How I moved my portfolio with Cash and Market Timing!| Updated: |
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I am sure you have heard many times that market timing is bad! I have even said it on this blog several times. But recently, I did some market timing. I had to transfer my entire portfolio from one broker to another. And by the time the money was transferred, the price had increased too much. So I timed the market!
And market timing saved me about 1000 CHF. But do not take me wrong. I still would not advise this to anyone. Hell, I would not even do it again. It would have been much better to automatically transfer my portfolio from my previous broker to the new one!
In this post, I am going to detail how I switched my portfolio from DEGIRO to Interactive Brokers. I used some extra cash to help me. And I ended up timing the market to buy back my shares. You need to keep in mind that my portfolio is relatively small. I only had to transfer about 50’000 CHF worth of shares. Some of the things I did would not have been possible with a much larger portfolio. There is no solution that would fit all situations!
Moving from DEGIRO to Interactive Brokers
Recently, I decided to change my broker. Until now, I was with DEGIRO. I am still satisfied with DEGIRO as a broker. However, they chose to apply European regulations, one year in advance. The result is that I do not have access to U.S. domiciled funds anymore. And the same stands for all Swiss investors.
To be able to invest a bit longer in U.S. funds, I decided to switch to Interactive Brokers. I opened an account and transferred a little money to it. Then, I still had to transfer my existing portfolio from the old broker to the new one. There are several options to transfer portfolios. Either you use an automated portfolio transfer system, or you sell your shares and repurchase them on the new account.
It is important to note than in Switzerland capital gains are not taxed. If capital gains are taxed in your countries, and you are selling and rebuying funds, you may have a significant tax to pay. It would make a big difference. In that case, it would be much better to use the automated way to transfer securities.
1. Using extra cash
I was quite fortunate for my transfer. In February, my ESPP shares were sold. Since my company is American, my shares have been sold in USD. And I have been able to transfer the result of the operation directly to Interactive Brokers. It is about 19K USD that was transferred to my Interactive Brokers account.
You may wonder what does this has to do with transferring a portfolio? It can help quite a bit to have some extra cash. The main risk in moving a portfolio by hand is that there will be a difference between the time you sell the shares and the time you repurchase them. If you are lucky, you can make some returns. But if you are unlucky, you can lose money. We want to minimize this risk.
And having extra cash is one way to minimize this risk! For example, let’s say you have one position to sell with a total of 5000 CHF. If you have 5000 CHF cash in the new broker, you can buy them and sell them at the same time. You are significantly minimizing the risks that way.
Transferring the first two funds
Using my extra cash, I sold the first of my two funds. That way, I could sell and repurchase them almost at the same time.
The first fund I sold is the iShares Swiss Dividend ETF (CHDVD). I have 55 shares of VOO. I sold them at 116.06 CHF per share from DEGIRO. This operation cost me 4.34 in fees to sell them. I repurchased the shares at 116.05 CHF per share form Interactive Brokers. This operation cost me 7.98 CHF in fees. In total, it cost me 12.32 CHF to transfer this position. Minus the 0.55 CHF I made in profit, this is 11.78 CHF in fees. After this, I moved the cash from DEGIRO to IB to start the process again.
The second fund I had to transfer was the Vanguard S&P500 ETF (VOO). I had 25 shares of this ETF. I sold it at 258.07 per share. The very good thing is that I did not pay any fee for selling since this is one of the free ETFs from DEGIRO. I repurchased them at 257.72 CHF per share. For buying, I spent 0.35 CHF in fees. I made a profit of 8.75 with a difference. It is a net profit of 8.40 CHF after the fees. I was lucky on that one. I was not counting on this profit.
Reviewing my portfolio
I have been growing less and less convinced about the SMIM (Swiss Mid-Cap) ETF I had in my portfolio. It took me a long time, but I decided to sell it to simplify my portfolio and make it more stable. The home bias part of my portfolio is here to stabilize my portfolio, not to make more returns. Therefore, the Swiss part of the portfolio will be entirely composed of the iShares Swiss Dividends ETF for now. I am still pondering whether I should simply use the Swiss Market Index (SMI) instead. But for now, I like this choice.
So I sold all my shares of this ETF. Unfortunately, I sold at a loss. But since this money will be invested in what I believe is better stocks, I think it will be a good loss in the long-term. I paid 4 CHF fees for this operation. This money was reinvested into my Swiss ETF to have a correct allocation.
