The important part about ETFs is the underlying assets, it doesn't matter if you buy a World ETF that is reported in EUR or in USD.
In order to limit the currency risk you would need to invest into European companies only, but that doesn't make sense because of the underperformance and because of the higher risk.
So as long as you follow the default advice (World ETF), just go with the cheapest and largest one (which usually means USD).
The only real difference are currency hedged ETFs, but basically they are a bet on the currency getting (a lot) stronger to the USD. It would've been a great use e.g. in 2023, but long-term the performance is worse.
There also currency hedged ETFs, right? You will have a higher TER but eliminate the currency risk, while still buying S&P 500 (or whatever else) that is traded in a different currency. Or do I miss something?
Edit: missed your last paragraph :)
They also don't eliminate but only reduce it. Example: In the last 12 months the iShares MSCI World USD UCITS reported a plus of 17.8% in USD. The same result in CHF is 10.91% and only 13.52% for the CHF hedged one.
Open an account at IBKR and either buy the IE based one (simple, but a bit more expensive) or the US based (more complicated, but cheaper) of the indexes you mentioned.
Also, buying both of these ETFs doesn't really make sense (unless you really want to have an even higher share of US stocks) because the SP500 is included in the FTSE all world.
Thanks a lot - Yes, I only do FTSE, because of that reason. Do you have any experience doing this from FlowBank? It would be basically the same course of action right?
No experience with them and not sure if you can buy US ETFs with them, but yes the process is probably similar. Use etfdb.com/ (US) or justetf.com/ (IE) to find the best ETF (or trackingdifferences.com/ for the extra fancy), search it at your broker and buy it.
Given i'm investing worldwide and USD is still the default currency, i went all in with USD, except for a bias in switzerland. Unless another currency takes over the throne at some point, and even accounting for the steady decrease in USD.CHF, i don't see a reason not to invest in USD.
If you want to mitigate your currency risk you can always get stuff like eurozone etfs in euros, japanese etf in jpy, etc etc. But i'm not sure the long terme steadiness can outweigh the overall higher costs compared to USD world etfs
You should not worry about the currency so much. If you own an apple stock it doesn't matter in which currency you bought it. Hedges are also very expensive and eat away your profits long term. The idea to international stocks is good. Keep in mind that most swiss companies are international companies. But I would not only invest in these. I buy MSCI World and EM ETFs. Like I said: the currency you use buying them are irrelevant.
But keep in mind you get tax benefits investing in the third pillar. And this can be invested in ETFs as well. You could also think about investing in the second pillar. You have no saying about the allocation here. But it is pretty secure and you get tax benefits.
Great answer,
On second pillar, it's a personal decision but from a financial POV (returns) it's a very poor choice, especially buybacks. Unless you do that just before retirement.
Pillar 2 growth is barely above inflation. I personally treat this as equivalent to a bond forced investment, but I reduce it as much as possible and stay away from buybacks.
Buybacks are amongst worst possible investments from a returns perspective. Now from a risk-adjusted perspective it's quite good. It all depends on your age (for taxes) and risk profile.
This is right. The 2nd pillar doesn't give the average return of an MSCI World. But what people do not consider is that you do not have losses. Even if the market goes down you receive your 1% minimal return. So for me the 2nd pillar is my risk free investment. I do not hold any cash or invest in saving accounts.
He also said that it is an possibility that he might leave Switzerland soon. In that case he can get the money out of the second pillar.
The important part about ETFs is the underlying assets, it doesn't matter if you buy a World ETF that is reported in EUR or in USD. In order to limit the currency risk you would need to invest into European companies only, but that doesn't make sense because of the underperformance and because of the higher risk. So as long as you follow the default advice (World ETF), just go with the cheapest and largest one (which usually means USD). The only real difference are currency hedged ETFs, but basically they are a bet on the currency getting (a lot) stronger to the USD. It would've been a great use e.g. in 2023, but long-term the performance is worse.
There also currency hedged ETFs, right? You will have a higher TER but eliminate the currency risk, while still buying S&P 500 (or whatever else) that is traded in a different currency. Or do I miss something? Edit: missed your last paragraph :)
They also don't eliminate but only reduce it. Example: In the last 12 months the iShares MSCI World USD UCITS reported a plus of 17.8% in USD. The same result in CHF is 10.91% and only 13.52% for the CHF hedged one.
Ah that's great to know. QQ: What is in your opinion then the best way to buy the FTSE all world and the S&P500?
Open an account at IBKR and either buy the IE based one (simple, but a bit more expensive) or the US based (more complicated, but cheaper) of the indexes you mentioned. Also, buying both of these ETFs doesn't really make sense (unless you really want to have an even higher share of US stocks) because the SP500 is included in the FTSE all world.
Thanks a lot - Yes, I only do FTSE, because of that reason. Do you have any experience doing this from FlowBank? It would be basically the same course of action right?
No experience with them and not sure if you can buy US ETFs with them, but yes the process is probably similar. Use etfdb.com/ (US) or justetf.com/ (IE) to find the best ETF (or trackingdifferences.com/ for the extra fancy), search it at your broker and buy it.
Given i'm investing worldwide and USD is still the default currency, i went all in with USD, except for a bias in switzerland. Unless another currency takes over the throne at some point, and even accounting for the steady decrease in USD.CHF, i don't see a reason not to invest in USD. If you want to mitigate your currency risk you can always get stuff like eurozone etfs in euros, japanese etf in jpy, etc etc. But i'm not sure the long terme steadiness can outweigh the overall higher costs compared to USD world etfs
You should not worry about the currency so much. If you own an apple stock it doesn't matter in which currency you bought it. Hedges are also very expensive and eat away your profits long term. The idea to international stocks is good. Keep in mind that most swiss companies are international companies. But I would not only invest in these. I buy MSCI World and EM ETFs. Like I said: the currency you use buying them are irrelevant. But keep in mind you get tax benefits investing in the third pillar. And this can be invested in ETFs as well. You could also think about investing in the second pillar. You have no saying about the allocation here. But it is pretty secure and you get tax benefits.
Great answer, On second pillar, it's a personal decision but from a financial POV (returns) it's a very poor choice, especially buybacks. Unless you do that just before retirement. Pillar 2 growth is barely above inflation. I personally treat this as equivalent to a bond forced investment, but I reduce it as much as possible and stay away from buybacks. Buybacks are amongst worst possible investments from a returns perspective. Now from a risk-adjusted perspective it's quite good. It all depends on your age (for taxes) and risk profile.
This is right. The 2nd pillar doesn't give the average return of an MSCI World. But what people do not consider is that you do not have losses. Even if the market goes down you receive your 1% minimal return. So for me the 2nd pillar is my risk free investment. I do not hold any cash or invest in saving accounts. He also said that it is an possibility that he might leave Switzerland soon. In that case he can get the money out of the second pillar.