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Moin, I don't think much of this topic, simply because my investment horizon is retirement and I don't invest money that I might need in the short term, so that distress sales are on the cards. I'd rather park the money somewhere else.
From a tax perspective, the whole thing seems to make sense at first. The administration would ultimately be too time-consuming for me, and as you say, they quickly run out of ETFs, otherwise you would probably have to switch to expensive providers.
If it's just a matter of building up 1-2 small "packages", there's probably nothing to be said against it, but generally there's only the risk of a price change and falling returns.
Then your money is not safe either, so if you restructure frequently you could inadvertently chase market movements.
From a tax perspective, the whole thing seems to make sense at first. The administration would ultimately be too time-consuming for me, and as you say, they quickly run out of ETFs, otherwise you would probably have to switch to expensive providers.
If it's just a matter of building up 1-2 small "packages", there's probably nothing to be said against it, but generally there's only the risk of a price change and falling returns.
Then your money is not safe either, so if you restructure frequently you could inadvertently chase market movements.
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@VPT However, this would be important for retirement or for the planned withdrawal phase. Withdrawing in a tax-efficient way then significantly extends the range of the custody account. Depending on the value of the custody account, this can add up to a lot of money💸💸💸
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@TomTurboInvest Well, the taxes have to be paid sooner or later anyway. You can trick them however you like.
I understand the point of optimizing now at a young age to benefit as much as possible from compound interest...
But if I retire in 40 years' time and am sitting on my portfolio of millions and actually have to reduce my holdings, then I can still sell small holdings (e.g. 1 unit) and then I'm happy to accept the taxes.
Who knows whether the legal situation won't be completely different by then.
And I won't go through all the administrative stress of having x ETFs in my custody account.
I understand the point of optimizing now at a young age to benefit as much as possible from compound interest...
But if I retire in 40 years' time and am sitting on my portfolio of millions and actually have to reduce my holdings, then I can still sell small holdings (e.g. 1 unit) and then I'm happy to accept the taxes.
Who knows whether the legal situation won't be completely different by then.
And I won't go through all the administrative stress of having x ETFs in my custody account.
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@VPT When is it only about the same indices anyway? Of course, the various S&P500 ETFs vary a little, but I think that's negligible in terms of returns.
In terms of administration, there are no major disadvantages. I let it all run in the savings plan and when I have reached a certain investment amount, I close the savings plan and open a new one. I then no longer need to worry about the old one.
The investment horizon here is also retirement, but you can never say with one hundred percent certainty that you won't need the money and that's the kind of situation I'm concerned with.
At the end of the day, you're right that you have no idea what the law will look like in 30 years' time anyway. We will see 👍
In terms of administration, there are no major disadvantages. I let it all run in the savings plan and when I have reached a certain investment amount, I close the savings plan and open a new one. I then no longer need to worry about the old one.
The investment horizon here is also retirement, but you can never say with one hundred percent certainty that you won't need the money and that's the kind of situation I'm concerned with.
At the end of the day, you're right that you have no idea what the law will look like in 30 years' time anyway. We will see 👍
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@VPT Everyone as they wish, but this has nothing to do with trickery. But why give away this simple optimization?
For example, you would like to withdraw €1,500 net per month to supplement your pension.
Case 1: only 1 ETF with FIFO, old shares have the highest profit, i.e. high taxes or, in other words, you have to withdraw €2,500 gross. This reduces your portfolio value by €30,000k in the first year.
Case 2: several ETFs, you do LIFO
To withdraw €1,500 net, you only need to withdraw €1,750 gross from the last/most recent ETF. This means you only reduce the value of your custody account by €21,000. The difference of €9,000 remains in the custody account and continues to work for you.
And this will continue for many years to come, adding up to several €10,000 just because you are not making tax-optimized withdrawals. This changes the range enormously with constant withdrawals!
It's essentially about making good use of the compound interest effect of the remaining deposit.
For example, you would like to withdraw €1,500 net per month to supplement your pension.
Case 1: only 1 ETF with FIFO, old shares have the highest profit, i.e. high taxes or, in other words, you have to withdraw €2,500 gross. This reduces your portfolio value by €30,000k in the first year.
Case 2: several ETFs, you do LIFO
To withdraw €1,500 net, you only need to withdraw €1,750 gross from the last/most recent ETF. This means you only reduce the value of your custody account by €21,000. The difference of €9,000 remains in the custody account and continues to work for you.
And this will continue for many years to come, adding up to several €10,000 just because you are not making tax-optimized withdrawals. This changes the range enormously with constant withdrawals!
It's essentially about making good use of the compound interest effect of the remaining deposit.
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@TomTurboInvest that's really not insignificant. Of course you have to get to the old parts at some point, but why not let the fastball roll a little further?
Above all, it's really easy to do it yourself.
Above all, it's really easy to do it yourself.
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@Kimono_93 Yes, this is the same compound interest effect as with savings.
Yes, and at some point you also have to access the old shares, but they have increased considerably in the meantime due to compound interest.
Yes, and at some point you also have to access the old shares, but they have increased considerably in the meantime due to compound interest.
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@TomTurboInvest makes sense in your calculation. I still wouldn't want to have 20 different ETFs in my portfolio.
As already mentioned, there are also big differences in the costs of the products here 0.2% points in the TER make a difference of €120k in missing returns for a 2 million custody account and 9% annual return over 40 years, because I haven't opted for the cheapest ETF, but want to optimize taxes by hook or by crook and am trying to pick out 20 ETFs.
Then I can just as well do without 10k for 12 years.
As already mentioned, there are also big differences in the costs of the products here 0.2% points in the TER make a difference of €120k in missing returns for a 2 million custody account and 9% annual return over 40 years, because I haven't opted for the cheapest ETF, but want to optimize taxes by hook or by crook and am trying to pick out 20 ETFs.
Then I can just as well do without 10k for 12 years.
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@VPT That's the beauty of investing, everyone can do it the way they want to.
With 2 million, I wouldn't save 20 with 100k, but I would still split it up. Even if it's only 4 with 500k, I'm just too stingy to pay taxes unnecessarily 😅
Especially because the new ETFs are getting cheaper and cheaper. The one I've been saving in since June is at 0.07%, prices like that didn't exist a few years ago. In my case, that's on top of everything else.
With 2 million, I wouldn't save 20 with 100k, but I would still split it up. Even if it's only 4 with 500k, I'm just too stingy to pay taxes unnecessarily 😅
Especially because the new ETFs are getting cheaper and cheaper. The one I've been saving in since June is at 0.07%, prices like that didn't exist a few years ago. In my case, that's on top of everything else.
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