Thanks, you brought up many very good points and those give me a lot to think about.
Answering a few of your questions:
Spouse is still working
Our common gross salary is about 280k
There is a tiny 3a pillar but negligible.
Pillar 2 is about 300k in total but we consider using that for the mortgage pay-down.
In general, I prefer to have complete control over all my assets and avoid putting them in any pillar 2 or 3, even if it means facing a substantial tax burden. This approach grants me greater flexibility, and I also feel uneasy trusting the pillar 1, 2, and 3 for the next four to five decades, which is my remaining life expectancy. The world is constantly evolving, and circumstances can change rapidly. I’ve witnessed such changes in other countries. I suppose I have the “German Angst.”
The “German Angst” is also the reason why I stay mostly away from ETFs. I have worked some time ago in asset management and have seen the internal mechanics of ETFs which scares me.
I’m aware that I should no longer maintain the same investment portfolio as before. My current focus is on stability rather than generating alpha. I’ve already begun to reallocate about half of my portfolio into a more diversified equity and fixed-income allocation.
I’ve thought about it, but as a long-term value investor I’d be at the wrong place as a sell-side analyst, PM, etc.. The incentives are misaligned: agency risk, career risk, moral hazard, and pressure to sell products and generate fees. It’s structurally short-term because capital leaves on underperformance at exactly the wrong time. In the end, too much of it is a poor deal for clients who would often be better off just buying a low-cost ETF.
I have nothing else to what one can find also on certain youtube interviews or Bloomberg articles etc. But working there just gave me a bad gut feeling. Here’s a few issues of which I’d be concerned during severe market stress:
Trading feedback loops
Liquidity illusion
Dependency on a very small number of Authorized Participants
NAV dislocation
Securities-lending risk
Forced passive demand as an exit for insiders. Rapid index inclusion of newly listed companies (Spacex)
I’m sure that ETF evangelists like Gerd Kommer (and I read his books) would have great arguments why any of these risks are not really relevant.
Id argue most of these (while real) are not problematic for long term buy and hold investors or can be mitigated by choosing the right products (e.g 5 and 6).
If you dont work with ETFs, how broad is your portfolio and how do you keep it maintained and blanced?
I agree, with you, that most of these issues might not be a problem for long term oriented investors who have the temperament to hold through such events.
But can everybody just hold through? E.g. a large amount of ETFs are actually held by other funds which will face redemptions too during market stress and they have to sell at probably the worst moment. And then the question is, who is owning those funds?
For me personally I have decided that ETFs are much more complex than they are often advertised and I feel unable to fully understand all of the details well enough to exclude any potential hidden risks. But still I think they are the best possible investment vehicle for many people.
Regarding your question: In the past, my portfolio was just comprised of 10 to 15 positions. Never had any position a cost basis of more than 5% of my portfolio value, but it happened that some positions grew up to 25% of the entire portfolio.
Now as I’m not aiming to generate alpha and rather look for stability, I own probably about 25 different stocks and maybe about 10 to 20 bonds and some gold. There is quite some research that even 20 different stocks are enough for sufficiently diversifying a portfolio. of course the should be in different sectors etc.
Thanks. I guess 25 can give you quite some diversification if selected and balanced with skill and discipline.
As this post was also about the liberty to spend your time more freely - how much time are you dedicating weekly/monthly in managing this portfolio? I guess thats quite a bit of work?
Unless I’ve missed something, OP didn’t disclose his/her age. I can understand that for privacy reasons and we can (roughly) infer the info from the mentioned life expectancy. Still feel that’s relevant information when assessing (degree of) financial independence.
I’d agree though that he/she probably is financially independent already - just not feeling comfortable enough about it, given desired income/withdrawal and consumption.
You can’t make voluntary contributions to pillar 2 after quitting you job (unless you voluntarily maintain pillar 2 insurance).
…evidently not AHV’s own brief guide on the matter…
"Bei erwerbstätigen Personen, die nicht dauernd voll erwerbstätig sind (weniger als neun Monate im Jahr oder weniger als 50 % der üblichen Arbeitszeit), führt die Ausgleichskasse eine Vergleichsrechnung durch, um zu bestimmen, ob sie im Sinne der AHV als erwerbstätig gelten. Dabei wird überprüft, ob die Beiträge aus dieser Erwerbstätigkeit (inkl. Arbeitgeberbeiträge) mindestens die Hälfte der Beiträge ausmachen, die sie als Nichterwerbstätige entrichten müssten. Ist dies nicht der Fall, gelten sie nicht als erwerbstätig im Sinne der AHV und müssen zusätzlich zu den Beiträgen auf ihrem Erwerbseinkommen Beiträge wie Nichterwerbstätige zahlen.“
Thats a good question and I’m thinking about how to optimize the time spent on that. Usually I only pick companies that I intend to hold forever and therefore I spend a lot of time initially before investing (maybe between 10 to 100 hours, it depends on the company). But then the effort reduces quite a bit later one since I only read new information like new earnings reports, regulatory filings etc. and try to keep the position untouched and simply let it compound for years.
I’d say 25 are already too many stocks to know all of them very well. I only know probably 10 to 15 companies very well and the rest rather high level.
I’m curious, do you also pick stocks? How much time do you spend on alayzing them?
I am in a similar spot as you. Though I do not have any tips for you. I can only share so you can feel you’re not alone in this .
