Goodbye 'No Money, No Clue', Hello FI!

#1

Hi everyone,

It’s about time I introduce myself, since I’ve read pretty much every thread on the forum!

Before I moved to CH in 2010 I was living in one of the most expensive cities (London), in an underpaid job (the recession meant employers could pay far less than they should have) and with a costly way of life (aka breaking Rule 1 of Mr JL Collins). All this meant I was ecstatic to have £20 left at the end of the month. Literally, £20.

Since then I’ve been happy to even have money on the side and didn’t really think about doing anything more with it, other than keeping it and seeing it grow slowly each month. Now I’m at the point where I have my emergency fund, the debts are paid and I don’t live on credit, so according to the Bogleheads, I’m ready for more!

I just started learning about investing and, up until 1-2 months ago, didn’t know there was such a thing as an index fund. All the advice on this forum and MP’s blog have been so, so helpful.

Some stats:

Savings rate: 50%, which I can’t seem to get any lower as rent makes up 25% of that (my boyfriend and I live just outside Zurich)

Income: Was 180K (combined) but my income will drop dramatically as I will work only max 40% after our baby is born (which could happen any day/minute!)

Asset Allocation: 25% emergencies/liquid assets, 75% investments

  • 55% VWRL on SIX with CornerTrader*
  • 20% local Swiss fund, probably iShares Core SPI but we’re not sure which is best - any advice there would be great
  • Following Boglehead’s advice, I know we should invest in bonds, but from what I’ve read on this forum it doesn’t look like that’s the way to go…Further research required!

*Seems a lot of people on this forum are in favour of VT with IB, but is it so much cheaper after paying the monthly inactivity fees, cash transfer fees and currency conversions? This is definitely a question, not a challenge, as I’m still trying to make sense of all the things I’ve read - it seems so much overlaps or cancels each other out!

Anyway, thanks a lot for all the help and hopefully one day I’ll know enough to help out too. I’d be very, very happy to have your comments/advice!

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#2

Hey Mia,
great post, and congrats for being “ready for more”! I hope you financial plans will come true soon :slight_smile:

VWRL@CornerTrader is definately one of the best foundations for any long-term investments based in Switzerland. The difference to some (presumably optimal) VT@IB solution is almost negligible, compared to what un-smart investments are offered on the market. however for example I am determined to go after the last detail in this issue and once I am done with it I will post it in the forum :wink: this post gives you a hint but is already outdated.

If you want to put 20% into a local swiss fund, there is mainly only a bunch of options (at least if you require passive low-cost funds): get started with the swiss indices overview . In case there are any other (ETF-) availale indices, plz let me know :wink:

Bonds are a traditional part of a Boglehead’s lazy portfolio, with the main purpose of adding a “safe haven” to your portfolio that would not drop as far as stocks during a crisis (=have a ‘low’ correlation to stocks) and hence provide opportunity for rebalancing during/ after a stock market correction. But since “safe haven bond” returns tend to be negative for a while now, people reconsider their bond allocation, and tend to leave it just as cash. I, for example, am comitted to a 100% stock allocation. I don’t have to deal with this bond issue, but my personal situation is entirely different from yours (no family, no need of the money, no kids,…)

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#3

Welcome, @mia!

Yes, it really is so much cheaper. IIRC, you’d pay at least 20chf per order on CT, and on top of that there’s the Swiss stamp tax. On IB, you’d pay at least $5 to buy VWRD in London, plus $2 for currency conversion. If you went for ETFs in the US, you’d pay even less per trade.

In general, CT is cheaper if you’re going to make less than 6 trades a year, but beyond that IB pays for itself pretty fast. Several people have put together spreadsheets showing the difference, but it’s probably best if you make your own simulating your actual plans.

Of course, the downside of IB is its learning curve. To overcome that, I recommend the excellent mobile app and playing around with the paper trading account.

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#4

Hello,

I would recommend the SLI for the Swiss fund.
The SMI 4 biggest companies weigh more than 60%. The SPI index has also the same issue.
The SLI gives a better diversification

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#5

ah i forgot:
just as wapiti points out, SMI and SPI are heavily dominated by the three big (Novarrtis, Roche, Nestle). SLI has them capped to 9% (?) each improving the diversification.


in addition there is a SPI mid ETF that allows you to diversify much better over 80 swiss mid caps. considering that all swiss blue chips are already in your VWRL (from Nestle 0.66% to BCV <0.00%) [source: p.42] it might make sense. I concluded this for myself when putting together my portfolio that also contains VWRL and SPI mid. however, i already consider swiching to IB & a different portfolio :wink: \edit: i am conciously overweighting small caps in my personal portfolio

there is also a SPI extra index fund by CS, but it is available only for institutional investors.

interesting NZZ article (german…) i just found

\edit: available indices via ETFs (to my knowledge) are SPI, SLI, SMI, SMIM, SPI mid

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#6

Exactly, VWRL+SMIM or VWRL + SPI MID would make sense.
Nevertheless, be careful, Inside VWRL, Switzerland is only 3%. if you choose, VWRL + SPI MID or VWRL + SMIM. You need to calculate the allocation properly. I wouldn’t advise overweighting small caps.

Note: Not all indexes in the nugget’s chart have an ETF/fund opened to private investors.

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#7

Hey @mia! Good to hear that you’re on your way to mustachianism! :smiley:

Congratulations for the baby! Mine is about to born anytime this or next week! :slight_smile:

Few comments on the assets allocation:

  • VT/VTI at IB as it’s really much cheaper
  • I don’t agree with @_MP for home bias fund. It might make sense for US-based investors, because US is 50% of world market capitalization, but SIX is only 3%. If you put too much your investments there, you’re less diversified and thus you expose yourself to addtionall risk that is not worth the returns (I’d go for an ETF of European developed markets including Switzerland or something similar for home bias - but personally I don’t think we need home bais fund at all).
  • Don’t hurry with the bonds - I personally keep most of that money as cash + I started buying some gold and bitcoins as an alternative, but not too much.

