Investing 6. Exchange Traded Fund (ETF) Arbitrage

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In part 4 of the Investing series, we have covered Exchange Traded Funds (ETF). In this post, I’ve mentioned that ETF used arbitrage to follow closely the price of the index. If the price of the stocks in the index go up, the price of the ETF should follow. And if the price of the stocks go down, the price of the ETF should follow as well. But if the price of the ETF goes up because of stock market trading, something should correct the price quickly. This is where arbitrage plays a big role.

In this post, we are going to see how Exchange Traded Funds are created. And also what is arbitrage ? How it makes sure the price of ETF stay in sync with the price of the index. It’s a bit of a complicated subject. But I think it’s important to know exactly how financial instrument are working before investing in them.

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Investing 4. – Exchange Traded Funds – ETFs

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This post is part 4 of 5 in the series Investing – All about investing.

In the previous post of the Investing series, we talked about mutual funds. They are a great tool for investment. And especially passive funds with very low fees, thanks to index investing.

This is all great, but the problem with mutual funds is their availability. If you are lucky, you have access to Vanguard. And you can directly invest in their low fees mutual funds. There are other like Vanguard, but they are the most famous ๐Ÿ˜‰ If you are not lucky, for instance, if you live in Switzerland, you don’t have any easy access to good mutual funds. I can bet that your bank does not offer cheap passive funds.  At least mine doesn’t! Here comes Exchange Traded Funds!

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Investing – 2. Cash, Bonds and Stocks

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This post is part 2 of 5 in the series Investing – All about investing.

In the first post of the Investing series, I covered the basics of investing. This should have given you a few important rules you should follow before you invest. However, we didn’t cover into details how to invest. In this post, I’m going to cover the main financial instruments that you can use to invest: Cash, Bonds and Stocks.

We are going to see the advantages and disadvantages of each of these instruments. By the end of this post, you should have a better understanding of them. And you can always ask questions for more information ๐Ÿ™‚

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Investing – 1. The Basics

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This post is part 1 of 5 in the series Investing – All about investing.

 

This is the first post I’m going to write about Investing. I’m going to try to cover as much as possible on the different forms of investing. In this first post of the series, we are going to see what is investing in the broad sense.

I don’t yet know how many posts will be in this series. I will try to cover the basics, the stocks, the funds, Exchange Traded Funds (ETFs) and so on ๐Ÿ™‚ Hopefully, it will be interesting for some of you and it will motivation some people to motivate.

I’m no financial advisor. I’m not nearly an expert investor. This post is just what I know about investing from my experience and from research. 

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How to buy an ETF (VT) on Degiro

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In this post, we are going to see how to buy an Exchange Traded Fund (ETF) on DEGIRO. Vanguard Total World (VT) is the main part of my new portfolio. So I’m going to use VT as an example. The process is exactly the same with any ETF you buy.

I decided to use DEGIRO after comparing with several other brokers. The main advantage of DEGIRO is its very low fees. You can read my full review of DEGIRO if you want more information. This post assumes you already have an account with DEGIRO. If not, you can open one account very quickly.

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How to see total result on the mobile Degiro application

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In my review of Degiro, I mentioned that something I really didn’t like was that it was not possible to see the total result of the position in the mobile application. Only the daily result.

I just found out it was in fact possible to see this information on the mobile application. It is just not really intuitive. But once you know it, it’s really easy to use. Since it was not easy for me to find it, I’m going to post my findings for all of you!

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My review of Degiro as a broker for Swiss investor

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(This post was first published on Mustachian Post. Thanks a lot to MP for the opportunity of guest posting.)

I’ve now been using Degiro for about four months. It’s now time for a review of the tool.

I would like to mention that I never tried any other broker. I decided to use Degiro four months ago based on costs. Moreover, I’m a computer scientist, so no issues with potential tech issues. Finally, my portfolio is very small, so my experience may not compare to yours.

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Degiro updated its Cash Funds structure

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DEGIRO just updated a few things about the cash you hold in your account.

Since Netherlands investment firms are not permitted to hold cash, Degiro invest the cash from your account in a money market fund. There is a separate money market fund for each currency that you can hold with Degiro. Money market funds are principally investing in government bonds, with very high quality. However, the interest rates are very low and even negative for many European countries. Therefore, some money market funds, such as the EUR or CHF cash funds, have a negative interest rate.

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Updated ETF portfolio for Switzerland – Bonds and Dividends

Posted on Categories Broker, ETF, Investment, Switzerland18 Comments on Updated ETF portfolio for Switzerland – Bonds and Dividends

In 2018, I wanted to add a few bonds to my portfolio. Since I’m in long-term investing, I don’t need a lot of bonds. But I wanted to add 5% of bonds into my portfolio to be safe and to allow for more re-balancing opportunities. Also, I do have bonds in my third pillar account. Moreover, I also wanted to get rid of my crypto-currencies. So, I updated a bit my previous portfolio to reflect this. Moreover, I also wanted to depend less on the dollar.

This is what I settled on:

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First deposit at DEGIRO and first ETF investment

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After having opened my DEGIRO account recently, it was time to use my DEGIRO account. My first deposit reached my DEGIRO broker account! Let’s start with the good, there is no fee for transfer! I’ve transferred 1000 CHF and exactly 1000 CHF arrived in my account. I was afraid of a hidden fee or transfer fee.

With the bad now: The transfer took 8 days. I sent the transfer Friday 17th, the bank debited it from my account Monday 20th. It only arrived today, Tuesday 28th on my broker account. I’ve contacted DEGIRO several times in the meantime to ask about the whereabouts of my money. They did have an issue with their bank (CIC Bank, Basel). The bank was not transferring the money statements to them for about a week. So, normally, this should not be so slow. I’m inclined to give them the benefit of the doubt for this one. I’ll see what happens to my second transfer. I sent it yesterday and it should arrive tomorrow on my DEGIRO account. If this issue is something that happens regularly, this is really bad thing for DEGIRO, but we’ll see.

With some part of this money, I bought 13 shares of Vanguard Total World Stock ETF (VT) at 73.16 USD. This ETF is a passive fund that holds 7955 stocks in the entire world, weighted by capitalization. It contains around 50% of the stocks from US and the rest is from the entire world. The fund contains 2.6% of stocks from Switzerland. It has a very low Total Expense Ratio (TER) is 0.11%, which is very low and absolutely fine for me.

Since this ETF is in the list of free ETF offered by DEGIRO, I didn’t pay any fee to buy the shares. Nevertheless, I paid a small fee for the currency conversion. I paid 0.19CHF on an order of 936.80 CHF, which means a fee of 0.02%. This is pretty good since I was paying around 0.5% fee for funds on PostFinance ๐Ÿ™‚

The buy was pretty easy do on DEGIRO, no issues here. At first, not very clear, but it turned out quite OK. I’ll post more information on the future on how to use DEGIRO. I received a mail notification for both the deposit and the trading transactions. Everything seems fine.

I’m not totally sure on my final portfolio, but VT will definitely be a part of it and probably a large part at that. I’ll keep you up to date as soon as I update my portfolio.