fee. This fee is also for the custody (the account itself). Both of these fees are zero at IBKR. You would do the management itself indeed.

 

[OxygeN]

I think so, but it is unlikely to be a contract if that's only a goal. To see if it blocks you from withdrawing anything, you would have to read the fine prints.

I'll check the fineprints, aka I'm asking my UBS contact person.

In my situation, I would do that.

Your situation = you're working towards FIRE and you are confident on how you manage your wealth on IBKR?

But obviously, this must be adapted to your situation. Can you handle large swings in the next few months/years on that money? Can you keep that money invested for 20+ years?

In 20 years I'll have reached the retiring age (if it still will be 65 for men). As of today I don't have any plans on using the money I've invested. My thought is that I would leave that money invested until retirement but if I would need some cash (in addition to what I have in my savings account for "emergencies"), I could withdraw from my investments (which today would be fine as I'm doing surplus, but maybe it wouldn't be good anymore if the investments would be in a "losing" situation).
Why do you mention "large swings"? And how large?

This would give you the performance of 90 VT / 10 CH market. How much did you get at UBS?

At UBS I'm invested as follows:


Does the above answer the question about "how much did I get at UBS?", or did I misinterpret?

That's a lot of money indeed and it seems to be 1.7% per year, billed quarterly.
On top of that, you would have the TER if UBS uses funds for you. If they use stocks, then, there is no further fees unless they are charging your some load/exit fees.
You can probably find that out in some statements, but I have never used UBS, so I don't know for sure.
These fees are to get your portfolio managed indeed. But even if it was passively managed by UBS, you would pay a management fee. This fee is also for the custody (the account itself). Both of these fees are zero at IBKR. You would do the management itself indeed.

So basically I would have at least two options:

• remain at UBS and knowing that my portfolio is actively managed to achieve the best possible performance (in accordance to my risk level);
• move to IBKR and not actively managing my portfolio, putting lump sum into VT (and some Swiss "home bias") - here I probably would perform less compared to the actively managed UBS option.

What do you think? Do I miss something? Are some considerations/factors missing?

 

[Baptiste Wicht]

Your situation = you're working towards FIRE and you are confident on how you manage your wealth on IBKR?

Correct.

In 20 years I'll have reached the retiring age (if it still will be 65 for men). As of today I don't have any plans on using the money I've invested. My thought is that I would leave that money invested until retirement but if I would need some cash (in addition to what I have in my savings account for "emergencies"), I could withdraw from my investments (which today would be fine as I'm doing surplus, but maybe it wouldn't be good anymore if the investments would be in a "losing" situation).
Why do you mention "large swings"? And how large?

You have to be careful about withdrawing money if you do not know when you will withdraw.

If you invest as a lump sum now, you can probably expect at least one -40% drop sometimes in the next 20 years. And if it's early, it means you will be fully in negative. And you will have to trust yourself not to sell.

Does the above answer the question about "how much did I get at UBS?", or did I misinterpret?

Yes, it does. In about 4 years, you did at most 28% in the best of your fund. There is nothing particularly good about these returns. Since June 5th 2020, VT did +42% until today.

So basically I would have at least two options:

• remain at UBS and knowing that my portfolio is actively managed to achieve the best possible performance (in accordance to my risk level);
• move to IBKR and not actively managing my portfolio, putting lump sum into VT (and some Swiss "home bias") - here I probably would perform less compared to the actively managed UBS option.

What do you think? Do I miss something? Are some considerations/factors missing?

I think you are overestimating the capacity of UBS to make money for you. Your stock portfolio would have done better 4 years in VT than in the portfolio you are mentioning. You will not necessarily have lower returns in IBKR with passive investing. This is of the biggest issues with active investing, you often have higher fees and lower returns.

 

[OxygeN]

You have to be careful about withdrawing money if you do not know when you will withdraw.

Indeed I can't tell when/if I will eventually need to withdraw from my invested money - as I said before, that would be in a very exceptional situation (emergency), where my emergency funds wouldn't be sufficient. So, yes: I would need to be careful in choosing the right moment in time (when I'm making surplus), if possible.