Yes, it is much cheaper. If you sum up and compare TER of US-based ETFs, Swiss stamp tax and currency conversion fees (at CT it costs 0.5%, at IB it’s $2-3), IB + american-based ETFs is way cheaper option. For example, for $5000 at CT investment I got CHF46 commision+currency conversion fee, at IB it was ~$6 (in total I’ll pay $10 because I have less than $100k invested) - and this doesn’t include the difference in TER and taxes!

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#8

I’d lean against overweighting in Switzerland, too. What’s the point? As a protection against currency swings? Well consider that swiss economy is heavily export-oriented, most of earnings come from abroad, need to be converted to CHF and so there’s a non-trivial amount of currency effects on share prices:

Strong frank -> weak swiss market & weak global market when expressed in CHF. One might argue this negative correlation justifies keeping the bond part of portfolio as CHF cash (forget CHF bonds, they are losing money at the moment). Except that then the SNB enters this picture with an agenda of not letting the frank get too strong…

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#9

Hi Mia,

I’m in a similar situation to you. Baby due in July, and just starting to try to sort out finances but definitely very much a beginner at this stage. I have a corner trader account and started with VWRL on the SIX. I realise that IB seems to be everyone’s recommendation round here. I see the logic of lower transaction fees but I’m only doing a few transactions a year so I don’t view it as imperative yet.

I’m pretty keen to avoid unnecessary admin so I’m planning to try and keep things as simple as possible. I was a bit intimidated by the idea of holding indexes listed on exchanges outside Switzerland in case it complicated my situation without me realising. I think I probably need to do more research on this. I will probably stick with CT for a year at least and then consider opening an IB account and US based ETFs if I get convinced that it will make a material difference to me.

One of my original reasons for going with CT was that I was hoping they would provide everything I need for the tax return in a compatible format. I haven’t been through that process yet so I’d like to submit next year’s tax return before I decide whether to move things about. Does anyone know if there is any advantage at all in using a swiss based broker from the perspective of the tax return?

In summary, I’m trying to get the basics right and avoid admin. Hope I’m not doing too badly.

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#10

Hi @Rinch, there’s no advantage in having a Swiss broker when filing your tax return, because the data you’ll need will be fetched from a government site. CT doesn’t provide anything more than IB (even if it did, you’d want to be sure to use the official source anyway). When I transfered VWRL to IB and then sold it, I paid a little over 60 CHF to sell, when I had paid around 180 CHF to buy it (just because I didn’t have to pay the Swiss stamp duty), so I’ve only been pleasantly surprised every time I do a transaction with IB.

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#11

Thanks Mobius, looks like I really am just wasting money on CT then. Thanks for the link to that site, seems fairly straightforward as long as the instrument you’ve bought appears on the government list.

I suppose I’d better start seriously looking at IB then.

#12

You’re welcome. Also, be aware that you can easily get new instruments added to that government website by making a phone call. This has been documented in another thread.

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#13

Guys thank you all so much for your great advice and input. I didn’t realise that the cost difference between CT and IB was so much. Perhaps this was just wishful thinking, because like @Rinch, I thought CT would make trading in CH that little bit easier for a beginner with all the admin (and the better UI) and that the difference was negligible. I’ll definitely try out the app if it’s easier to navigate - thanks for the tip @Alex

Great input on the CH home bias. Looking at it now, 20% would be leaning quite heavily on the Swiss market and as @1000000CHF & @hedgehog pointed out, really, what’s the point? Especially if the companies are included in VRWD/VRWL etc. I need to look into this far more, so thanks for the ‘warning’, so to speak.

Seems I was right to be weary of bonds - I’ll do the same and keep it in cash for now.

Hi @Rinch, yes it seems we’re in exactly the same situation/ way of thinking right now! Let’s stay in touch and learn from each other - I’m sure we’ll each think of things to ask the guys here that the other one hasn’t thought of and we can hopefully avoid any costly mistakes along the way.

Seems we have a lot of MP babies due! Wishing @Rinch and @1000000CHF all the best. @1000000CHF, I’ll race ya to the finish line :stuck_out_tongue_closed_eyes:

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#14

Sure thing @mia, I’ll certainly be interested to follow your experiences. At the moment I’m mainly spending my efforts to cut out any stupid spending and waste from various bad decisions. I aim to learn more about investments at some point but until then I’m relatively happy that i’m not making any terrible mistakes even if things could be optimised.

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#15

Here you have more info about home bias from Swiss perspective:

All the best to you and your family! See you at the finish line! :smiley:

#16

Holy crap, everyone here is having kinds and i do not even have a girlfriend.

Not even a Phonecall, An E-Mail is enough and they are super quick (somebody give me an award for getting VT added XD)

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#17

Why do you think we were congratulating you on the foresight of starting your FI journey so early? :wink:

In any case, you have plenty of time for that - you’re already doing the most important, which is to set yourself up financially for when you do have wife and kids to be able to enjoy it without stressing about financials/making ends meet.

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#18

Sorry that was a bad joke (i actually do not want kids, accidentally getting one is one of my bigger fears)

#19

Haha, you need to use a smiley

#20

NEVER! I have like an irrational hate towards emoji, freaking Unicode-pollution XD.

But enough shitposting for today, congratulations to everyone who is getting a baby.