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  #121  
Old 04.01.2017, 11:01
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Re: Low cost Investment Funds in Switzerland

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Your choosing to ignore the income tax deduction under line 16.3 (Zurich)
That's exactly the line we've been talking about, no?

You can deduct 0.3% of your invested wealth there from income. Let's say your marginal rate 39% (single high earner in Zurich), then you'd be saving 0.117% in taxes by declaring your stocks. At the same time, the wealth tax reaches 0.118% at 420k wealth and becomes bigger than the savings from that deduction.

If you earn less, have family or live in cheaper municipality than Zürich, the threshold will vary, but it's about in 300-500k range, not 5M.
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  #122  
Old 04.01.2017, 11:01
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Re: Low cost Investment Funds in Switzerland

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The appeal of Truewealth, beyond the convenience, is that it's very customizable. I don't use their default asset allocation either, but bias heavily towards US. There are lot of people who think/say they can do better, and perhaps they can, but it requires discipline and taking an active interest in the the process. Truewealth provides:
- ease of use - transfer the money and everything else is taken care of
- automatic rebalancing
- removal of the emotional element (being tempted to buy into the asset that has done well short-term)

I think for a lot of regular folks, especially given the highly priced, and overly conservative Swiss investment offerings, what Truewealth offers is compelling.

The 20% that you're referring to is true in an abstract sense (based on straight formula values), but that assumes you never make any mistakes on your own, always have time to manage everything, etc. I think in the real world it's a more complex consideration.
The biggest world stock market is the US, so it's normal that the US figures high. Bear in mind the US companies earn their income world wide & some US quoted companies have zero US sales.
Nestle for example is Swiss, however 98% of profits are from abroad. More profit comes from India than Switzerland.

I really don't get rebalancing, over time the quality of your portfolio diminish. I would rather hold winners than losers.
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  #123  
Old 04.01.2017, 11:16
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Re: Low cost Investment Funds in Switzerland

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The 20% that you're referring to is true in an abstract sense (based on straight formula values), but that assumes you never make any mistakes on your own, always have time to manage everything, etc.
You can buy and hold the exact same ETFs that truewealth thinks you should be buying, through any other broker in the world. You'll get the same performance and save 20+% of your wealth that you'd otherwise be paying them long term. There's no need to actively manage anything. It works pretty much the same as with truewealth: transfer the money to the broker, buy the ETFs in desired ratio, and try to forget about it to remove the emotional element. I don't get why I should be paying 0.5% p.a to them for an opinion on how to allocate my assets. That's just ripoff. You ask 10 different asset managers, you'll get 10 different opinions on how to allocate the money, there's no guarantee one will be better than another. There's no reason to praise truewealth's opinion as the One True Investement Strategy either.
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  #124  
Old 04.01.2017, 11:28
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Re: Low cost Investment Funds in Switzerland

The 0.5% is a bit frustrating, I agree. betterment.com charges 0.15% for larger balances, which is far more reasonable. I'm currently paying 0.25% to Truewealth (for referring some people). I guess that's the surcharge for being in Switzerland.

However, what you describe is already beyond what most people are willing to do. It requires a baseline level of knowledge that most people don't have:
- what are ETFs, and how to pick them
- how to rebalance
- how not to overreact
Yes, all this can be learned. But, most people don't care to. They want to move on with their life rather than picking ETFs. That's where truewealth comes in, and I think over time (if the model catches on in CH) the fees will come down. Given the fees of regular investments offered by the major financial players in CH (UBS, CS, etc), Truewealth is already quite compelling.

I think we all agree that if you're DIY with knowledge, you don't need a service like that. However, I think charging a reasonable fee for the the convenience of automating everything is a completely sensible model.
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  #125  
Old 04.01.2017, 11:30
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Re: Low cost Investment Funds in Switzerland

If you'd just explain to all those people the magic of compound interests, and that 0.5% p.a. fee is 20% long term, I'm sure they'll be more than willing to spend a few evenings to learn how ETFs and brokers work and do all the work themselves from now on. This isn't hard with basic internet access. They just need the proper motivational kick, the greed will do the rest.
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  #126  
Old 04.01.2017, 11:47
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Re: Low cost Investment Funds in Switzerland

I think it's also worth mentioning that 20% is the number you get after certain assumptions, which may not hold true long-term, and is generally on the high side.

e.g. at 5.5% rate of return at 30 years, 0.5% fee is 16.9% lost to fees
if the rate of return goes up, the fee is relatively less, so at 8%, it would be 16% flat.