If you invest as a lump sum now, you can probably expect at least one -40% drop sometimes in the next 20 years. And if it's early, it means you will be fully in negative. And you will have to trust yourself not to sell.

Uh, interesting: where do you get that expectation from, to have a ca. 40% drop during the next 20 years?
So by "early" you mean that if the drop would happen let's say in 2026, I would have to keep my pace and not sell anything, waiting for the market to recover from the -40% drop - right?
And talking about "lump sum": if I close all my invested positions at UBS I will have 210k in cash, which I should not leave on an account. Thus, I'd be investing it with IBKR... at this point is it where you'd rather do DCA by putting e.g. 20k each month or so?!

Yes, it does. In about 4 years, you did at most 28% in the best of your fund. There is nothing particularly good about these returns. Since June 5th 2020, VT did +42% until today.

Yes, I've seen that 28% and I was amazed - but probably because I'm a newbie and 28% looks great at first glance!
So you're saying that if I had invested the same amount of money back in 2020 in VT, today I wouldn't have made just +10.37% (which is what I've made as of today with UBS) but +42%?

I think you are overestimating the capacity of UBS to make money for you. Your stock portfolio would have done better 4 years in VT than in the portfolio you are mentioning. You will not necessarily have lower returns in IBKR with passive investing. This is of the biggest issues with active investing, you often have higher fees and lower returns.

Thanks for addressing this. Yes, probably overestimating UBS' ability to make money for me - first of all because I've just started the journey of taking care of my finances/wealth and second because I of course lack of experience in passive investing. I know that in finance there's nobody ever that can guarantee anything, but to me it's already worth to know and understand that VT is good for passive investing. I thought UBS made (and makes) more surplus with my money, but apparently (from your feedback) it's not true (compared to VT).

 

[Baptiste Wicht]

Uh, interesting: where do you get that expectation from, to have a ca. 40% drop during the next 20 years?

This is based on history. Historically, you would get at least one major drop (40+) in 20 years. It may not happen, I am no oracle. But this is what we must prepared for.

So by "early" you mean that if the drop would happen let's say in 2026, I would have to keep my pace and not sell anything, waiting for the market to recover from the -40% drop - right?

Exactly. The worst thing you can do when you are 40% down is to sell.

And talking about "lump sum": if I close all my invested positions at UBS I will have 210k in cash, which I should not leave on an account. Thus, I'd be investing it with IBKR... at this point is it where you'd rather do DCA by putting e.g. 20k each month or so?!

In my situation (again, likely different from yours), I would invest it at once. But I cannot really say what you should do in yours. You have to weigh the pros and cons.

In a sense, you are already invested and you are simply doing a transfer, so doing it at once makes sense.

Yes, I've seen that 28% and I was amazed - but probably because I'm a newbie and 28% looks great at first glance!
So you're saying that if I had invested the same amount of money back in 2020 in VT, today I wouldn't have made just +10.37% (which is what I've made as of today with UBS) but +42%?

28% is great, no problem with that.

Yes, but keep in mind that VT is 100% in stocks, so it would not be exactly an apples-to-apples comparison and you seem to have some sustainable investing going on as well that cannot be directly compared with VT.

Yes, probably overestimating UBS' ability to make money for me

This is a very common understanding.

 

[OxygeN]

Thanks again @Baptiste Wicht for taking time to reply
I'll proceed step-by-step: first I'm going to finalise the 3A move from UBS to finpension and choose a strategy there.
Afterwards I'll wait for the market to recover from last Friday's dip (because my 210k are now only 205k!) and I'll request UBS to close all positions. Or, well... it depends on how fast the market will recover: I pay around CHF 900.- every quarter, which means that if I keep the UBS investments running hypothetically until December, then I'd be paying (counting from today) 2x900.- which I should by then have made in terms of profit/surplus... might be realistic, if the market recovers "in time"?!