Best way to handle 1M cash

Thanks @Dr.PI !

I think overall, you are right. No matter what I do, it is unlikely that it will be fundamentally bad (among the options we are discussing - not talking about investing all in bitcoins) :slight_smile:

It is likely that I will invest 90% in VT and just let it grow.

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More mortgage, either through more properties or revaluation of your existing one.

Owning and letting can be a good business, especially if you do some stuff yourself. Instead of paying a tradesman, you pocket the difference. It can also be a buffer for work of sorts. Do more or do less yourself, depending on personal availability.

This also is a very good hedge for your own housing consumption.

But what makes it attractive in my eyes, is that you can additionally take very high, cheap and safe loans. Illiquid, but not a problem combined with enough very liquid assets like broadly diversified stock ETFs.

Probably still needs plans for alternative temporary sources of leverage. Getting your only leverage yanked from under you at the worst moment (e.g., low current valuation of your assets) ranks high on the list of bad things. Being able to stick to the plan by tapping into alternatives solves that issue.

All of this is quite involved for a likely outperformance of some percent per year. A 100% VT strategy is competitive if simplicity is valued highly (no time, no capability). And there are certainly simpler improvements over 100% VT than real estate and/or leverage.

Foxstone is surfacing relatively safe 6% yield corporate bonds every 2-3 months. That gives you 60k over a million per year but it locks away your capital at 18-24 month intervals, depending. Considering where the stock market is today I’d take a 6% CHF yield any day over VT.

Moonshot is having 4% interest on money with a short liquidity (2-3 months) block. Or they are having 8-9% corporate bonds of you trust their system (which is not fantastically transparent to be honest) over multiple (4-5) years.

I’d probably think about buying some fancy house at 2-3M valuation and live a happy life there, knowing that this will be a good inflation hedge for the rest of your life and a good starting point for your future kids. Then throw the rest into VT.

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I must say, I find myself at odds with your suggestions. But let me reason about it:

Links?

In general, bonds have serious tax drawbacks in Switzerland. It could only be worth it for diversification. Corporate bonds are not a good diversifer for stocks.

Some red flags in this Reddit thread.

Everybody can do with their capital what they want. But consuming (renting or owning) the equivalent of 2-3M capital in housing is quite an expensive luxury. This will tie up loads of capital in a position with low return (because potential returns go to luxury consumption).

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How can something „relatively safe“ yield 6% and the actual safe bonds (SNB) yield 0.5% ? If someone need to pay 6% to borrow money , they are not safe in my opinion

Remember in bonds the most important number is not „return on capital“ but „Return of capital“

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Don’t want to convince anyone either way, I’m just showing some options. :man_shrugging:

Yes nothing is risk free. Foxstone makes junior loans that are secured by mortgage notes 3-4x over. You need to take_some risk_ for the premium. Taxes are reimbursable the year after.

A home for 2-3M won’t get you any economy, it’ll get your kids a nice place to live in and be around the best schools and it’ll get you a decent appreciation over 20+ years and a peace of mind of owning something tangible for yourself. There is a reason these things are expensive (ZĂŒrisee silver coast)

RE development companies are apparently very deprived of credit these days so a 6% credit sounds reasonable for them to realize projects.

This is good. But high asset prices in ZH silver coast make me really worried. It feels like they are priced to perfection. This is why I tend to not buy. But these locations are really good for generational wealth :slight_smile:

I would have expected that with housing crisis in big Swiss cities, there is enough money.

But good to know. I will keep an eye on it

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You pay income taxes on interest. This is not cheap in most cantons for high income. Capital gains, on the other hand, are free. I just don’t see how corporate bonds can compete.

This is not priced in, as most capital will pay capital gains taxes (or not pay taxes at all).

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That’s true.