If the fee goes down to 0.25% (splitting the difference between truewealth fees and the US provider ones), at 5.5% rate of return over 30 years, 7.8% goes to fees. I think quite a few people would be willing to pay that.
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  #127  
Old 04.01.2017, 11:50
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Re: Low cost Investment Funds in Switzerland

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I think it's also worth mentioning that 20% is the number you get after certain assumptions, which may not hold true long-term, and is generally on the high side.

e.g. at 5.5% rate of return at 30 years, 0.5% fee is 16.9% lost to fees
if the rate of return goes up, the fee is relatively less, so at 8%, it would be 16% flat.

If the fee goes down to 0.25% (splitting the difference between truewealth fees and the US provider ones), at 5.5% rate of return over 30 years, 7.8% goes to fees. I think quite a few people would be willing to pay that.
US online brokers have a annual fee of 0, no need to pay anyone anything.
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  #128  
Old 04.01.2017, 11:53
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Re: Low cost Investment Funds in Switzerland

No need, agreed. Some people might want to for the service, though.

Assuming one does use a US online broker, how does one efficiently convert CHF to USD, if one is paid in Switzerland?
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  #129  
Old 04.01.2017, 11:58
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Re: Low cost Investment Funds in Switzerland

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No need, agreed. Some people might want to for the service, though.

Assuming one does use a US online broker, how does one efficiently convert CHF to USD, if one is paid in Switzerland?
Currency fair or Charles Schwab (US online Broker) has a CHF account in Zurich you can pay straight into. The rate was very close to spot when I did it & the funds appear the same day.
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  #130  
Old 04.01.2017, 12:04
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Re: Low cost Investment Funds in Switzerland

I think I'd rather pay 1% to Fundsmith guy, than to truewealth. He's actually doing something meaningful for it in my opinion: looks for undervalued but solid companies, tries to minimize loss in crisis times, managed to beat the index several years in row even though that wasn't the goal, gives interesting talks and even wrote a book about his methods.

Whereas Truewealth basically just tells you: buy 40% of this index, 15% of that, hope for all the best on the markets, and don't forget to pay us 0.5% for this advice. I can find such advice all over the internet for free thank you very much. I don't see any added value in it for me.
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  #131  
Old 04.01.2017, 12:04
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Re: Low cost Investment Funds in Switzerland

Does Schwab allow someone with no US associations to open a regular trading account?
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  #132  
Old 04.01.2017, 12:14
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Re: Low cost Investment Funds in Switzerland

I really don't see what makes Fundsmith different from any other "celebrity" hedge fund managers, to be honest. Over long term, they tend to underperform the market. It's an actively managed fund that has existed for a hair over 5 years, a period of where pretty much all equities went up. Just tracking the broader US market over the similar period would've doubled your money. Fundsmith has zero track record in down market situations, so there's no telling how good their downside risk management is. He seems like a sharp guy and is doing reasonable things, but that in itself doesn't translate to long term success.
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  #133  
Old 04.01.2017, 12:19
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Re: Low cost Investment Funds in Switzerland

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Does Schwab allow someone with no US associations to open a regular trading account?
Yes, you even can have US checks & a US debit card.
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  #134  
Old 04.01.2017, 12:21
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Re: Low cost Investment Funds in Switzerland

Thanks, that's useful to know. I already have a Vanguard account, so feeding that via currencyfair is easier for me, but good to know that alternative exists.
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  #135  
Old 04.01.2017, 12:23
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Re: Low cost Investment Funds in Switzerland

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I really don't see what makes Fundsmith different from any other "celebrity" hedge fund managers, to be honest. Over long term, they tend to underperform the market. It's an actively managed fund that has existed for a hair over 5 years, a period of where pretty much all equities went up. Just tracking the broader US market over the similar period would've doubled your money. Fundsmith has zero track record in down market situations, so there's no telling how good their downside risk management is. He seems like a sharp guy and is doing reasonable things, but that in itself doesn't translate to long term success.
Fundsmith is in no way a hedge fund, quite the opposite TBH.

