I have started reading about finances a few months ago and I am starting to think about my future strategy.
I am 27, working in Geneva and am able to save 3,000CHF per month.
My financial objective is to be financially independent and not worry about money. Retiring early is not an objective at that point as I like my job.
For now, I do not have anything in place. I have saved 60K on my bank account, and nothing is invested for now.
I want to create a logical strategy that would make the most out of my money and make sure that my portfolio is diversified to mitigate the risk.
Based on my readings and researches, I have several ideas in mind:
Stocks: invest in ETFs (with InteractiveBrokers which seems to have the lowest fees)
3rd pillar: open a 3rd pillar account on VIAC (which also seems to be one of the best online options) and invest as much as possible
Real Estate: I currently rent my place in Geneva and do not have any plans of buying a house/apartment in the next few years. I was more thinking about rental investment in France as I am french. But I am not sure if I am up for this journey as it means quite a lot of time investment and understanding of the real estate market. Alternatively, I know that in France it is possible to invest in real estate (business buildings, parking lots, etc) and receive dividends every quarter with low time effort. They call it SCPI (I do not know if there is any equivalent in Switzerland or in other markets). I consider this solution as it looks simple, but I know that one earns less with this type of investment (vs. rental investment) as there are a lot of intermediary fees.
What is the community usually doing in terms of real estate in Switzerland and/or France?
As you can read, I am still at the beginning of my financial journey but I have the motivation to learn and build the best strategy suited to my situation. According to you, what should be my priorities in terms of investment to avoid having 60K+ sleeping on a bank account? Every month this number is growing and I feel a bit lost with all the available options out there.
Hi! @Dr.PI Thank you very much for pointing me to that topic, it was very helpful.
I’ve continued my readings and researches and came up with this simple portfolio:
VIAC Suisse 100 (third pillar) - 15% Invest every month to reach maximum yearly capacity.
I was thinking to invest in the Suisse 100 instead of Global 100 to have my total stock portfolio being exposed to Switzerland for at least 15-20%. Do you think it makes sense? As VT only has 3% invested in Switzerland, which is minor.
Vanguard Total World Stock Index Fund ETF (VT) with Interactive Brokers - 56% Invest every month and also invest potential bonuses.
I have read quite a lot about ETFs and I was trying to figure out which one would be the best to be exposed to the world. I do not want to bias my portfolio with any specific conviction for now so I thought that VT would be the best total exposition. However, this ETF is rewarding dividends and I know that dividends are considered as income in Switzerland which might not be the best tax-efficient move. Do you know if there is any VT-equivalent without dividends? Or is it pointless trying to go that route and should I just live with it?
2nd pillar - 14%
I consider my 2nd pillar as bonds so I do not plan to invest more in that.
Cash - 15%
Same goes for cash. I also want to keep some liquidity for other potential projects (real estate, etc.).
What do you think of this portfolio? Is it a good starting point for me to get started with investing?
That’s what you’re doing with sour VIAC Suisse 100 though. You are not following the world but are overweighting Switzerland. You can read up on ‘home bias’. Most people would recommend to avoid having a home bias in your portfolio.
Looks like a pretty good plan for me if it fits your risk assessment.
I’d note that even though your total allocation has 29% fixed income/cash, we may also be psychologically impacted by the numbers we see when watching a specific account (here, your brokerage and 3a ones). I’d also try to figure out my reaction if those numbers went down 50%-80% over the course of a few months (which could be starting tomorrow) while evaluating my allocation.
That being said, the important thing is to get started and analysis paralysis is a real thing. The brokerage/provider and funds you’ve selected are fine and can be adjusted with time. There is no capital gains tax in Switzerland so you can adjust your holdings if you realize you haven’t assessed your risk tolerance accurately (which is likely, we really only get to know it when confronted with periods of high uncertainty). Getting exposed to the fluctuations of the market will help you better assess how you react to it so it doesn’t make sense waiting too long to get started.
@San_Francisco That makes sense, therefore sticking to distributing ETFs has the same tax implication as doing accumulating.
@preparations You’re right… Investing in VIAC Suisse 100 is a bias. But I have also read that home bias can be a good thing to have money invested in a domestic currency and then reduce risk coming from foreign currencies.
I know that the VIAC Global 100 has 40% of stocks invested in the Swiss market, maybe that is enough to bring more security to my portfolio (as CHF is a robust currency).
What do you think? What would be the rationale behind investing in the Global 100 instead of Suisse 100? Would that not overlap a bit with VT?
@Wolverine Thanks for bringing this up. I have done a risk assessment two weeks ago during an introduction call with VZ and I am 6/7. Maybe this will shift a bit when I will be confronted to the reality of the market for the first time… As I am very early in the process, I think it will be fine if I decide to reduce my risk tolerance.
The reason for me personally is simply that I do not think that the swiss stock market will outperform the global market over the next 30 years. Note: I also do not think that it will necessarily underperform - I just don’t want to make that active bet in either direction.
Yes, it there will be an overlap which is a good thing though. I personally use a custom strategy to match VT the best way possible.
If that’s your reason for overweighting Switzerland in your portfolio, you could also take a look at currency hedging. It’s not recommended much because over a long period of time it will only cost you money and you won’t benefit from it. Search up on ‘currency hedging’ in this forum, there are a few threads - also about why investing in Swiss companies to be more exposed to the CHF does not make sense as the biggest Swiss companies act globally and earn most of their revenue abroad (not in CHF).
Thanks for all this context and discussions on home bias, it was very interesting for me.
I think that I will probably start by investing in a 3rd pillar with the VIAC Global 100 and invest in VT in IBKR.
I want to start with a simple strategy, see how it goes and how I react to market fluctuations and then potentially adjust the strategy.
I think that investing in VIAC Global 100 will for sure bring some home bias (40% in Swiss Market) but a reasonable one vs. all that will be invested in VT.
So from my understanding it makes more sense to take a distributing ETF because once you retire you get some income (the dividends) without having to sell (= pay fees) whereas with an accumulating ETF the only way to get income from the ETF is by selling. Since accumulating and distributing ETF are taxed the same in Switzerland (read what @San_Franciso wrote) the distributing is more advantagous in Switzerland. In other countries where this is not the case an accumulating one is better. The only advantage an accumulating would have in Switzerland is that you don’t really have to re-invest the money since it’s done automatically which saves time and some fees.