Advice on new portfolio for better diversification

Investing / Portfolios
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I’m looking for some advice my on my new portfolio. Some information that’s worth taking into account:

  • Large exposure to unvested US BigTech equity and job security tied to the US Market
  • Looking to work significantly less in around 8-10 years
  • Mid-thirties old :slight_smile:

Non-retirement portfolio (Liquid funds) (70%-ish of overall net worth)

Ticker Description Class TER Allocation
VT World Equity ETF Equity 0.06% 40.0%
VXUS Non-US World Equity ETF Equity 0.05% 20.0%
CHSPI Swiss Equity ETF Equity 0.10% 10.0%
IEGA Developed Euro Gov Bonds Bonds 0.07% 5.0%
CSBGC7 Swiss Gov Bonds Bonds 0.15% 7.5%
CSBGC3 Swiss Gov Bonds Bonds 0.15% 7.5%
DRPF Residential properties in German-speaking Switzerland Real Estate 0.77% 10.0%
Total 100.0%

A few comments:

  • I’m OK with some currency risk on IEGA
  • Wondering if I should have some exposure to Swiss Corporate bonds, but since the main goal here is diversification, I’m not a big fan of the correlation with equities.
  • The VT + VXUS mix is a bit odd - it’s my attempt to lower US exposure, but without being too opinionated about the actual US vs. non-US equity split, as VT will automatic rebalance according to market cap.

Retirement portfolio (Acces >60 years-ish) (30%-ish of overall net worth)

~100% World Equity ETFs such as VT and some small amount in our Pillar 2s.

Just looking for a second pair of eyes - would appreciate any comments. Thanks!

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I am in general very skeptical about bonds, especially now. For me, CHF cash and mid-term notes of Swiss banks are the best bonds.

You might profit from the recent interest rate decreases and sell your bond funds hopefully with a profit.

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No portfolio is an island.

That means, you should look holistically at your portfolio and not make separate buckets. You only really have one portfolio.

Only if your retirement pot would be much much larger than taxable, and the accessability becomes a problem (your taxable funds getting low and you not being able to rebalance to your target allocation), you‘d need to think differently.

So I would choose my asset allocation incorporating, even including second pillar. See second pillar as a cash position that returns 0 real, meaning goes up with inflation, which it for most standard roughly does.

I personally am not a fan of swiss bonds for swiss investors. The yield is 0 right now.

I‘d use a flobal bond fund hedged to CHF. That way you may get a bit of yield and if the swiss yield curve changes upwards in the future (I have no clue if that will happen, but it can easily), you don‘t get hit that hard.

Yield is also very low due to hedging of course (hedging costs the interest rate differential between the currencies). But you currently get slightly more still.

To bonds in general: I would use them only if your goal is to reduce volatility and de-risk in general. See them as safety ballast with basically zero real after inflation return in CHF.

To your equity allocation:

Be very sure on your conviction with underweighting the US. Also think about how you react psychologically, when one or the other outperforms.

For ex-US, you could also look into actually using ex-US ucits funds. You‘d need developed and emerging separately though.

US domiciled can have DA-1 pitfalls potentially.

set up very clear rules beforehand as well! To not be tempted to market time in the future.

Maybe you could also instead go with a home bias (which you already do) and invest in a value fund like AVGV, that way you go by market cap always, but still achieve your goal to underweight US large cap growth stocks.

Overall it‘s a solid allocation though. You can run that still. Nothing major against it.

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What do you mean by that? I see DA-1 as an advantage since you can get withholding tax back.

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For US domicile ex-US holdings, you merely break even if you get the full DA-1 credit.

As that is withholding tax layer 2. There is already withholding tax deducted by all the countries that distribute in VXUS (layer 1). Then VXUS distributes to you from the US, there another layer of tax comes on top. Only this layer you can get back.

Layer 1 is always lost.

When using a ucits fund like EXUS you also lose about the same amount in layer 1, but nothing in layer 2 and you don‘t need DA1.

US funds for US stocks is always the most efficient.

Not the case if you don‘t get close to all of DA-1 back for ex-US holdings in a US domiciled fund.

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Yes, agree. The reason for looking at it this way is to make sure I de-risk money I need access to in 5-10 years.

The goal is exactly to reduce volatility and de-risk and I’m hard pressed to find another asset class that does the same (other than pure CHF in a 0.05% savings account at UBS). I was considering buying into the 2nd Pillar instead with the obvious advantages of lower tax etc., but I’d like to de-risk money that I need access to within 5-10 years (i.e. in early retirement) and 2nd pillar is locked up for at least 20 more years.

Thanks for the heads up - I agree, but am overall comfortable with this. As mentioned, a large part of my income is heavily tied to a US Large Cap Growth Stock right now. If this changes in the future, I might just go full VT.

Thanks for the thoughtful answer!

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