3 fund portfolio for Swiss citizen with the benefit of Degiro Free ETFs

Hi

I have not to much experience in investing. Therefore I read up on some of the concepts. Since many of those concepts are very US-centric, it’s somewhat annyoing, that you have to figure out everything by yourself. In the end it’s not en exact science, but anyhow I would like some feedback of what I came up with. Since I live in Switzerland it’s not that easy to put together a lazy portfolio or the 3 fund portfolio, although I came very close to it.

What I basically try to do, is a 3 fund portfolio with an allocation of 30/30/30. I wanted to use Degiro as broker, since it offers the free etf from the public list (1 transfer/month).

I think I came up with a pretty solid foundation.

  • Domestic (30%): iShares Core SPI® ETF (CH) CH0237935652 0.1% TER
  • International (33%): VANGUARD TOTAL WORLD STOCK US9220427424 0.19% TER
  • Bonds (20%): iShares Swiss Domestic Government Bond 3-7 ETF (CH) CH0016999846 0.15% TER
  • Bonds (10%): iShares Global Corp Bond UCITS ETF IE00B7J7TB45 0.2% TER
  • Real Estate (7%): VANGUARD REIT ETF US9229085538 0.12% TER

That will leave you effectivly with:

  • 31% Swiss (there’s around 2.8% Swiss in Total World Stock)
  • 18% US
  • 6.7% Europe
  • 4.7% Pacific
  • 3.39% Emerging Marktes
  • and some others
    exposure in the stock market. This is roughly the same as Gerd Komer suggests as well in his book “Souverän investieren…” without even trying to hard (There’s as well an article up here, although not going in too much detail as the book).

Another benefit:
This would leave you with roughly 50%/50% CHF/USD.

Problem is though for my taste, that’s on the very low end for Europe and Emerging Markets. Adding an Europe ETF would leave you with the problem, that you have Switzerland in a third fund. Therefore you would have to bump it up with another ETF, like Vanguard FTSE Emerging Markets Index Fund (US9220428588 0.25% TER) ending up with 6 funds.

Questions:

  • How would you further optimize it?
  • Would you remove the Global Corp Bond? Since it’s in USD it’s in contrary to Gerds concept (all in your domestic currency). Do you know an alternative?
  • Is there a possibility to verify with historical data? I know, that those are no guarantee for future success, but would at least give you some confidence.

Thanks for any advice. If you talk about any specific ETF’s, please add the ISIN number. The world is complicated enough already :slight_smile:

1 Like

Hello there,

(I’m not an expert, nor a financial advisor)

Did you check which of your ETFs are free on Degiro ? Not all of them are free. At least the SPI and Swiss bonds ones are not free if I remember correctly.

You should probably reduce your exposure to Switzerland. You probably already have a second pillar that is full of Switzerland exposure. And maybe your third pillar as well. You should consider your entire assets for the allocation. 20% Switzerland is probably enough. SPI is a good choice in my opinion.

Are you aware that Swiss Government bonds have negative yields ? You are better off leaving the cash in your bank account currently.

Corporate bonds are more correlated to stocks. You should maybe consider Total Gov Bond market (BNDX or even BND).

Some real estate is already included in VT, so maybe you are better off removing this 7%. Be aware that 7% is very small and won’t make a large difference overall. Moreover, it will complicate rebalancing your portfolio. I would move this 7% to VT as well.

I hope that helps you a bit :slight_smile:

Did you check which of your ETFs are free on Degiro ? Not all of them are free. At least the SPI and Swiss bonds ones are not free if I remember correctly.

That’s correct, but that is intentionally. I wasn’t able to fullfil all needs with those offered. In addition, there are many of which have transaktion costs for buy in and buy out.

You should probably reduce your exposure to Switzerland. You probably already have a second pillar that is full of Switzerland exposure. And maybe your third pillar as well. You should consider your entire assets for the allocation. 20% Switzerland is probably enough. SPI is a good choice in my opinion.

On the other hand, I have no access to my second and third pillar (with some exceptions). Reading up, they face the same situation in the US and they still don’t consider this as part of their lazy fund. This boggles me :smile:
I might consider reducing the Switzerland bias. For those of you, who know Selma Finance it has also relativly low exposure to Switzerland on a demo portfolio.

Yes, on the other hand, this is a unique situation atm and the portfolio should fit any need, since I don’t like to mess around with it constantly.

1 Like

Ok :slight_smile:

Most portfolios I have seen in the US actually consider this. They often consider their 401K, IRA and such accounts in their investment portfolio. They have the huge advantage that most people can choose how their accounts are invested.

Then, shouldn’t you at least delay your buy until negative interest rates are not the situation anymore ?

I agree, that there are some concepts which make use of the 401k, to optimize the taxes. This has also to do with the different taxation, like capital gains tax, etc.

