I recently started my road to investment with the goal of increasing my financial freedom in the future (meaning having the possibility to retire early ). I’m really thankful to all the resources available on the Internet, especially on this blog.
Just after the 10% SMI market drop, I bought three shares from Swiss companies (UBS, Mobilezone, Swiss Re) that have, from my perspective, a very good cost/return, meaning that the dividend which should be paid in 2020 is above 5% of the cost of the share. I also look at the stability/increase of the dividends paid the last years as well as the evolution of the price of the share the last 5-6 years to avoid overpriced shares.
Now I am split between carrying on such a strategy (stock picking of Swiss companies with a good stock price / dividends ratio) or choosing one SMI ETF [UBS ETF (CH) SMI (CHF) A-dis; iShares SMI (CH)]. My impression is that the return is higher when picking shares with high dividends (5-8%) than with an ETF (2-3%). ETF has the advantage of more diversification but I could also by buy different shares in order to realise such a diversification. The management fees with an ETF is counter-balanced by transaction fees following stock picking. The ETF iShares Swiss Dividend ETF (CH) could also be an alternative as an ETF with a higher distribution in comparison to the two previously mentioned ETF. I see dividends as a way to create a passive income that could be re-invested or, later in my life, used as my main source of income. For these reasons, I am considering choosing a “half-half” strategy, which means choosing one or two ETF and choosing for e.g. 5 Swiss companies with high dividends (Swiss Re, Mobilezone, UBS, Zurich Insurance, Adecco and Swisscom).
What are your advice in this regards ?
Because I am living in Switzerland, I tend to focus much more on the Swiss market to avoid the risk of price change (CHF vs USD/EUR) and to benefits from dividends (many big US companies aren’t paying a dividend). What are the benefit to choose an ETF with international shares ? How much should it account in my portfolio ? I understand it will bring more diversification in my portfolio. However, I have the impression that this diversification is somehow factice as we are anyway living in a world in which all economies and markets are interlinked so what pull or push a market will very likely also be pulling or pushing all other markets.
In addition to this, I read a lot about the necessity to invest regularly month after month instead of doing one investment per year, which is then more subjected to price volatility. However, now that we are entering a crisis and that the stock market dropped, I see an investment opportunity, which makes me more inclined to invest more in the next weeks than to split my investment on a monthly basis until the end of the year. Do you also have any advise on this ?
Thank a lot for you help to my questions - I’m by far not a specialist in finance/market and I’ll highly appreciate your advice