If you bother do any research you would Terry was running the pension fund of the brokerage he took over using the same principle. it went from high deficit to surplus & covered a market meltdown. I have been an overweight investor since early 2013 & have mentioned the fund on the forum for as long.
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  #136  
Old 04.01.2017, 12:51
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Re: Low cost Investment Funds in Switzerland

Ok, fair enough, not a hedge fund.

I have indeed researched him and his prior performance. He has a reasonable track record at Tullett Prebon, although the details of his investments there are not widely available from what I could tell - for example taking a high-risk position around 2008 could've easily covered massive losses prior to that. He has done well with Fundsmith so far.

It is still not at all clear to me that over the long term he has an edge. There's nothing special about him that contradicts all the usual arguments against actively managed funds. If you wanted to go down this path, why not stick with Berkshire with its much longer track record?
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  #137  
Old 04.01.2017, 13:02
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Re: Low cost Investment Funds in Switzerland

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Ok, fair enough, not a hedge fund.

I have indeed researched him and his prior performance. He has a reasonable track record at Tullett Prebon, although the details of his investments there are not widely available from what I could tell - for example taking a high-risk position around 2008 could've easily covered massive losses prior to that. He has done well with Fundsmith so far.

It is still not at all clear to me that over the long term he has an edge. There's nothing special about him that contradicts all the usual arguments against actively managed funds. If you wanted to go down this path, why not stick with Berkshire with its much longer track record?
Berkshire is essentially an insurance company, so very different animal, Fundsmith will not invest in insurance companies or Banks where Berkshire has large holdings. Pre Fundsmith I had a large holding in Berkshire, Fundsmith has been a better investment to date, I still have some exposure to Berkshire.

If you look at historic share price growth of the type of companies in the Fundsmith portfolio, you will notice a higher compound growth figure stretching back. (I researched going back 50 years). I think Terry showed research showing 16.6% compound over 35 years. Thats the edge that I bought into 4 years ago.
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  #138  
Old 04.01.2017, 13:20
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Re: Low cost Investment Funds in Switzerland

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If you wanted to go down this path, why not stick with Berkshire with its much longer track record?
I think Berkshire is actually awesome. Fundsmith and Buffet both basically follow similar methodology of value investing. But Berkshire is huge now, there's less opportunities for them to invest the money and grow. Smaller funds like Fundsmith's have an edge over them here, they're more flexibie.

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Berkshire is essentially an insurance company
They're more of a highly diversified conglomerate sort of thing, insurance is just one big business of them.
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  #139  
Old 04.01.2017, 14:12
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Re: Low cost Investment Funds in Switzerland

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They're more of a highly diversified conglomerate sort of thing, insurance is just one big business of them.
Whilst that is true, I was oversimplifying in describing the biggest conglomerate in the world, but that was as a Fundsmith Alternative.

Berkshire has changed philosophy recently, historically Buffet would never buy any capital intensive business's. His problem is he has too much cash & can't invest it as profitably as he could throughout the 60's, 70's, 80's & 90's. He has admitted this. He then bought a Railroad on the assumption that oil prices would stay very high & railroads would be the future in transportation of goods, this has not panned out quite as expected.
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  #140  
Old 04.01.2017, 15:08
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Re: Low cost Investment Funds in Switzerland

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I think it's also worth mentioning that 20% is the number you get after certain assumptions, which may not hold true long-term, and is generally on the high side.

e.g. at 5.5% rate of return at 30 years, 0.5% fee is 16.9% lost to fees
if the rate of return goes up, the fee is relatively less, so at 8%, it would be 16% flat.

If the fee goes down to 0.25% (splitting the difference between truewealth fees and the US provider ones), at 5.5% rate of return over 30 years, 7.8% goes to fees. I think quite a few people would be willing to pay that.
It's tricky. Be careful what you compare.

Investing $100, after 30 years:
  • with a return of 0.0% and a fee of 0.0% you will have $100
  • with a return of 0.0% and a fee of 0.5% you will have $86
  • with a return of 5.5% and a fee of 0.5% you will have $429
  • with a return of 5.5% and a fee of 0.0% you will have $498

With a return of 0.0%, the total cost is 14%.
With a return of 5.5%, the fee also takes away exactly 14%.
The rate of return doesn't matter. You need to compare how much would you have earned with and without fee.
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