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:
- Save so much that VIAC only accounts for 8% of your total investable assets. So that by setting VIAC to 37% CH you’ll get 3% CH allocation.
- Use CHF hedged funds in VIAC to reduce Switzerland to 3% (2% SMI, 1% SPI Extra).
I got the point, but I would like to give these two counterarguments:
- Higher salary would mean higher pillar 2 contribution, so the overweight will stay through pillar 2.
- Hedging is worse than home biais
- I see 2nd pillar as bonds, so no overweight in terms of stocks.
- Agreed.
2 Likes
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%)?
1 Like
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.
1 Like
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.
2 Likes
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.
1 Like
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:
- VIAC Global 100% → 40% CHF
- 2nd pillar → 100% CHF???
- Rental deposit → 100% CHF
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.
4 Likes
Welcome to the forum!
You kind of mixing together two different things: asset classes and geographic exposure of your stocks investment.
and
are stocks + maybe some other asset classes in VIAC strategy. Here you indeed has some home bias because of the construction of VIAC strategy. You can adjust it, this is your decision.
and
are cash and cash like stuff. I was analysing quite a lot this question and always came to the same conclusion: if you are Swiss resident, cash should be in CHF only. So here you are doing everything right, I would say.
Now the question is the assets allocation. What is the proportion of value in ”stocks" and “cash” positions listed above? I guess after you take everything into account, there are too little stocks.
4 Likes
Hi Pi. Thanks
Ok. Maybe I didn’t really get the concept of a home bias. So, the home bias is really about investing in stocks in your own country, not much about the swiss franc. But then I don’t really understand the concept, as the big companies in SMI and so are mostly international companies, with business all over the world. A “better” home bias would be a SMIM or SPI Mid, with companies actually making business in Switzerland, right?
About your question:
I use the predefined VIAC 100% Global strategy, that is 99% stocks, 39.2% swiss stocks.
So I guess my true home bias is only in the 3rd pillar from VIAC.
VT is 100% global stocks.
Thanks. Making it clearer, what home bias means.
Home bia serves 3 reasons that I know of:
-
home country stocks usually have preferential tax treatment (it’s easier to recover the potential witholding tax). Others are way more qualified than I am on that topic but I don’t think it holds too much for Switzerland: we have fairly good tax treaties with other countries and our own home witholding tax of 35% is fairly high (we eventually get that back with our tax return but since it is stuck in prepaid taxes until then, there’s an opportunity cost to that).
-
home country regulations are easier to enforce on home country companies. I’d probably have an ‘easier’ time suing Nestlé than Coke, for example, because it’d be easier for me to find a lawyer, I’d understand the set of laws better and if my government doesn’t enforce the laws it is meant to enforce, I can vote them out.
.
While investing in big fund manager’s ETFs, that risk seems kind of mitigated/reversed: Vanguard/Blackrock/other will have an easier time making their interests hold up when facing rogue companies than I could as a very small shareholder because they have the professionals to do it and can exert more pressure on the company/local government. Of course, that means you trust your foreign fund issuer, which most here do. -
investments in home country companies fuel the country’s economy, which makes our global situation a tiny bit better, which may make local life a tiny, tiny bit better overall and somehow secure your employment a tiny, tiny bit more depending on its exposure to market and economical downturn risks.
Fixed income investments serve mainly 2 purposes that I know of:
-
providing a flow of reliable income. That income is less reliable if it is subject to forex wild fluctuations, hence it should be issued in the home currency or currency hedged (being denominated in the home currency isn’t enough, if it is issued in a foreign currency, it is still subject to currency exchange rates risk).
-
providing more stability to the overall portfolio by mitigating the fluctuations created by more volatile assets. It is less stable if subject to forex wild fluctuations, hence I would currency hedge it too.
I would say so, yes, though many of these companies also do a fair share of business on the international scene.
3 Likes