To be fair, Ben Felix mentioned multiple times that if he was a DIY investor he would hold a single “Vanguard and chill” like World ETF (assuming something like VT or whatever is available in Canada). That actually surprised a lot of people in the RR community!
Holding “just” the market with a single ETF makes active decisions, especially in bad times, less likely to happen. It is superior when it comes to psychology and behavior but also in terms of simplicity and even cost.
Now, if you behave like a machine and you want to spent more time on the field, you can differentiate slightly from the market:
a. Add some home bias. Per latest Scot Cederburg paper, anything between 10-50% domestic allocation has practically the same effect. Still the benefit is relatively small compared to 0%. Even himself hasn’t changed his portfolio - 50%-50% domestic-international allocation (he is US based)
b. Factor tilt - pursue other premiums on top of the market premium, like small cap or value. Ben Felix expects around 0.40% premium net of fees over a long period. The problem is that you may need to wait for more than 10 years for the premium to appear. Moreover many suggest that the premium especially in the US might have disappeared. In any case, even if there is no premium, the fact that tends to pay more on markets downturn, helps in bad periods.
c. …
I am not sure at all that my tendency to become more active (not stock picking - but reducing exposure to US, home bias, other premiums etc) will turn out to be good long term.
To replicate this ETF (which is really interesting for canadian investor) as a Swiss investor, the simpliest way would be to hold 30% of SPI + VT (and other all world ETF)?
That would roughly be a replication yes (technically you’d need to subsctract the ~2.5% CH weight in VT and that also fluctuates then by time, but overall negligible)
I however think that 30% SPI would be a bit much, due to Nestle/Roche/Novartis making up 50% of the index.
I take SPI as an example for having the total market of Switzerland. I would personnaly go with SLICHA in that case (basically what I’m doing at the moment). So my strategy to have between 20-30% of home biais is on the good train
Sidenote: As mentioned on many other posts on this forum, it’s slightly more tax efficient to hold your CH bias assets in 3a because of the generally higher dividend yield and thus higher income tax when held outside 3a.
You have the benefit of true 0% withholding tax (and no struggles to claim them), and 10% of the dividends come as tax free capital gain, that you have uniquely in taxable.
CH stocks in taxable make them better than develop/emerging markets therefore.
If you would truly optimize, you‘d only hold developed ex-CH and emerhing markets in 3a and US/CH outside of it.
At current yields (that may change even in 10/20 years, who knows)
But that gets messy real quick.
Also depends on the size/contributions of your portfolio.
I‘d just mirros the allocations, not worth it to optimize here imo.
My strategy is: VTI in taxable and the rest of the world (1/3 of it being Switzerland) in retirement accounts. Gets me close to 70% US, 10% Switzerland, 20% rest of the world.
Eventually I‘ll end up with VEA and VWO too as my taxable account is growing much faster due to much higher contributions. I guess in 5-10 years I‘ll be 100% CH in retirement accounts.
Did you run the numbers on CH vs. exUS developed world within 3a?
Looking at this EM & CH within 3a should be better
I didn’t understand the comment about tax free capital distribution. I know what it is but I think it’s not part of dividends. In your view , is it included within 2.9% or on top?
US assets are generally held in US repositories. That is also true for assets purchased through Swiss stockbrokers and “held” in Swiss custody accounts. Likewise, assets from other countries are generally held in local repositories in those countries or regions. The situation is similar with commodities.
More important considerations are where the actual company or other entity you are investing in is domiciled, and whether or not you are registered as a shareholder or creditor with that entity. E.g. If a country where to forbid Swiss citizens from owning shares in companies, then where the stock certificates or records are held would completely irrelevant. Same thing with commodities.
Of course, there is also the flip scenario: If the country you live in were to forbid you from owning assets in another country (as the EU/Switzerland did with Russian assets, as one example), but the country where your assets are held does not, then you would remain the legal owner as per the laws of that country.
Personally, I see more logic in being geographically diversified than in putting too much trust in the political/legal framework of any one country.
Personally, my strategy is to try to have the same allocation between my securities account and my 3a. But I think that, in the end, the best strategy for me would be to go back to the good old Viac Global 100, which is performing well; at least that’s what I’ve noticed with my partner.
It may just all be a misunderstanding of his unique way of winning over friends and influence people -
“There can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW,” the president posted on his social media website Truth Social Monday morning, saying that “‘Preemptive Cuts’ in Interest Rates are being called for by many.”
I mean, why would Powell worry about a little inflation from dishing out wholesale tariffs to the rest of the world ?
To Trump’s credit, and I never would have thought I would have said that ever, I would say that the proper way to handle supply side inflation coming from tariffs is to bolster domestic production by lowering rates (no sarcasm)?
Powell has done an awesome job so far and I’m just a layman so I’ll trust his judgement over mine but I don’t really understand what would be staying his hand if tariffs are there to stay (which they may not and which may be why he’s waiting for more clarity).
I think the thing that’s fairly risky, is that even if in theory tariffs are a one time inflation, the risk is that inflation is partly psychological.
If people think/expect inflation, it might be sticky well above the 2% target, that’s really what the central banks want to avoid. If you lower rates early, it will increase economic activity (and further risk missing the target).
For almost all US equities the Depository Trust Company (DTC, subsidiory of DTCC, one of the main US clearing agencies) is the central securities depository (CSD) in the U.S and maintains records of ownership at the institutional level (not individual investors) of brokers/custodians that are participants in the DTC system.
Your (direct counter party) custodian (or their sub-costodian) is merely a record in the CSD database (e.g. IBKR holds x securities of US company XYZ).
Your custodian (your direct counter party) in turn keeps record of who of its customer owns which shares that it itself “holds” aka has-an-entry-for in the CSD database (e.g. IBKR “holds” x security of US company XYZ, and IBKR keeps and updates records of who of its customers A, B, … Z hold how many records of the x shares of XYZ).
If you “register” your securities in your name, all that happens is that your custodian (your direct counter party) notifies – usually for a small fee – the issuer company of your shares in the company so the company can send you its annual letter and whatnot.
If some black or otherwise colored swan were to step on DTC, it wouldn’t matter who your (direct counter party) broker/custodian is. DTC ultimately holds them.
Bear markets are the only time when I do market timing. Because it is worth it. The worst bear market in history would then only have taken like 3 years (which is still a lot), but oh boy, you could make shittons of money after the first sell-off of more than 80%.
As long as the “orange elephant is in the porcelain shop” stocks can hardly rise. If Powell is overturned the dollar is dead, one could just print turkish lira over it. But OK, every company is it’s own currency and I have only debt in dollars.
Most strategies do not work in bear markets. The correlations are simply too high, this time even with the dollar. At the moment I do what Flintstone does on my avatar and what I do best: nothing.
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