Hi there
Broad geographic diversification like Vanguards VT ETF is a good thing and my favourite. I stumbled accross this paper https://www.google.ch/url?sa=t&source=web&rct=j&url=https://www.vanguardinvestments.dk/documents/consideration-global-equities-ch-tlor.pdf&ved=2ahUKEwjWwZTvseXoAhXR2KQKHfwFCUoQFjADegQIAhAB&usg=AOvVaw0JzRkNbVolmEfRSvqkvuBm which states, that having about 40% of CH stocks in your portfolio, reduces volatility by 1.5%…
What is your strategy?
From the paper page 6: “Holding all else constant, increasing the portfolio weight for Swiss equities exposes an investor to higher volatility than that for the entire market. Therefore, a Swiss overweight implies embracing additional volatility without necessarily gaining any expected return.” Have we read the same paper?
Correlations with MSCI world has increased over the time which means that an overweight of Swiss stocks has less impact than in the past.
Between 2009 -2020 the correlation was 0.93 https://www.portfoliovisualizer.com/asset-correlations?s=y&symbols=EWL+VT&timePeriod=4&tradingDays=60&months=12
You also need to take into account the other advantages of a global portfolio: company diversification, sector diversification
Market cap weight would be 2.6%, but I keep it at ~15% overall (IBKR+VIAC) and reduce my allocations to Europe and Pacific to keep the US and Emerging Markets neutral.
Right, like Cortana said trough pillar 3 and pillar 2 you will automatically overweight CH
And you can adjust your CH allocation in VIAC from 37-90% (assuming we aren’t using CHF hedged funds). So that should give you enough range to get your desired home bias.
yes, but 37% is still bigger than 3% ?! 
I don’t want any home bias (if possible)
This limit is more harmful than useful.
Well then you have 2 possibilities:
I got the point, but I would like to give these two counterarguments:
I very much like your argument and am thinking about overweighting my CH allocation towards 25% just because of the strong currency that is CHF.
Like others in this thread I‘m looking at 2nd pillar as bonds. What ETF are you using or does it make sense to mainly do it through VIAC (although there I don‘t have enough to make 25%)?
Hi - I currently have 20% of my equity stocks portfolio in a swiss indexed, (and 75% world index, 5% US)
The idea behind it is to diversify and protect against currency variations, but I feel 20% is likely overweight. My retirement plan (Pillar 2, Pillar 3) are in CHF so the actual % is closer to 35% for my full assets. That being said, I can’t access / withdraw from these accounts before retirement.
Question: what is the recommended home bias for CH or EU residents?
Do we actually need a home bias, if we already have retirement accounts in our local currency?
Is our salary (if in the same currency as residency country) a form of protection as well?
Maybe we don’t need a Swiss home bias, but I also have 20% in Swiss stocks across my combined ETF and VIAC portfolio (not considering 2nd pillar which would increase Swiss bias further). I like to believe that overweight exposure to Swiss stocks stabilizes my portfolio and reduces currency risk somehow…
However, looking at my results since 2017, I should have gone full ‘All World’, would have been much better.
I’m 100% Swiss stocks in taxable. The reason I’m not in 3a is that the actual assets don’t belong to me but to the pension fundation and it’s up to them to sort out any political/fiscal trouble that may arise.
My reasoning is that:
My government is the most likely to try and protect me if things go south. A foreign government may try to protect its citizen at the expense of foreign investors if the worst happens.
My government is the one I have the most impact on. If I’m not happy with what they’re doing, I can try several measures, political, legal or others to try and convince them to be more fair to me. If my government is really unfair to its own citizens, I’m more likely to find other people who share my view of its actions and gather more political or other power to change the way things are being handled.
That’s probably not a good reason but companies with a foot in Switzerland pay taxes here, which contributes to my well-being so I’d rather advantage them over others.
This exposes me to concentration risk and I may be in a really bad position if things turn south in Switzerland. This is where physical gold comes handy to try to pass the border and start again elsewhere.
That being said, I’m a strange person and have a different viewpoint on risk assessment than most. 
Edit: though my plan past a certain networth would be to build meaningful relationships in another country and buy some assets there. The relationship with the locals being the key to an additional layer of protection while still allowing for some (limited) amount of (low) diversification.
Do you have any source article for this?
I’ve seen in a few posts you are negative on US, I’m interested as it seems a bold contrarian move to underweight US / over weight Europe.
I agree stock valuations are stretched
However without looking up precise data an investment in Sp500 10 years ago has increased 4 fold or more whilst Euro stoxx 600 <2 fold. That difference is too big to be market inefficiency alone
Part of the higher return is underlying value generation - US innovation is creating companies that are dominating the world. US Companies we said had crazy high valuations 10 years ago now have huge profits (for example Facebook). Growth prospects are also higher than for European companies
Buffett said recently never bet against America. Betting against Buffett is rarely going to work out well…
Thanks. As said above I agree that valuations are high but the GMO article itself acknowledges that part of the excess return from US stock is due to higher value generation vs. ROW
Well, the guy is 91 years old. Chances are he won‘t even be sitting on the table anymore anytime soon, to take your bet.
The United States are going to have another presidential election in 2024. And Trump‘s considering running again. If that turns into a close race and Trump‘s about to lose by narrow margins, things may (IMO probably will) get very ugly. Even if Trump is elected squarely, there‘s a good chance it will. And I have my doubts whether this time his running mate will (again) turn out to be god-fearing conservative but ultimately honest and upright as Mike Pence.
Hello. I’m new here and thinking about this home bias stuff.
I have 80% of my “free money” invested in VT, 20% in a CHF saving account.
That is, lets say then, around 22.5% in CHF.
Additionally, I have:
When I calculate all these together, I have a CHF bias of around 47%. Is the assumption right that the 2nd pillar can be viewed as 100% CHF? In this case, I think the home bias is very high and I would not invest in another swiss ETF. Or what do you think?
(Furthermore I have some daily allowance account → 100% CHF, so even more CHF.)
Welcome to the forum!
Home bias does not normally refer to currency bias, but to equity bias. A portfolio with 50% of SPI equities would have a home bias.
A currency bias is not a bad thing. Currency exposure in a portfolio should be aligned with your future expectations for your retirement. If you plan to stay in Switzerland, then it is a good thing to be well exposed to CHF (in particular through cash, pillar 2, and bonds). Otherwise it exposes you to the risk of losing purchasing power if CHF becomes strong when you retire.
Currencies for the equity part are not as important as for the bond and cash part. This is because companies do not always run their business in the currency in which their stock is traded. The SMI has a lot of international companies exposed to USD, EUR etc.