The asset allocation including your pension fund, etc only works if you have the same investment horizons and plans. I assume, that you have vastly different investment plans, also in respect to liquidity. In case you you need to pull some money, you would probably sell bonds first, to add them later on, instead of selling your stock. So how would you do that with Pillar 3a? (more a rethorical question)

In addtion: If you have your Pillar 3a in one of these funds or Viac you are out of luck. For instance VIAC Global 60, you have 60% stocks, whereas 30% of it are allocated to Switzerland, and so on. This would make the asset allocation very complicated.

Are you bad at math or what? -1% guaranteed return (considering taxes) is worse than 0% in any situation. And there will be a lot more messing around needed than if you just kept the money in a bank at 0% interest

I highly doubt that, SPI is not much better than SMI, it’s all the same multinationals with USD revenue streams, slightly underweighted but not really much

I’d not use that as a primary decision factor. With a good broker and trading on right exchanges, cost of transactions is neglibible enough

Sure you have, pop out of the country for a few months for a new adventure elsewhere and you can have it all cash minus a little bit something for the swiss government. (Although I suppose this depends on your industry; I’m writing from tech/IT perspective where jobs are plentiful atm and workers are generally very mobile; ok, maybe you’ll lose the advantages of swiss unemployment insurance with jumping ship like this, but would you really miss spending 2 years applying for/working off at some mcjobs just to satisfy RAV?)

It’s allocated to SMI/SPI which is not really much about Switzerland. Same global sh*t with worse diversification

Why? Unless you’re self employed, you can only put some peanuts into 3a every year so its exact strategy is not going to move your needle much

Cash in your swiss bank account, what’s wrong with that? With the cost of USD/CHF hedging approaching 2-3%, hassle free 0% in CHF is actually looking somewhat attractive. Or prepay your swiss taxes, get 0.5% interest

Sure, step 1: get the historical data. You’d probably want to get the data about indexes (+divs), not the exact ETFs since your ETFs didn’t exist for very long, e.g CHSPI is from 2014 only. Professionals normally get this from sources like bloomberg terminal, but that costs like 4-5 figures a year, so you’ll just have to work with what you can gather from google for free and maybe settle for approximations (e.g. SMI instead of SPI) Step 2: run the simulation, should only take just a little a bit of python or excel or something once you have the data. Getting and cleaning data is really the biggest part of all data analysis

1 Like

I cherish simplicity and thus recommend portfolio consisting of just VT ETF + cash. I think home bias outside of US doesn’t make much sense (CH is only 3% of the global market and most public Swiss companies anyway get their revenues from abroad in dollars, so investing in them doesn’t protect you from currency risk). In fact, I think currency risk is a smaller risk than overweighting too much home country.

Bonds don’t make sense in Switzerland because they are negative after inflation. International bonds fund in USD is a good option, but with current interest rates and with cost of currency hedging, it is not best deal these days.

2 Likes

+1 to this. I really don’t understand why people tend to overcomplicate simple things. The beauty of index investing is you don’t have to know anything to do well. The more you deviate from it - like overweighting “swiss” indices that you have no idea what’s inside of them, the more, much more you have to know.

For one thing, how to run a friggin’ backtest. You come to us with your portfolio and ask us how it’s doing. We can point out obvious idiocies like negative yield bonds, but for the rest the canonical answer is backtest, and that’s work and generally needs (expensive) data, don’t expect anyone to do it for you for free.

1 Like

check out https://portfoliocharts.com/calculators/
no perfect backtesting, but lots of good stuff

2 Likes

I don’t know what’s the point in insulting other forum members. I could easily make you look bad in my own field of expertise, but what good will it do? In the end no one will benefit… In addition, this forum will be a piece of crap and no one ever will post anything.

What exactly was the insult??? You wanted to buy 90 Rp for 1 Fr, I called it for what it is, you should be thankful. Wasn’t it implied that you wanted some healthy criticism of your portfolio? If anyone’s insulting anyone it’s the SNB/ECB who caused this negative yields insanity, direct your anger at them.

Insult may be a bit hard of a word to use here but if you are the millionth person with basically the same question here that usually leads to the same answer you should not expect sugarcoated answers (not that @hedgehog usually delivers those).

Get your feelings out of this, this was not about making you look bad.

Also there are pretty overlapping fields of expertise on this forum so that is not as much of a given as you might expect. I for example consider myself pretty good at programming but I am pretty sure i would get my ass handed to me by a lot of members here.

1 Like

I guess there’s a temptation to add things to portfolio, as it feels like we’re getting something extra (more diversification, more returns, less risk), but in many cases (like e.g. overweighting CH in portfolio or adding overlapping funds), we’re getting less (at least less diversification, as the portfolio gets heavy on a few Swiss companies).

It almost feels dumb having a portfolio consisting of just one global fund, but it’s of course not dumb - the fund has ~8000 shares of companies weighted by market cap by size and geographic region with very little cost and additionally there’s no need of rebalancing (less hustle, less cost).

1 Like

Here’s a good list of Internet sources: