Introduction - Where to invest 200k

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Hi all,
Been reading this forum on and off for the past couple of years and I have to say there is loads of very interesting content here.

I’m 35, moved to Switzerland 2 years ago and currently living in Geneva. I’m married but don’t (yet) have kids. Mrs S has been struggling a bit to find a job since we moved here so we are both living off my salary (we are both non-EU). We live quite a simple life and are not big spenders, and I would say on average I am able to easily save 3/4k a month after tax, before bonuses.

I’m a bit of a noob when it comes to investing and had never really taken the time to look into it, either because I was at the beginning of my career and wasn’t earning enough, or through living in low-cost countries where I would be comfortable locally, but my savings were getting eaten up by inflation and currency devaluation. Ever since moving to Switzerland (and also through promotions in my job) my net worth has significantly increased, to the extent that about 65% of my current savings I have accumulated since arriving here 2 years ago.

I currently have about 200k of savings of which:

  • 20% is invested in stocks
  • 30% in very low interest French savings accounts (Livret A, LDD, PEL, etc…)
  • 50% is just sitting around in my current accounts getting eaten up by inflation (I know…)

When I first moved here I was thinking of putting some money towards buying a flat/property in France to rent (targeting net cash flow positive opportunities), but I didn’t really move forward with it due to a variety of factors, including:

  • Never having bought a property before and having to buy one without visiting it physically (there are companies that do this for you)
  • The only bank I spoke to didn’t want to lend me as much as I wanted
  • I was under the impression that the tax impact on my Swiss tax rate and Swiss wealth tax was probably going to wipe out most of what I was earning through rent.

I then, having spent hours on here, opened an IB account and proceeded to buy, 12 months ago (great timing!), about 45k of ETFs including VT, Nasdaq, and a couple of other stocks. I’m now down about 25% after a year :slight_smile:
The idea of course was to continue to buy ETFs every month, but after seeing my money disappear like this I just couldn’t bring myself to do it.

More recently I have been looking into the possibility of purchasing property in Switzerland (I even upped my monthly 2nd pillar contributions from 8% to 12% of my salary with this in mind), but I am put off by several things:

  • I’m likely going to need to save up probably 350/400k before having enough for a deposit here
  • The prices are so high in Switzerland I’m not sure it’s a good investment - there is a great thread here somewhere on the 5% rule for renting vs investing that opened my eyes and really made me wonder if it’s worth it (I have a pretty cheap rent at the moment comparatively to the size/location)
  • It’s probably not the best time to invest in Real-Estate anyway with a potential recession around the corner

So at the end of the day I find myself completely paralysed when it comes to investing my money: when I do I seem to lose it (although I probably choose one of the worst moments in history to start investing, and I know in the long run you can’t beat the market), and when I don’t I know the money is just sitting there getting eaten up by inflation.

I would love to hear your thoughts and recommendations if you were me. My investment horizon is probably as long as it gets if I’m looking at retirement, although I would like one day to be able to live in my own home, but that’s probably not going to be for at least another 10 years.

Thanks.

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Nothing have disappeared as long as you didn’t sell in panic. Get over your fears and continue investing as you have planned originally. The best time to buy stocks is now.

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Drop all into VT, it’s on 20%+ discount today. No regrets

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Great timing.
Great choice of stocks/funds too

I mean, a broadly diversified fund such as VWRL is only down like 15% (your VT should be the same).
Whereas you made it 25% with your hand-picked selection of specific index fund and stocks.

:japanese_goblin:

:point_right: Increase your equity allocation by another 20 percentage points over the next 12 months.

If you bought at 100 last year and the prices are now 75 (25% down), you‘ll lower your overall cost basis by investing more. Assuming the markets stay flat for the next year, you’ll only be down 12.5% overall. Instead of 25% today💡

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Nasdaq and or so greatly performing FAANG stocks I guess. @Samyrov : check what “Chasing Past Performance” is.

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Rather than thinking into amount you should do the exercise to review and classify all your funds into different class of assets (e.g. cash, bonds, shares, real estate… ) and expresse them in percentage of your total wealth.
Then based on your risk awareness and tolerance express your target class allocation.
The last step will be to move your cash and reallocate it accordingly. You can spread the love over few months to ease the change.

As French born, I am really conservative and it help me to be more risk taker.
I have detailed it in few charts in my portfolio.
I was 90% Cash invested in 2016. I am still targeting 70% shares allocation…

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https://www.bogleheads.org/forum/viewtopic.php?t=293747

Both are from me.

