Another Vanguard VT based portfolio

Hi everyone

I would like to have your opinion:) I’ve started investing this march. At the beginning my knowledge was quite limited so I’ve started with a robo advisor (True Wealth) and right after my initial deposit I’ve landed on webpages like Mustachianpost, PoorSwiss, JLCollins, etc and realized, that its probably better to invest directly through a broker.
I’m currently 31 and my investment horizon is at least 10 years. I’ve currently no plans to retire earlier, but hey, who knows what life brings:) For sure its good to have as much FU money as possible. I wouldnt consider myself frugal, but I try to save a decent amount each month.

My current situation looks like this:
Cash: 30k
Vanguard VT: 96k
Truewealth: 40k
3a (VIAC/Global 100): 45k
Strategy: Buy & hold

I would like to get rid of the Truewealth account and buy more VTs and a SPI ETF (Blackrock or UBS).
Now my 2 questions:)

  1. How big do you think should my home bias be? VT holds 2.8% in Swiss shares and in VIAC I have 38% Swiss shares. So if I sell now my Truewealth fund I would have (for a very short time) the following situation:

Cash: 70k
Vanguard VT: 96k
3a (VIAC/Global 100): 45k

In that moment my portfolio would hold 9% swiss shares (and half of it would be Nestle/Roche/Novartis). I’m thinking about having 20% swiss shares. Which means I would buy 22k SPI ETF & 18k VTs which would result in:

Cash: 30k
Vanguard VT: 114k
SPI ETF: 22k
3a (VIAC/Global 100): 45k

In detail this would mean an overall allocation of:

emerging markets 7.5%
europe ex. CH 10%
pacific 7.5%
north america 40%
switzerland 20%
Cash (Fr.) 15%

What do think of it?

  1. Which SPI ETF would you recommend? I see the following 2:
    iShares Core SPI (CH) JustETF
    UBS ETF (CH) SPI (CHF) A-dis JustETF Link

The Backrock ETF fund size is more than double, has the better TER (.10 vs 0.16) [Remark. I dont now to which time period this TER is refering], both do physical replication (optimized sampling), but somehow the UBS ETF has a better performance. I’m lacking of a tool to see if this related to tracking error, older higher TER value or some other factors which I dont understand. What is your guys opinion on this?

Thank you already for your feedback!

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Looks good to me.

Why home bias? Will you stick to it if spi sucks? @Cortana explained his reason for it on this forum and on bogleheads.com

Why cash? Will you always hold 15% / rebalance?

Do you have an emergency fund / plan?

I would chose ishares spi (bigger & cheaper), did not have a look at its tracking error vs ubs though. Maybe others on this forum will explain.
The other possibility to overweight CH would be to do it first in VIAC, and it gives you the possibility to reduce your exposure to nestle / roche / novartis by overweighting spi extra.

Instead of SPI which includes the big-cap Swiss companies (Nestle&co) which is anyway already included in VT you might want to diversify even more by taking into account mid-cap companies with the following ETF:

TER is a bit higher at 0.28% but the performance overall looks quite promising. Also note the small size of this fund which might be a no go for some people…

By the way welcome to the forum :clap:t2: you will see that you will learn a lot here.

Hi yakari & mabi

Thanks you very much for your feedback. Regarding the different topics:

Emergency fund
I should have stated this more clearly. The 30k cash is my emergency fund. So as long as I’m happy with the 30k size, I will keep the amount and the percentag will go go down over time.

Home Bias
I thought of a home bias to have a bit less currency risk. I must admit that this does not really work for companies that export goods, do Business outside of Switzerland or are in the toursim sector. After checking the SPI and the SPI extra I realized that most of the companies are in one of the previous group. How you guys do it? Whats your % of Swiss shares in relation to your total portfolio?

Swiss Index
The SPI Extra looks interessting, but based on your feedback I’m wondering if there is any benefit of having a Swiss ETF. Unless I would bet that the Swiss stock market will do better which they did not in the past. Same for the UBS ETF (CH) SPI Mid (CHF) A-dis, I think it would be a bet on those 30 companies that they will perform better in the future then the “overall market” covered by the VT.

Welcome
Thank you very much. I was reading quite a while and thought now is the time to join the community:)

So you’re going 100% stock? Will you be ok and stay the course when it goes down by 40%? What’s your long term strategy? (I guess you’re not planning to stay 100% forever but have a glide path towards a less volatile allocation)

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No one (having a pension) is.

An article in German which could be interesting.
A certain guy did an extensive analysis of different asset allocations over 40y periods. In the end everyone was inside of a 1% range per annum

https://www.finanzwesir.com/blog/etf-mischung-egal

Just invest, don’t bother too much about your asset allocation. The most important part is the risk/risk free part so you sleep well during crashes, and don’t sell in a panic.

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Love your linked article. One reason more for abandoning financial news, and forums.

Invest in ETFs, put your head in the sand and wake up twenty years later with a fortune.