1 year ago my NW was at 2.5M USD, and that might have been the right moment to convert into a conservative all World ETF and reduce workload. Instead I did nothing and my portfolio dropped to 1.5m. Currently it recovered to 2m USD, but I’m still short of my goal of 2.5-3.0m USD.
For the last 7 years, since covid, I’ve been working in 4-days home office + 1-day office mode, and as a contractor. However, it seems like for the next year it might be hard to find a contracting job at all, and even less likely for them to allow such extensive home office. In-house jobs generally maybe allow 2 home + 3 office mix and they only pay 60% of what they pay to contractors.
I like doing what I’m good at, the bosses of my boutique consulting are advising me that I should consider pivoting into something else. Not only would I hate to go back to the office, but also to reskill myself and take an appropriate salary hit.
I really don’t know how to deal with this, and that’s why I’ve been considering moving back to Poland to reduce my living costs and lower the required savings amount. Any option just fills me with anxiety.
Thank you for sharing this. If I understand this correctly, then either me or my wife would need to work more than 50% so that the AHV contribution is covered. I’m just wondering how does that exaclty split up for a married couple? Lets say I work 20% and my wife would work 40%. Would we both then be considered above the 50% threshold?
Technically, it’s after you leave employment. So if you quit resign for January, that’d still allow you to buy-in this year and early next (edit: while still within the notice period). Whether that makes sense tax-wise, just to shield against AHV or wealth tax is another question, of course. Since OP doesn’t like 2nd pillar, it’s not relevant. It was just a comment to address the specific cost often mentioned, which I don’t consider that high at that level of assets, anyway.
It also states: “Sie müssen keine eigenen Beiträge bezahlen, wenn Ihre Ehefrau oder Ihr
Ehemann im Sinne der AHV erwerbstätig ist (siehe «Auf einen Blick») und
jährlich mindestens 1 060 Franken (doppelter Mindestbeitrag) entrichtet.”
That’s 20k a year (or 10k if employer contribution count for it?). But likely they’d still test for the 50% if both are non- or under-employed.
When I started learning about investing I tried a bit of everything: crypto, P2P loans, single stocks, different strategies. One study that really made me rethink my approach was Bessembinder’s “Do Stocks Outperform Treasury Bills?” (2018). Of all US stocks from 1926 to 2016, only about 4% created all the net wealth. More than half did worse than T-bills.
For me the bigger risk with 15 stocks isn’t one bad pick. It’s missing the few winners that drive the whole market. And even the good companies you hold forever need watching, because things can turn fast. Twenty years ago GE was one of the most valuable companies in the world, Nokia owned the phone market and Credit Suisse looked rock solid. All looked like buy-and-hold forever picks.
So I switched to broad index ETFs. The index drops the losers and picks up the new winners automatically, and I spend very little time on it (besides nerding-around on this forum too much ;))
Thanks for sharing your story. You brought in a very good point that I’m also feeling confronted with. I don’t know your exact profession but for me as a Software Engineer it is critical to always learn new things and to re-skill, learn about new technologies etc. If you only stop doing this for a few years you fall behind so much, that it will be hard finding a “good” new job which is my current situation. I went from an highly skilled professional to someone who is just average. I also feel that competition on the job market has tightened in the recent past and it is much harder to find a new job. Therefore I think it would be very bad taking a sabbatical as it was suggested above. As a IT professional working in CH things will continue to become tougher and my feeling is to take as much out of it as you can do now. But dont think you would ever get a well payed job in a few years from now.
Similar as you, I’m also thinking to move abroad where cost of living is lower and house prices are also lower. So switching the house in CH to a cheaper house somewhere else frees up some additional capital. I have already studied potential countries but had to conclude that CH is probably still the best option because of favorable tax and other things that allow FI people to not get punished for not fitting into the standard pattern. I’m also having a EU citizenship but I find certain developments in the EU concerning. I have the feeling the political regime there went too far left and therefore doesn’t like wealthy people. In particular in Germany, which is my home country, wealthy people rather tend to leave the country because of repressive political decisions against them. I didn’t want to become political here, but its a real concern.
Yes the struggle is real. I’m also a software engineer, but a niche one. And in recent years/decade there has been a shift from monolith architecture to microservices / Kafka, and I don’t know that whole technology stack and I also don’t like it. A bunch of applications which you need to coordinate just to push data between the systems, you probably spend more time orchestrating stuff and finding the responsible guy who can help you, than on coding the business requirement.
Since you are also a software engineer and face similar issues, we should have a chat about starting our own software business
Which is an option I’m also currently evaluating. Lets say a small business that pays as little as net 3000 CHF a month would be a nice stability anchor. And I’m not talking about consulting but rather a SaaS solution etc. that generates re-occurring revenue that isn’t linear to the hours of time spent on it.
Pretty sure you wouldn’t. My guess is that at least on person needs to work more than 50%.
I’d ask AHV.
No.
Once you quit, your pension fund coverage is terminated. They won’t allow for voluntary buy-ins after that.
Even if you do nothing, your benefits (accumulated savings/capital) routinely gets transferred out of the pension fund (to Auffangeinrichtung, in this case) after 6 months. So no way they could allow for voluntary buy-ins. Two years after.
Oh yes , let’s vibe code something that will belong to us, not slave away for the big guy to add yet another field to a form. But my problem is, I have no idea what to build.
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, let’s vibe code something that will belong to us, not slave away for the big guy to add yet another field to a form. But my problem is, I have no idea what to build.