Calculating total wealth and asset allocation

I am curious how other people calculate their total wealth and how they implement their asset allocation strategy.

At first, this seems straightforward, but there are actually several decisions to make. E.g.: Pillar 3 and 2 money will be taxable (include future taxes?), Pillar 1 (include this? when will I die?), etc. All this is further complicated when one also has assets in another country with its own investment vehicles and tax rules.

Another consideration is asset allocation… once one has decided on values (current, projected, tax-discounted, etc.) for each asset, one can categorise them. For example, one can separate things into these 5 categories of increasing risk and aim (and maybe fail ) to maintain a certain percentage of each, e.g.:
a) 10% cash
b) 10% bonds
c) 50% real estate
d) 25% broad market (ETFs, mutual funds)
e) 5% sector ETFs / individual stocks

(yes I know that some would move real estate further down the list… :upside_down_face: … and others not present here would have a category f for put options, etc.)

Personally, I do not include future taxes on Pillar 2 and 3, and don’t count pension (Swiss OASI and foreign equivalents) in net worth calculations. I count Pillar 2 as bonds. And any ETFs like health care or automation or emerging markets or whatever get assigned, with individual stocks, to the last category.

There is obviously not one single way to do these types of calculations… and some might actually do their asset allocation strategy completely outside their Pillar 2/3 money. Curious to hear about other methodologies (and I’m sure many here would jump at the chance to tell the world about their amazing spreadsheets…).

I work actually with an asset allocation the following way:
25.1 % CH Stock
12.1 % EUR Stock
2.8 % UK Stock
4.6% SE Asia ex JP Stock
2.8 % Emerging Stock
4.7 % Japan Stock
37.2 % US large
3.6 % US Small
5.6 % Bonds (mostly CHF)
1.5 % Cash
The definition of the market is mostly given by the FTSE index.
Yes, Switzerland is overponderated. For historical reasons, better knowledge of the swiss market and a bit of tax advantage. The ETF are mostly Vanguard based in Ireland but there is also some ETF from Blackrock and Comstage. In the swiss market the ETF is based in Switzerland and I am holding some shares directly.
I keep track of it using an accounting software and a spreadsheet. The accounting software is there to help to keep track of the cost, cash flow from dividend and portfolio structure. The spreadsheet is there only to assess the portfolio structure. I made some wisely timed re-balancing thank to the spreadsheet and I am convinced this system helped a bit to buy in the dip.
The allocation was not always like that and there has been some re-balancing due to change of allocation, mostly to optimize the long term return.

Interesting, so you are basically making your own world equities fund where you control relative weightings.

But isn’t this just what you hold in your brokerage account (i.e. immediately liquid assets)? What about your 2nd Pillar (or real estate if you’ve emptied it to buy a house) or 3rd pillar?

I was moreso asking about how people categorise their wealth when they sum it all up… e.g., If someone has 20% of their wealth in a Pillar 2 but wants to have their money in 80% equities, then they wouldn’t hold any bonds in their Pillar 3 or investment accounts.

Yes, this is liquid assets. On the side of this there is a third pillar, a second pillar and a small multi apartments house. But because all this is not liquid it is just outside of the strategy. Why bother for things where you can’t do that much anyway. You could also make the comment that I am too much invested in the stock market but this is balanced with my other assets. Finally for me the question is not about balancing but more about is it safe and I think that the answer is positive.

Yes, but when summing up your total wealth, the pillars and real estate do actually count, thus you are not really 92.9% in equities. Would your portfolio strategy be different if you didn’t have those other assets?

I think my strategy would not be that much different as long as I have a job and a salary. I do not think that lending money in bonds or deposit is a good thing to do and it is not even very safe. A bank lending money has a return on own capital about ten times higher (because of scriptural money) than me when I lend my money. I prefer to stay out of this game. The reason to pile up money in a deposit or in high quality bonds is if within the next 2 or 3 years you have a project specific (building a house, financing a company,…).

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