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First i wrote my IPS.

I chose an emergency fund that keeps me relaxed.

I invest:

Monthly Pensionskasse of course.

1x Yearly (Jan) Lump max into VIAC: 20% smi, 20% spi extra, 10% EM, 47% world ex ch, 3% cash.

2x yearly (Jan, jul) lump max (amount over emergency fund) into VT.

Max 1x month i invest (a very small amount) into ny fun fund.

I do not do home bias (job, PK, viac are already ch heavy).

Pensionskasse is my risk free (arm) allocation.

I keep my portfolio as simple as possible (1x lump viac, 2x lump VT, no active rebalancing necessary), that way i stay away from poor decisions.

Having a ‘play money “ fund (<5% portfolio) fits my needs: i keep on learning, experimenting, gambling, failing, but it does not affect the big picture. Xbi, Qqq, Viov, Arkk :crazy_face: And i have many other “great ideas”.

Golden rules:

  1. Time in the market 2) Diversification 3) Stay the course.
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I am still using an index fund which covers the full SPI with its ~220 companies. I say still using because I am tempted to change it with either an SPI Mid ETF or even SMI Mid (SMIM) ETF so that I can give more weight to the mid caps.

Currently my home bias is at 7% but I aim a 10% home bias for Switzerland. In that number I do not count the ~3% exposure to Swiss shares which is included in my world ETF which is VT. Some people do take that into consideration, I don’t.

Besides my emergency fund and my pension fund (second pillar) I do have currently an 100% stock allocation. How will I react if stock prices crash 40%? If you ask me now I would say I wouldnt feel great, but I’m aware that at point it will go up again and therefore stay the cours. But I think its hard to say, as I never been in such a situation.
As I might want to reduce risk/volatility by time, some % stocks will be replaced by bonds. I do not have yet any plan at what age I want to have a certain % of bonds. Do you have a more concrete plan on this?

Would be interessting to see of what those portfolios consisted.
But I agree with you on your remark. As life brings unexpected surprises you might also need to adjust your risk tolerance level.

Edit: That blog also sells some “finance seminars”, so I dont know how trustworthy it is.

I did not yet write an IPS, but I guess its time to write one.
Thanks for sharing your details. I’m currently tracking my portfolio (as I track my finances on a monthly basis) but I might reduce that to only 2-4 times an year.
I do also like your idea of the “play money”. I dont have any need for it right now, but if once have the appetite for some risk, then such “play money” would come in handy:)

Agree with your mentioned golden rules. I am also aware that there is the risk that you might need to access the money earlier due to an unforeseen heavy incident, which cannot be absorbed by the emergency fund (heavy illness, etc).

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Thanks for your details. I do dislike as well the fact that ~50% of the SMI & SPI are just 3 companies. After our discussion here I’m thinking of just going with VT.

Personally I am 35% on Pillar2+cash, 65% stock. And I’m planning to revisit every decade, likely will follow some well known formula like the vanguard target funds. I probably should have defined it in advance :slight_smile:

Ok, I dont now my current second pillar figures but I guess with them I’m having a similare allocation as you at the moment.
Hehe, I might need to define it as well. Life circumstances will anyway change and with it the person risk tolerance. Every 10 years seems to me a very long period. I think I will need to assess that at least every 5 years.

This is most probably the easiest and best solution as the keep it simple rule applies. You will also save yourself some additional transaction costs.

Why do you decide against Swiss Shares? Swiss Shares in a long run and consistently beat the MSCI World. Besides you won‘t face any double taxation issues.

The taxation issue alone makes up the case for Swiss Case. Efficient markets mean that markets are efficient at average tax situations. If you vs. such average tax get preferential tax treatment at a certain place - that constitutes a free Lunch you get in the sense of additional return. Besides this tax topic - there are more objective reasons why it geberally makes sense to overweight Swiss shares.

Clearly, the weight of Nestle, Novartis and Roche are not ideal - but these weights may be broken by investing in a combination of SLI and SPI Mid & Small. SLI historically comes at a slightly lower performance than SMI. Swiss Mid and Small Caps (as well as the entire SPI) however come with a signifficantly higher return than SMI. So you can get SPI returns with an SPI Index as a basis and a slightly MID&Small Heavy (5% more) SLI and SMI Mid&Small Combo?

Baiscally it is pro bono consulting, so actually more trustworthy than if it would be for free and selling its own financial products.

Anyway, this is from a book from Mett Faber who analyzed different portfolios, not his own research.

Main message : stop worrying so much about your portfolio, as long as you diversified, you will get 5+x% after inflation, for a minimum amout of work. ROI on working harder at job etc. will be much greater than that.

The Tax advantage of Swiss shares are quite small. VT only has around 10 basis point of unrecoverable withholding taxes.

You might as well overweight US equities, because you don’t have to pay WHT taxes on them either.

The “Capital payback” dividend loophole will be closed very soon, so it doesn’t make sense to include it in an evaluation.

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