21M - Anonymous Introduction

Share your story
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I’ve learned a lot in this forum and on the MP blog and so I thought I’d share my bits here too!

About my life
I’m 21 years old and am born / live in Zürich. I am currently studying full-time at a university of applied sciences and thus have no income besides the obligatory “Zivildienst” :frowning:. I still live with my parents which is quite profitable ;).

In the past, I first did an apprenticeship with a known bank in IT for 4 years. Afterwards I was lucky to stay with them and got a role with quite some responsibilities! (Income was between 60-80k/y). Then last september I started studying part-time. End of January I quit my job and changed to full-time studying. (Luckily changed before the rise of corona :smiley: )

Now to the finance part:

Cash / Emergency Fund
I have 20’000CHF in a savings account with an interest rate of 0.6%. The account is with Migros Bank (Sparkonto Free25). And obviously, normal cash account with ZKB of ~7’500CHF (zkb student package).

ETF / Stocks

I first had my investments with the bank I worked at, but then after I quit my job I transferred everything to Swissquote. I did hold quite a lot of ETFs and Stocks, but I recently (one week ago!) changed my strategy to a rather simple one and thus hold the following:

In the future, I’m only going invest in VWRL / SWDA. I won’t invest in IUIT & RBOT anymore but will hold to it.

The (dividend) stocks I bought during the pandemic time and will sell it as soon as a specific threshold is reached (dont worry, i did some analysis on the stocks!).

VIAC 3a
I started paying to a 3a cash account last year and this year in march, I moved everything to VIAC 3a. Also I’ve deposited 4’000CHF this year and am planning to deposit the remaining part soon. My strategy in VIAC 3a is the Global 100 (which is why I changed my ETF porfolio).

Current Profit is at ~16%. :slight_smile:

P2P
This year, I invested about 3k on Mintos, but after this pandemic I’ve realised how risky this can be and therefore went out of it. ~200EUR are still with Mintos but I can’t get it for now.

Regarding FIRE
I deliberately haven’t calculated a FIRE number as I’m still 21 years old! There will be many changes in the future, which will certainly change some aspects necessary for the calculation. Heck, I don’t even know if I still want to retire early in the future. I might move to another country or stay in switzerland for ever… But I think it’s best to work towards it in slow steps so that I still enjoy my life.

My expenses are obviously low due to living at home (for free), eating at home, etc. I’ve calculated my yearly expenses and it’s currently at ~8k CHF per year without food / taxes (high probability that there is something i forgot to add tho!).

Next Steps
I’m planning on moving my assets to IB as I currently only see advantages. As I’m younger than 25, I’d only pay 3$/m or 36$/y on custody fees, which is less then the 64.64CHF/y on Swissquote. Transaction cost is obviously cheaper, but I’m not yet finished with my “investigation”.

Thank you
Lastly, I’d like to thank you all on the discussions here on this forum as it helped me a lot. I was able to add more deductions to my tax declaration and many more things! Thank you! :smiley:

Looking forward to your comments :smiley:

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Indeed, also remember to take the time to invest in yourself (not just for monetary aspects, find what makes you happy, etc.)

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Thank you. Regarding stocks, I guess I tried stock picking! But yeah. Maybe I should create an IPS as you said to help staying the course…

Yes, I still was employed this year and so I invested in 3a. For next year, I probably wont invest in 3a.

Thank you! This whole interest in finance came due to being quarantined at home, i guess. :slight_smile:

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You seem to have considered most things. I would only say 3 broad things:

  1. Keep the bulk of your portfolio (80% or more) simple, meaning world markets cap or some variation using low cost index funds

  2. Keep 5-10% for fun funds/stocks/crypto/etc etc. Read, watch, learn, make good and bad decisions in anything that interests you.

  3. Travel. In your 20s, you can travel the world on a shoestring budget. Or do something else that makes you happy, keeps you interested and lets you explore things beyond day to day life.

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Small 1 Year Update

During the past 1.5 years, I was able to develop myself (due to a lot of “me time” / free time) and financially, I’m also doing good. I’m still studying, but I got an internship and will therefore start studying part-time for the last two semester.

Since the last post, the following happened financially:

  • I moved everything to IBKR and went for a simple VT (92.46%) + ARKW (7.54%) portfolio. I’m thinking of selling the ARKW part (or just not buy it anymore), because the TER keeps rising!
  • I also reduced the amount held in cash (22.07%) and invested the rest in ETFs (77.93%).
  • My VIAC Portfolio is also doing really good, though I’m currently not paying into it.

image
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Performance since 1.1.2020

Have a nice summer :slight_smile:

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In my opinion, contributing to a 3a when your income is low (I imagine that yours is) doesn’t make much sense, you did the right thing by stopping to contribute. The tax savings are very low, since your marginal tax rate is low. On the other hand, VIAC charges you fees. In addition, you’ll have to pay taxes at withdrawal on the full amount of your 3a (that means: including the capital gains). Those capital gains would be tax-free on a broker’s account. So, you’re better off investing your savings through IB, for the time being. When you’ll get a full salary, then it will be a different story…

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This part is incorrect, since multiplication is commutative.

