Over the past couple of years, I’ve been reading about different investment strategies for Pillar 3a. After exploring different Swiss finance blogs (especially mustachian post ;), I decided to go beyond Pillar 3a and start investing a portion of my savings instead of letting them sit idle in a bank account.
While I’m not ready to manage investments through a broker independently yet, I’m eager to begin my investment journey. That’s why I recently opened an account with Finpension Invest (see attached image). To provide some context, I’m 32 years old with a long-term investment horizon of at least 10-15 years. I have a stable income, an emergency fund (covering 3-4 months of living expenses), and I’m already contributing regularly to Pillar 3a. Additionally, I can allocate at least CHF 500 per month towards these new investments.
As a novice investor, I would greatly appreciate any guidance. Here are my questions:
What is your take on the investment strategy selected by Finpension (see attached) and is it suitable for my risk tolerance?
Should I consider deactivating rebalancing?
What has been your experience with Finpension Invest?
I’m looking forward to hearing your thoughts and suggestions. Thank you in advance!
Hi generic swiss guy and congrats for being on your journey!
I would personally qualify that as medium term. It still allows for a rather agressive asset allocation provided no other parts of your risk tolerance would be conflicting with it. Do you have any dependents?
It’s ‘good enough’ so don’t let trying to get it better get in the way of you starting investing now. Getting a foot in is the most important step, adjustments can be made later (exception to that: mixed insurance/capitalization 3a/3b products. Don’t get into those with an attitude of “whatever, I’ll change it later if they don’t work”, the front costs in the first few years are very high. Only buy them if you’ve thoroughly analyzed them and concluded that they are specifically the one product you are after).
That being said, it lacks some countries and doesn’t provide the full range of diversification you could have. Finpension Invest’s fund offerings seem to make it difficult to have an easily replicated full coverage so I wouldn’t let that bother me and I would stay with the default strategy at your point. A lack of Canada or Norway won’t kill the strategy.
Other factors can enter the picture but for a generic swiss guy with stable employment, an emergency fund and no dependents, an 80/20 (80% stocks, 20% fixed income) allocation falls within the range of allocations that seem ‘good enough’ to me.
It’s fine tuning. Others may have arguments for not rebalancing. I consider it part of a market cap weighted passive strategy and would keep it on.
Not a user, I’ll let others reply.
Have fun, find your zone of confidence and be consistent within it.
Do you have a second pillar? You can add this to your total fixed income. How do you invest your 3a? These two aspects should be looked at when determining the 80/20 split.
You’re right, medium-term would be more adequate. Currently, I don’t foresee any need to access these funds for the next 20 years, but circumstances can change. Regarding your question: No, I have no dependents.
Thank you for all your other insights ! I understand that robo-advisors may not be the optimal solution, but they significantly lower the barrier to entry.
Edit:
I see what you did there ;D and the concept of “good enough” is something that should be applied more in life.
If you are seeking roboadvisor then Finpension invest is good. Of course it’s a bit expensive versus buying one world ETF yourself every month using a broker
Here is a post on Reddit with some examples of different options available for Swiss investors
I do have a second pillar. My 3a account with Frankly is currently invested in the Strong 75 Index, holding 75% shares. My Finpension 3a has 99% shares. Initially, I was hesitant to increase the equity allocation in my Frankly account beyond 75%, but I’m now considering adjusting this.
So with the second pillar counting as fixed income I could go for somethin like Finpension Global 100 with 99% shares and still be within my risk tolerance?
Thanks, this is a really informative post I hadn’t come across it before. So, if I understand correctly, they estimate a 5% overall gain across all accounts, and the main differentiator ends up being the fees?
This makes full sense. With newly transferred funds rebalancing should happen automatically when investing these new funds. The more interesting part about rebalancing is where there are no newly transferred funds.
I couldn’t find the answer in their FAQ/website, but I assume it will be invested according to my initially chosen strategy (see image attachment). Wouldn’t that lead to a kind of rebalancing, simply by buying according to said strategy?
It may be a bit of both according to P/L in each allocation and liquidity?
The way I see rebalancing is as something that becomes necessary once you cross an amount invested where having liquidity is unfeasible. Say you have 10k allocated across assets, you could rebalance by adding more cash, but if you have 50-100k or more then it’s not obvious to miracle the thousands potential needed, so rebalancing happens with selling high to buy low.
I remain sceptical about how FP and others rebalance “for free” and allow it to happen so often. Where are the trading fees?
Edit: after being set it and forget it for 2-3 years now, I am only just starting to think seriously about rebalancing and its merits.
As someone with very little knowledge, or at least not enough confidence yet to invest by myself, choosing a robo-advisor made a lot of sense. Besides a lower barrier to entry, it seems to need little to no maintenance. I’m currently quite happy with a “set and forget” approach, where all I do is set a monthly payment to my account at finpension. And when I’m ready in 2-3 years to take the next step, at least my money won’t have just been sitting in my savings account.
Since I was still unsure about the whole thing, I wanted to get some insights from experienced folks, so I posted here
It wasn’t misleading at all You’re absolutely right. I just thought I should add this to my initial post, so you guys knows what my current goal looks like.
They have so many people in the same funds that most of the rebalancing is basically virtual between the accounts / done for all the accounts at the same time is what I think.
A bit like an etf works with the shares they hold. They won’t buy 500 fractions of shares if someone buys the etf either.
Trading isn’t really very expensive though.
Actually, if they are buying the same ETFs every day for new customers anyways, rebalancing all the other accounts at the same time will not cost them anything at all.
The bad thing is that it will generally work against returns the more you do it, so… Basically, they should rebalance less, but they sell it as a feature.
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! I understand that robo-advisors may not be the optimal solution, but they significantly lower the barrier to entry.