How to invest non-stock part of Portfolio

[RPI]

Hi Mustachian Post forum

I have currently around 70% of my portfolio in stocks (ETFs: FWRA/Finpension 3a VT replication, CHSPI, SPMCHA). CHSPI is around 24% and SPMCHA 6% of my ETF portfolio, due to home bias and concentration risk. Maybe in future I will change FWRA to VT, but I am not sure about US domiciled ETFs for now. In addition, I have a monthly Sparplan on Neon for FWRA.

Now I am looking to invest the 30% rest.

What would you do?

One third in cash on a Sparkonto (around 1% return)?
One third in a Real Estate fund (which one)?
One of these?
REET ETF
UBS ETF (CH) SXI Real Estate Funds, ISIN CH0105994401
UBS Direct Residential (very volatile, but the return looks good): UBS Fonds - Preisdaten | UBS Schweiz

Maybe in future I want to buy real estate, so I thought these real estate ETF will track the value of an apartment/house.

Are there any good leveraged real estate funds in CHF?

One third in some swiss corporate bonds (CHCORP) or hedged global corporate bonds (how much return here after hedging costs subtracted, GLAC : SPDR® Bloomberg Global Aggregate Bond CHF Hdg UCITS ETF (Acc))?

CHCORP has a big overlap with CHSPI and GLAC I am not sure about, since it has long average duration and I don’t know how to get the net return after hedging costs included. Is hedging already included in the 2.83% return?

In addition I have some high risk stocks, crypto and gold in my portfolio (but very small amount of two monthly salaries all together).

Any other suggestions?

Pillar 2 I do not count for now, since I am far away from retirement and I do not intend to buy property soon.

My situation:

I do not count any additional income from work in my calculations, except 3a contributions and my Neon savings plan, which is quite low (around 250 CHF per month).
Mid thirties, so I plan to work until at least 60-65, hence I have around 30 years until retirement.
I can handle drawdowns, if I do not need money right now.

I arrived to this 70/30 split from multiple sources.

The purpose:
70% in ETFs for growing my net worth.
The 30% for hedge against black swans or personel issues like illness or losing my job for a longer time. But I still want some increase of net worth from this 30%, so not put everything into a savings account.

[Helix]

@RPI

Any other suggestions?

Also have a look at managed futures. It takes a bit to understand what is going on (as one should), but the basic strategy (trend-following) has existed and paid for a long time. They tend to have low correlation with stocks, but higher returns than bonds. Fees where high in the past, but so where returns. The fees have come down significantly, and (or as) solid index replicators have entered the market. Returns where low in the 2010s, but have taken up again, so make of that what you will.

Managed Futures

Ok, I yield. Data I took the monthly index data of KFA MLM (index replicated by KMLM) from their website. I subtracted their TER of 0.92% spread evenly over the year. They actually replicate this index for customers since 1993. The index is rules based (and the rules don’t look overly complicated). Both reduce the influence of retroactively choosing a strategy that fits the past best. The S&P 500 Total return data I got from Yahoo. I made some assumptions for expenses. The 1x has a TER of 0.1…

[PhilMongoose]

Property
Cash
Gold
T-bills
Commodities
Pension

[Barto]

Keep in mind that if you are in employment 2 pillar may grow over time to something at or close to the rule of thumb “your age in % in bonds” due to increasing salary and increase contribution rates

[RPI]

Thanks! I have them in mind, but I have to first learn more about them, before blindly buying.

[RPI]

Thanks! I have those in mind, but I am not so sure about gold and commodities, since I see them as somewhat speculative. T-Bills I am also considering.

[RPI]

Thanks, I have Pillar 2 in mind, but for now I just consider it for retirement and as insurance and not for my net worth. This may change, if I buy property some day or are close to retirement.

[RPI]

Thanks! I am glad that I joined this incredible forum as active participant!

I have updated the information about me. I hope this helps!
Thanks I will definitely have a look into Phil’s thread!

May I ask you if you are happy with drpf? Why did you choose it? Due to the “tax advantage”? Are you buying it via UBS or directly on your broker?

Why did you sell CHCORP?

[Barto]

@RPI

have Pillar 2 in mind, but for now I just consider it for retirement and as insurance and not for my net worth

If you are investing for 30 years with too much “insurance” you have lower short term volatility but the trade off is lower expected average long term return and delay in financial independence

[RPI]

Yes I know. But except investing in property or switching jobs I do not know how to utilize pillar 2.

[RPI]

Thanks! Yes I just want about 10% of my portfolio in real estate as sort of diversification. The rest I will keep in stocks and emergency fund. So there is just 10% left for me to invest. I will see what I will do with it. My emergency fund is around 8-9 months of expenses, due to children and my low risk tolerance.

I just have two more questions:
Which net return do you expect with drpf?
How does “plus in my case the ter is being off-set via wealth tax + oasi reductions” this work? Only for self-employed people?

[RPI]

Thanks for the response!

that’s fine. just note that RE is not a huge diversifier, i.e. can be quite correlated to stocks at times.

I know about the high correlation, but I do not know anything better. I am basically following the Malkiel Portfolio with some small adaptations, since I am not US based. And I do not hold bonds and money market funds for now, since I do not care about the increased return i.e. 1% to 1.5%

Burton Malkiel Late Thirties to Early Forties Portfolio: ETF allocation and...

So for drpf do you think 4% expected return is reasonable?

[PhilMongoose]

Owning your own home also acts as a hedge against future housing requirements. In a sense, you’ve pre-paid it, so then you no longer need to generate income to pay rent in the future.

[Abs_max]

@RPI

One third in some swiss corporate bonds (CHCORP) or hedged global corporate bonds (how much return here after hedging costs subtracted, GLAC : SPDR® Bloomberg Global Aggregate Bond CHF Hdg UCITS ETF (Acc))?

CHCORP is good if you want Swiss exposure. If you want exposure to international debt then hedged (currency) funds would be needed. Most funds do not show the Yield to maturity after accounting for hedging costs. So the final returns would be lower than you see on factsheet. Perhaps you can use Justetf to compare historical returns to get an idea.

[RPI]

@oslasho

yeah, probably depends on the amounts if that part is worth it to try optimizing as well.

I will have a look on it. Maybe I just increase my stocks allocation.

@oslasho

yeah, always depends on the objective if something’s better or not. fixed income, for example, is better to reduce volatility but it’s probably also gonna reduce returns.

Makes sense.

@oslasho

4-5% is probably reasonable if that’s nominal and for a basket of such funds.

That’s not bad at all for me. Since ETFs also yield around 6-7% nominal, as I understood. So you mean I would need more funds, not just drpf for diversification?

[RPI]

Yes, I know. Thanks! But my personal situation with my family (maybe we will move in the near future) is not optimal to buy a home. Also i rent quite cheap for now, so this hedging makes sense for me maye earliest in a couple of years.

[RPI]

Thanks for the hint with justetf, maybe I will find something there regarding the return after subtraction of hedging costs!