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You describe the fear of losing money. One thing I would try to find out is you risk tolerance, like how much money are you okay to loose in the short-term. By short-term I mean here like ~1-7 years. There is no guarantee that you have a plus in 10 years, but the odds are with you. Thats quite a difference!
Once you are aware of your risk tolerance, then you can look into the asset class allocation topic.

Worst think you can do is pump everything into stocks, because everbody tells you thats the way, but then after a major crash (-50%) you become nervous and sell everything.

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You would’ve recommended this in January I guess. That was 20% ago.
End of 2023 might very well be 20% lower again. That’s 80k loss. Might be multiple years of savings for someone.

Unless one has an unlimited time horizon and follow-up money, I would be cautious about such all-ins, especially in the next 12-18 months.

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What if the market recovers and never drops again to todays levels? OP will never invest in his entire life.

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That’d be contrary to basically EVERYONE on the internet and most “professionals” as well.

Not impossible, but I’d put my chips into

  • a severe recession (-30% or more) at about 50% probabilityű
  • a longer but milder recession (15-20%) at around 20%
  • or an even longer "minus flatline (-10% to +5% over 2 years) at 20%.
    (- other 10%)

Thats’s just my personal guess, could be anything in the end.
There doesn’t seem to be an upside story basically anywhere.

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And how isn‘t all this already priced in? Are people stupid for not selling everything as it‘s so obvious that stocks will tank even more?

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Yes they are. At every single rate hike event this year, even though the target rates were already known, there was a massive down-spike in the market. Seems like people are full of … hopium, and they don’t believe facts until they see them with their own eyes.

The priced in hopium is what keeps markets afloat.

This year was the valuation collapse, next year is gonna be the earnings collapse.

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If that were true, then exactly that kind of pessimism, historically, would be a good indicator to keep/start buying.

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user137’s next post though makes a point that there’s still too much optimism in the market.

Just randomly pulling up the most recent articles on Yahoo Finance, I think this single quote may sum it up:

“The equity markets have it wrong in that they think the Fed is going to stop and eventually cut interest rates later in 2023”

Despite progress, Fed remains focused on inflation fight as 2023 rolls in

I think there’s quite a bit of optimism in the markets that these interest rates are just a short-term “transitory” thing. Which they may not be - or not unless they’ll push interest rates considerably higher than the 5% or so expected.

To me, it feels as if outsized (bear market) rallies are still occurring based on relatively minor positive economic news or indicators.

When a string of good news/indicators do not move the needle much into positive territory though, that may be a better gauge of “peak pessimism”. Because sinking prices on good news are unsustainable over the longer run.

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Economy != Stock market :slight_smile:

Hasn’t there always been some “doom & gloom” around the near future?
Nobody knows what happens for sure, but in the long term play it shouldn’t matter too much.

Of course things are different if one is nearing the end of the accumulation phase - I’d definitely be more cautious then too.

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Did you sell all your stocks seeing you are 90% certain of a significant decline?

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no, but looking at my IB balance, I’m not sure that was the best “move”.
I still have about 15-20 years to accumulate, so the “timing the market” bit will come with a larger buy-in around end 2023 (if my expectations play out well).

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Fear of entering the market at the wrong time is only holding you back. The sooner you get it over with, the sooner you can actually work on reaching your financial goals.

Take me as an example. Let’s assume (if you read my thread on Bogleheads) in 2019 I decided to wait a couple of months because of my feeling that the market will crash (back then the yield curve was inverted). Corona happened and I would have been right. Despite being right, that outcome could have put me on a very wrong path. Maybe today I would believe that I can successfully time the market? Getting in and out and eventually end up making big mistakes long-term and thus never reaching my goals. Sometimes being right might do more harm than good. As counterintuitive as it sounds.

Despite experiencing a -33% crash in the first couple of months of my investing career I’m still happy I started investing right before that. It taught me a lot about myself and it set me on my path of reaching FIRE.

@Samyrov
I know that 200k sounds like a lot. It certainly is as it’s the product of your 35 years of living. But if you feel insecure investing those assets now, how will you feel in xx years with a 1-2 million portfolio invested in the market? At one point in your future the daily fluctuations of the stock market will be much bigger than your monthly savings rate. Closer to retirement those daily fluctuations will be as big as your savings rate of a whole year. Stocks are risky and without pain there is no reward. You have to feel the pain and embrace it as it will make you the person you need to be in the future.

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And who says that you would have invested right at the bottom? :slightly_smiling_face:
There were so many reasons to believe, that it could very well go down even further. There was no way to forsee the immediate bounce back after April.
So maybe you would have waited another 12 months, only to buy at a higher price than before the corona-crash.

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