Advice needed on expat portfolio staying in CH long-term

Investing / Portfolios
1

Hello,

I am slowly building a more stable portfolio and 'd appreciate the collective wisdom of the blog for opinions.

35yo, living in CH for 10 years, with no intention to leave in the foreseeable future. I am looking for a fairly diversified low-cost portfolio that’s simple to manage (not too many ETFs etc), a bit heavier on equity than cash/bonds since I can tolerate fluctuations for some years to come (not looking to FIRE soon).

  • My target allocation is the following:

    • Stocks: 66%
    • Cash & Bonds: 30%
    • Crypto: 4%

  • The stock target allocation is the following:

    • US (VTI): 60%
    • Global ex US (VXUS): 25%
    • Switzerland (CHSPI): 10%
    • Other (XLE, VNQ): 5%

Pillar 2: With AXA, contributing through my employer
Pillar 3a: VIAC, maximal equity allocation
I don’t include the pension funds in my overall asset allocation, for the following reasons:

  • I 'd count Pillar 2 towards cash. If I did that I’d be very close to my target cash allocation, but Pillar2 is illiquid and I need some liquidity
  • Pillar 3a is split into 3 accounts of different amounts, which would make calculations and rebalancing across the pension and non-pension parts and across US/non-US segments very hard.

I 'd like to hear thoughts and criticism on this setup. Some of my concerns:

  1. Even though I plan to stay in Switzerland, I find 10% on swiss equity a bit too much, given the tiny Swiss economy on a global scale. Also, living here I am by definition kind of invested into Swiss assets (AHV, Pillar 2)
  2. I chose to go for VTI & VXUS (vs. VT) so that I can manage the exposure to US vs non-US stocks. Is this though way too biased towards US equity?
  3. I already own XLE/VNQ, but not sure how much value they add. Should I go even simpler? I don’t really need fixed income and with a minimal allocation to REITs, what do I gain?
2

The other thing to consider is that CHSPI is extremely concentrated. 40% of it is just Nestle, Roche and Novartis. They’re companies you’d already have sufficient exposure to via VXUS, in just two sectors, and with the vast majority of the sales to outside of Switzerland in non-CHF currencies.

Sure, it gives you an asset that’s technically CHF-denominated. But the financial performance won’t actually be related to the Swiss economy, nor does it provide any kind of currency protection compared to holding the same shares via VXUS. Since the revenue of the companies in CHSPI is largely non-CHF, the CHF strengthening will tend to cause the share price of those companies (and the index) to go down.

So that over-allocation isn’t giving you the desired effect at all.

  1. I chose to go for VTI & VXUS (vs. VT) so that I can manage the exposure to US vs non-US stocks. Is this though way too biased towards US equity?

60% US exposure seems totally fine (it’s roughly what VT would give anyway).

But hypothetically, if your job were had a compensation component that’s directly tied to your employer’s share price (e.g. unvested options or RSUs), you’d want to count the unvested shares as exposure to the stock market where the employer is listed.

3

That’s a good point. In that case, I should not be reconsidering any index tracking the whole swiss economy (e.g., https://www.justetf.com/en/how-to/invest-in-switzerland.html) and look for something tracking Swiss mid/small cap (example). But in that case, 10% sounds excessive and should be maybe closer to 3-5%.

For unvested options or RSUs, I wouldn’t consider them at all since they are not my property until they vest. Once they vest, I would sell and invest in ETFs to avoid overweighing reliance on one company.

4

CHSPI gives you CHF dividends, if that’s important for you (maybe when you retire)