Having to sell your shares and repurchasing them anyway is an excellent opportunity for some rebalancing and cleaning of the portfolio.
2. Market Timing
At that point, I only had one ETF left to transfer, the largest allocation of my portfolio: Vanguard Total World (VT). And this is where it began to become complicated.
Transfer my last ETF: VT
I have 500 shares of the VT ETF. These shares are worth about 36K CHF. This amount is more than the cash I had available in Interactive Brokers. So I could not use the technique I used for the first two ETFs. I can see three ways of doing the transfer:
- Sell everything, transfer the money, and repurchase everything. This technique is the most straightforward. However, this is the riskiest of the three depending on the market. But it is the cheapest in terms of fees and the fastest.
- Use extra cash, little by little. Sell some shares, repurchase them directly with cash on IB, and then transfer the money. Rinse and repeat once the money arrives on IB. However, this can incur hefty fees on IB since there will be many transactions instead of one.
- Sell little by little, month after month. I transfer some money to IB every month. Once this cash arrives, I can buy new shares of VT and sell the same number of shares from DEGIRO. After a few months, everything should be sold. This technique has no risk of market timing, but there are still some transaction costs. The problem is that this will reduce the investments in the first months and make a significant investment after that.
The third technique is a bit too convoluted and slow for me. Even though it may be riskier, I decided to go with the first option. I sold all my shares at 71.26 USD per share. Directly after I sold, the price started to go up, I already started to sweat!
Timing the market
It took several days for the money to be transferred. It took one day for the withdrawal to go through from DEGIRO and then two more days for it to reach my bank. When the money was available in my Interactive Brokers account, the price had reached 73.55. That is more than a 1000 CHF loss compared to the amount I sold for!
So I decided to wait and time the market. Now, I know market timing is a terrible idea. But I still decided on it for a few reasons. First, the market was not in great shape already with the first talk of trade wars and the incoming yield curve inversion. And the market was already close to its all-time high. Moreover, I did not need the market to go down a lot to recoup my loss.
I still had to wait much longer than I thought. The market took two months and a half to go back to the level I needed. I ended up buying back my shares 71.16 CHF per share. This operation makes a small profit of 50 CHF. But since I also did not buy shares during this time, it makes my cost basis for VT lower than it would have been if I had not waited.
For reference, here is VT during the last six months. I sold at the lowest point of March and had to wait until the end of May for it to go back to this level.
In the end, I was lucky. Luck is all it comes down to! The trade war could have ended the day after I decided to wait, and the market could have gone 10% in a week! I could have had to wait for a year or forever before I could reinvest.
I have learned three main lessons while transferring my portfolio from one broker to another.
First of all, having extra cash to make the transfer much faster is very convenient. This extra cash helped me a lot to transfer my first funds. It may take a little more time that way. Indeed, you have to do several roundtrips with money. But it is safer than letting the market moves between the sell and when the money arrives at the new broker.
Second, and more importantly, the market can move very quickly in a few days. I had underestimated that. That means that between the time you sell your shares, and the time the money transfer gets to your new broker, the price of the shares may have changed a lot. If it went down, you are lucky. But if it went up, and the market generally does go up, you are losing money. It is not a real loss. But you will have fewer shares than before. And this is important!
If it takes three days for the money transfer to go through entirely, the market can have gone up several percentage points. All of this is a loss for you. And it is quickly much more than what you would have paid for the automated transfer of your shares.
And third and foremost, market timing is highly stressful. When I was investing, I was not watching my portfolio very often, maybe once a week. When I was waiting for the market to dip, I was looking at the value of VT several times a day! It is not enjoyable. Even though it helped me avoid a significant loss, it would have been better only using a standard transfer system.
Another small thing I learned is that it is not always possible to move as much cash as you want. In March, I have reached the limit of 50’000 CHF going out of my bank account. Since DEGIRO only allows me to send money to one bank account, I had to send it to my bank account and then to IB. Not only is that slow, but it is also inconvenient because of the limits.
Finally, transferring money is not fast. It took a minimum of two days, sometimes more, to transfer money from DEGIRO to IB. And we have seen that things can evolve very fast in the stock market. It was probably not a good idea to transfer my portfolio like this.
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Overall, I made a small profit of about 40 CHF by transferring all my shares by hand from DEGIRO to Interactive Brokers. However, it took some extra cash and some market timing to make it work!
Given all the downsides of having it done so, I would not recommend this technique to anyone! It was highly stressful, and it is not worth it! I was lucky. It could have been much more difficult. The best technique to transfer a portfolio is to use the automatic transfer system offered by all brokers.
If I had a more substantial portfolio, I would probably have used the automated transfer in the first place. But I did not want to pay for it. So instead of waiting maybe two weeks, I waited two months and a half for the full transfer. Not good, right?
I am hoping that this will be my only experience with market timing.
How would have transferred your portfolio? Would you have used market timing?
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20 thoughts on “How I moved my portfolio with Cash and Market Timing!”
Hi The poor swiss,
I’m aware of your “timing the market” opinion, but:
Imagine that you want to start investing during this uncertain market period, would you time it? Or do you go for it? In other words, what are your thoughts about the market in the short term?
I would say it’s better to invest now when VT is at 87 than to invest when it was at 109 :) Nobody knows where it will go next, so with a long-term strategy, current pricing does not matter.
Hi The Poor Swiss,
I followed your advice and opened an account at Interactive Brokers. But now that I want to start invest, IB tells me that I’m not allowed to invest in the fund of your choice (Vanguard Total World, VT, VTWIX). This is only for US clients. My residence is Switzerland.
Any idea? Thanks a lot!
Normally, you should be good if you live in Switzerland. Are you using IB UK or another entity?
Have you requested permissions to trade US stocks?
Dear The Poor Swiss,
I am reading your blogs with a lot of interest. I would like to consult you on a similar topic. I had 2x accounts with DEGIRO. 1x Basic account and 1x Custody account. I have asked DEGIRO to transfer some shares from the Basic to the Custody.
Initial Shares in Basic account: 100x shares bought at 70 EUR.
After the move to the Custody account I had 100x shares bought at 77 EUR.
Do you maybe know why this happened? I see that in the account it figures as sold, so they transfered the shares from EUR to CHF and then they figure in the new account as bought. I have sent them a complain e-mail regarding this because my instruction was to transfer the shares and keep the same number and the same buying price. Is what happened here normal? Do I have a chance to get the difference back?
Thank you very much for your time.
I am not sure I understand the issue. You had 100x shares before and you still have 100x shares after. You did not lose anything. The buying price is just an indicator of your average buying price and when you transfer shares, this indication is lost.
Did your cash change?
How do you see the inheritance tax that arises from having above 60k in US Assets (like in your case VT)?
Would you change to Ireland based world ETFs?
No, I am not worried about that. We have a tax treaty with the U.S. With this treaty, we have an exemption of up to 5M USD (prorated based on the % of U.S. assets we own). This is more than enough for me.
I would not change to Ireland ETF, no. I do not see any reason to do so. Unless I am forced by IB not offering U.S. ETFs to Swiss investors.
Thanks for stopping by!
With IB and Etrade as well as many other brokers it’s possible to transfer shares directly without selling them. That’s how I transfer all my ESPP shares without paying any fees and not having to worry about timing. Doesn’t Degiro have to offer such an option as well? After all they don’t own but just manage your shares.
That’s good to know. I never thought about transferring my Etrade shares to IB. This is good to know if you want to keep your company’s shares. With my ESPP, I want to cash in the 15% bonus.
DEGIRO does offer share transfer. But it’s expensive and complicated. However, I pointed out in the conclusion that this is what I should have done. I do not recommend to take the route I took.
Thanks for stopping by!
Hello Mr. Poor swiss
Where to start … :) first thank you for putting together all this great articles, which I only found yesterday :) And there is a good reason for it, I married when this blog started in 2017, and my daughter was born in december of that year. So I left my neglected my investements until yesterday.
Without knowing about FIRE , I had started to save about 40% of my salary several years ago,and already frugal many more, and despite being away for some years of travelling(which I recommend by the way before 50 – this would be an interesting discussion) Im closer to my FI.(first time Im using these terms, after reading your blog :) Anyway I will finally open a broker account :)On this research I came to your great blog. Until now I have been using postfinance mutual funds. (By the way I disagree with your bank comparisson. You did a very nice one between MigrosB and Neon, and you dismissed Postfinance as expensive.. :) its a mistake because Postfinance is totally free is you have > 25k chf invested in a fund (before it was 25k total assets). in this case you have a plus account which includes, multiple accounts creation, free debit cards (I have EUR and CHF) widthdrawing from here and abroad is free! I saved a lot in fees when travelling with these debit cards). Anyway my first question is: are you happy with IB now? (you wrote here the change happened because of no more US domiciled funds, but also in another comparisson you wrote that when > 100k IB was also cheaper and you were considering moving them). So … should I start immediatelly in IB and forget about DEGIRO considering I have more than that amount in CHF? I also have that amount in EUR and I was wondering if its possible in IB to handle multiple currency accounts. I have tried to read in IB website and Im still not sure. Thank you very much for your time and keep it up with this great blog. (I could contribute with some info for a post about post finance if your interested. I got stuck with postfinance, because when I did the research for the cheapest bank , PF was the cheapest. this was in 2009 (Im 10 years older than you, also a developer :) Well anyway, thank you
Congratulations on saving 40% or our salary early on! This is really impressive!
The problem with Postfinance funds is that they are insanely more expensive than ETFs from Vanguard for instance. So, yeah, you save 12 CHF per month by using the available funds. But you sacrifice 0.5% of your investments every year. This is much more than 12 CHF per month!
So, I would still argue that Postfinance is too expensive :)
Yes, I am still very happy about IB. I actually regret not having started with IB directly instead of going the DEGIRO route first. If you have the 100K, you can directly start with IB. Now, next year new financial laws will enter into force. So, it’s possible that we will lose access to the best ETFs. But even with European ETFs, it will still be cheaper than Postfinance.
In 2009, it’s quite possible that PF was the cheapest. Until they increased their fees recently, PF was actually quite good.
You can have many currencies at IB, that’s no issue. However, I do not know if you can wire directly EUR to them. I would think yes, but I never did it so I cannot confirm. But you can hold many different currencies without issues.
Thanks a lot for stopping by and sharing your experience!
Great article again, I have thought about this before, first when entering the equity market when I became focused on the very high P/E ratios. I stalled to far to long until I remembered the time I was willing to stay in the market.
That being said I just cashed out a portfolio, and am sitting on 70k chf, I plan to invest it in VTI and the vanguard real estate ETF but I have fallen back in the trap of wondering whether to wait until late July when earnings calls are done. Looks like most will be disappointing but as we already know that I should probably just invest!
I completely understand you! It’s very tempting to fall in this trap :(
And with trump being unpredictable, it’s difficult to fully trust the market.
Now, if you do not need this money for a very long time, you are better off investing right now. Or you should set yourself a goal of minus 10% of the current prices before you invest and then invest at once when you reach it. But you need to be aware that it is possible that you’ll have to wait very long.
It’s a difficult and emotional subject.
Thanks for stopping by!
Hey Poor Swiss!
I’m curious how the transfer affected your tax situation. I would imagine that selling all of your shares from your initial broker would trigger a pretty hefty cap gains tax. Any idea how you were affected there and if you took any steps to minimize taxation during this period?
That’s a very good reason! And I should have thought of writing about that in the article.
In Switzerland, we do not have capital gains tax. I should have considered the bigger picture.
If there was a tax on capital gains, I would have used the automated transfer system.
Thanks for mentioning that. I will include this in the next update of the post.
Why all this stress, fees and risk? You could have just kept the DEGIRO account and started a new one at IBKR. That’s what I did. You could have kept the SMIM and started buying CHSPI on the new account. That’s what I did…. then you create a Google Sheet with real-time quotes and always have the perfect overview.
Hi THe Poor Thurgovian,
I agree that I should have made it simpler.
However, I didn’t want to keep both brokers. First, it is a bit more complicated. And second, DEGIRO takes 3% of my dividends. So I could save money by not keeping my DEGIRO account.
What I should have done is simply use the automated transfer of shares instead of doing it myself. It is just dumb to do like I did.
Thanks for stopping by!
Why does DEGIRO keep 3% of your Dividends?
This is the fee for the Custody account at DEGIRO. If you use the basic account, you will not pay this fee. However, if you take the basic account, they are allowed to lend your shares to other people.
Thanks for stopping by!