For simplification, assume a 5% return per year over 10y on a sum A, current marginal tax rate of m, and a tax rate on withdrawal of w.

So investing on 3a final sum: A*1.05^10*(1-w) vs investing in brokerage A*(1-m)*1.05^10

Since it’s commutative, as long as w < m, you come out ahead (and that inequality is true for most people with income).
(That’s without taking into account the slightly higher TER on 3a but that’s usually compensated by having tax free dividends).

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w < m is not necessarily true when is m is the tax rate of a low income and w is the tax rate of a 1 million 3a portfolio.

In addition, with your equation, you assume that you’re investing the tax savings, which is not necessarily the case.

Let’s make an example with numbers (for those in the audience who don’t like formulas):
Marginal tax rate: 33.3%
Exit tax rate: 15%
Investment: 6000 at year 1
Growth rate: 5%
Duration: 30 years

Person A invests through a 3a. He invests 6000, and gets 2000 in tax savings.
After 30 years, he has around 26k. After taxes, he’s left with 22k. Plus the 2k of tax savings, that’s 24k.

Person B invests through a broker’s account and gets 26k, tax-free.

Of course, if Person A invests the 2k of tax savings as well, then he comes on top.

I’m just saying: it’s not ALWAYS worth it.

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Of course if you invest different amount you come out differently :slight_smile: But then you’re comparing something else.

I guess the takeaway is that you always need to compare your pre-tax investment strategy when dealing with pillar2/3 decisions.

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You’re the one assuming different amounts :wink: You’re assuming that Person A puts in 6k and then invests the 2k of tax savings on a separate brokers account. Some people (less financially sophisticated than you are) believe that their best choice is to invest through a 3a. So if they are able to invest 6k per year, they put in on a 3a. And they enjoy the lower tax bill the year after that. IF they would invest the tax savings on a brokers account, then it would be a smart choice, but more often than not, they don’t have a brokers account.

The take-away is: don’t take generic advice as automatically applicable to your situation.

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But then that’s we should explain to people, not that people will pay more tax when investing on 3a rather than a broker. Otherwise we fail at financial education (which is what we should aim at around here :slight_smile:)

In that case 3a wins even more, since the alternative is them not investing at all.

Edit: in any case the OPs post was comparing broker to 3a, so that doesn’t apply

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That’s not what I said.

(emphasis added)

For now, OP only has so much to invest. So he should invest through a brokers account. But when he’ll be able to invest more than the max of the 3a, he should obviously invest through a 3a.

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Nice dashboard, did you create or it’s that a tool?

And keep it up on the saving part. Being at home with the parents is great to accumulate fast a nice pot, which will compound for 40+ years. Good job on starting early!!

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It’s from the software portfolio performance, I can highly recommend it and it’s free open-source software.

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That’s indeed correct! I saved a lot on rent and food costs. But I’m kinda getting sick of staying at home with my parents… :stuck_out_tongue: Gonna do this for 2-3 years before I move out.

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Another one year update!

I hope it’s okay to update my story on a yearly basis here, I kind of like it and it also helps with reflection and such.

Personally, things are going perfectly! I’ll be finishing my bachelor’s degree in July (99% sure I’ll pass :D) and I already have a job lined up in the autumn. Compensation is a great deal: 100k CHF / year + (bonus) + RSU + only 2 days in the office. At the same time, I am looking for a flat in Zurich… at least, if I can find one! Any tips for flat hunting?

Financially, I have reached a net worth of 100k+, for 3 days… yay! I need to sell all my stocks and ETFs before 2023 (and take them to my future employer). I think I’ll just do it at some point and buy as soon as possible instead of trying to time the market. Or what do you guys think? For the rest, I’ll let the numbers speak for themselves:

Screenshot 2022-06-28 082542
Screenshot 2022-06-28 0825422388×544 52 KB

Data since 1.1.2020
Side note: Also tracking my 2nd pillar since the last update.

Thanks for reading and enjoy summer!

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You are doing great! At 21, I was thinking just how to spend the money rather than tracking my NW. it took me 15 years to break the 1m CHF NW. you are rocking it! Keep it up!

My 2 cents:

  • continue as is. Don’t overcomplicate / don’t chase performance. ETFs are just great
  • rent is a waste of money. Don’t over spend on it
  • don’t overspend on furniture or cars these are depreciating assets. For that matter, don’t spend money on any depreciating assets except experiences
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Congrats on your progress! I hope the Bachelor’s thesis/defense/exams went well and you can now relax for a bit.

Can’t you transfer them in kind? Might be more interesting if the fees are not awfully higher than selling and buying again.

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Thank you and yes, I officially got my bachelors degree!

I only have VT and iirc you can’t buy US ETFs with Swiss Banks. I’ll check with them but most likely I’ll just buy VWRL instead.

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If you have access to US stock market, you can buy US ETFs using a Swiss bank as a broker. It is just significantly more expensive than with IB.

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