A VT holds probably less than 1% of each of those companies. So basically Wirecard was a loss of max 1% last year and CS will not fail totally so quickly.
That is the beauty of index investing, 7000+ companies for less than a buck. You can’t do much better. Best return per unit of time I would say.
So, you basically confirm my initial argument that the global portfolios by VIAC and Finpension with 40% Swiss equity are inefficient.
Ya but your 3a makes up how much of your portfolio ? 10% ? 5% ?
With a decent savings rate, your 3a (or at least the 40% swiss tilt) should become nearly negligible in no time…
200k in IBKR in VT + 40k in VIAC in Global 100 gives you what, 6.7% Switzerland overall? No issue there.
Currently all stocks in the world have a combined market cap of 90 trillion USD. Wirecard had a peak market cap of 20 billion USD in 2020, that’s 0.022% of the global market. Them crashing down to 50 million market cap hat literally no impact at all.
So why has MSCI USA returned 11.16% (gross) annualised compared to MSCI Europe with only 8.26% since 1988?
Excellent example of businesses for whom country of jurisdiction (and their regulation and supervision) do matter.
This was not my point. I was arguing that 40% Swiss equity in a global 3a portfolio is too high. You simply cannot assume that all 3a investors have other assets to bring down the Swiss exposure to 7%.
Because of diverging valuations:
If you account for them, then you don’t have much “US-Alpha” left.
The differences in policy is public information, so it is priced in already.
You can still personalize your strategy to a very large extent, if you really don’t like the preset options and you don’t have assets outside 3a.
That said the preset options are already way better than anything that was available just 5 years ago…
I don’t understand your repeated argument.
It has already been mentioned several times above that you can adjust and customize the strategy (both in Viac and Finpension) to hold as little CH as ACWI (or even 0).
So you can keep the market cap weights, or whichever you want pretty much, both outside and inside of the 3rd pillar.
Those who do the “default” allocation are likewise informed about the distributions, so they can work with that info accordingly (e.g. outside portfolio rebalance).
Sure. Was absolutely not disputing that. Rather expecting it.
So what’s the take-away?
If the U.S. is not (that) fundamentally superior, then it is overvalued relative EAFE markets.
Investing 101 tells you to that overvalued investments have lower expected returns compared to overvalued ones, all other things equal. So doesn’t it seem reasonable to underweight U.S. stocks and overweight EAFE stocks, relative to a market-cap based allocation.
Sure, the divergence in valuation may last for a long time, and of course it may be hard predicting if and when valuations will converge again. But any guess on that is as good as any other. So underweighting overvalued markets (and vice versa) now seems sensible and (at least in theory) to offer some additional downside protection.
To me, the explanation(s) don’t support allocating one’s investments strictly by market cap.
Why do it on the country level, when there. are funds that do it on the stock level?
AVUV has a PE of 13 and Price/Book of 1.32, lower than VEA.
Indeed, the performance in the last year
were disappointing. That was due to the low volatility strategy practiced by Descartes Vorsorge. A very recent article by the renowned daily NZZ puts it into perspective. In fact, over the last 10 years Minimum Variance performed just like the MSCI World, but with a considerably lower risk level. And as the journalists says: «Wenn Low Volatility über mehrere Jahre keine guten Resultate geliefert hat, war es in der Vergangenheit im Durchschnitt so, dass diese Strategie dafür später umso bessere Renditen erzielte.» So I am not concerened that this risk-based approach will perform well in the future.The problem is not the lower gain. The problem is that Descartes managed to turn a comparatively modest gain of the passive counterpart into a loss.
Is this inflation adjusted return? The USD lost value at quite a high rate(around 3% compared to the chf) so I was wondering if this was already taking Inflation into account.
Both in USD. Not inflation adjusted.
I’m always wondering what’s the best way to compare these returns. Should they be normalized considering average salary per household per country, cost of life etc. Like you can compare a Swiss guy investing one time 100 usd in 88 in the MSCI Switzerland vs one american again 100usd in 88 in MSCI USA. But what do you use as a basis? 100 usd in chf equivalent would have had a different purchasing power than 100 usd in america in the 88. And the resulting total sum after 33 years may have different purchasing power. Should we look at similar fractions of average salary in 88 to invest the same sum?
In the end you want to know how worse off is somebody in CH vs USA. Can he buy less stuff after 33 years than an american who invested similarly?
I think the easiest way is to compare everything gross in USD returns. MSCI Switzerland had an avg. return of 9.04%/year since 1994 in USD and 7.20%/year in CHF. So summarized something like (in USD):
USA 11%
CH 9%
Europe 8%
Inflation will affect all above the same.
P/E valuation is not the most important determinant of investment return, ROCE is. I strongly suspect US companies had higher ROCE in the past 20 years vs. Europe
"If you were a great (and long-lived) value investor who bought the S&P 500 at its low in valuation terms, which was in 1917 when America entered world war one and it was on a P/E of 5.3x, and sold it at its high in valuation terms in 1999 when it was on a P/E of 34x, your annual return during that period would have been 11.6% with dividends reinvested, but only 2.3% p.a. came from the massive increase in P/E and 9.3% (80% of 11.6%) came from the companies’ earnings and reinvesting their retained earnings. "
Worth reading Fundsmith annual letter to shareholders 2019 :
https://www.fundsmith.co.uk/docs/default-source/analysis---annual-letters/annual-letter-to-shareholders-2019.pdf?sfvrsn=8)
Just a quick update on why I originally started this thread. My pension fund didn’t ever ask for the money, despite knowing there was more when I left the company. It seems that they don’t care.
Those 18k increased to 23k since I invested it in ValuePension 10 months ago. If I get a 5% real return in the next 40 years (when I turn 70), I’ll have 160k real. This small part of my assets will turn out to be quite a nice bonus in my retirement.
