Investment dilemma >> Real Estate vs ETF?

Share your story
21

I like a 50:50 approach when starting out:

50% lump sum (probabilistically superior*)
50% DCA over 6 months (psychological safety net)

If at any time you feel the urge / confident to throw the rest in (which might happen if the market continues to go up), just throw the rest in.

“*” ETA: Historically lump sum is superior in about 60% of cases and DCA over a certain length about 40% or 2/3 vs 1/3, something around that.
Don’t sweat it though, as long as you invest - time in the market beats market timing, so lump sum or DCA to start out won’t matter much in the long run.

4 Likes
22

In my opinion, the time frame is too short to tell. Do whatever you are more comfortable with.

You could invest all at once and be annoyed if the market tanks the next day. You could carefully spread it out over months, miss the gains in the meantime, and once it’s all invested… the market tanks the next day. :woman_shrugging:

That’s not to scare you off, it’s to promote a buy and hold mindset and not worry in the meantime.

Take the bright side. You do have a lot of other assets, and while 200k is a significant sum for most, it’s a yearly saving for you and you could easily sit out a bad scenario that may or may not happen. Warnings about corrections have been there as long as I can remember :roll_eyes:

3 Likes
23

You are probably aware of public mood in France turning almost hostile vs. ‚the rich who can afford secondary homes‘ who then ‚withdraw housing from tight local rental markets‘ turning them into ‚Airbnbs for affluent tourists or expensive furnished rentals‘.

In line with the above, taxes for owners have steeply increased, both fonciere and habitation. The latter was supposed to be eliminated, instead, now any commune within a remotely attractive area is eagerly levying up to 60% surtaxes on it. More action may be to come. So, the idea sounds quaint, but…

24

I couldn’t bring myself (psychologically) to lump sum invest, but as pointed out by @Moustachienne it’s probabistically superior.

Also, check out Ben Carlson’s What if You Only Invested at Market Peaks?

25

Personally I prefer liquid investments like our index ETFs to RE (and my reasoning is very similar to Mirager‘s).

And if you do decide to go the ETF route, I don‘t see how the difference between 2k or 20k available cash a month should influence the investment approach, especially if you expect the cash flow to remain constant for the years to come.

Any concerns of volatility are no more valid than for someone who invests 2k a month and for whom this all their excess cash, but this is something you just have to assume beforehand as an inherent aspect of investing in the stock market.

26

First congrats on your great revenu stream and managment.

Do 100% option 1 ETF tracker ! Unless you have a insider tracker record in real estate investment, don’t do RE even in Paris ! If i may guess it could sound like something Ego driven. Put that far away from your money.

Don’t do Tax reduction s*** with “Fake” present form the governement which is even more killed my cracked managment fees on top of the cake.

My advice would go for :

  • SP500 50%
  • MSCI World 50%
    They will do the job perfectly for you with close to 0 risk with almost 0 fees.
    Bonus : add 10% in Bitwise Bitcoin ETF, if you can stomach a little more volatility.

This will work no brainer, peacefull of mind and NO tax on capital gains !
Best regards.

1 Like
27

With your investable income I’d rather call it luxury of choice than a “dilemma”.

That’s “fake” (or an illusion of) diversification.

Why fake diversification - when you can just go all in, on what you obviously want to bet everything and the house on anyway?

5 Likes
28

Stock investments are definitely not close to 0 risk…

2 Likes
30

Did not understand your quote sorry.

31

If you have a long term horizon (+20years), DCA on ETF not “stock picking” is the safest bet or by far the best R/R. Bank account is Way riskier.
Prove me wrong and I would be happy to follow your better proposal.

32

That may be true, but that’s not the same as “close to zero” risk.

Just one example, you invested 100k in a largely diversified ETF in 2007 and then 2008 arrives, you lose your job and need the money to cover expenses and your car breaks down at the same time, you need 60k overall, but your ETF is only worth 40k due to the financial crisis. The same money on a bank account would have grown to 103k, not much, but definitely less risky than the stock investment.

In 2009 you would have recovered stock investments back, but people tend to act irrational and many people sold all their stocks out of fear in the financial crisis, or may have been forced to sell at the worst point.

I’m not saying anything about the particular situation of OP, just stating that stock investments are not close to zero risk.

33

They certainly mean your focus on the US/S&P 500. As 70% of the msci world is the s&p 500 already.

So you have 30% of 50% in something other than the s&p. That‘s 15% or barely anything.

My opinion:
Either buy only s&p if you want to bet on the US (I would not recommend that, especially looking at current valuation)

Or buy only msci world.

The latter is already extremely concentrated in the US, but you actually have some diversifcation there.

1 Like
34

:point_up_2: This.

You can just as well simplify and bet everything on the S&P500.
Probably more tax efficient as well.

1 Like
35

Both.
Each can outperform the opposite side of VS, under specific conditions. So there is no clear winner.
Whereas…
‘=’
makes it working for you under every condition.

36

Hello everyone,

Post some thoughts (partly nurtured by this topic), I think we will not proceed with another real estate investment in the short-term.

As a result, I will initiate a series of investments in a S&P 500 tracker. I’m swiss fiscal resident and using SaxoBank as brokerage platform.

Any specific tracker / ISIN code that you could advise in order to achieve best net performance? (Post tax)

Thanks in advance !

37

For ISINs tracking S&P 500

Ticker - VOO ( US9229083632)
Most tax efficient and cost efficient ISIN for Swiss residents for exposure to S&P 500.
Assumption - you are able to claim full DA-1 refund. Some tax payers due to their mortage etc cannot get full refund and hence advantage reduces.
This option has higher tax efficiency for dividends but it subject to US Estate tax jurisdiction.

If you seek UCITS version in order to avoid jurisdiction of US Estate taxes or for other reasons.
Ticker - SPY5 (IE00B6YX5C33)
This option has lower tax efficiency for dividends but it is not subject to US Estate tax jurisdiction. Comparison for dividend tax efficiency for Swiss residents below

VOO SPY5
TER 0.03% 0.03%
Dividend yield 1.35% 1.35%
Dividend yield after US WHT 1.15% 1.15%
DA-1 refund 0.20%
Effective Taxable yield 1.35% 1.15%
Post Tax dividend yield
Case 1 -: 30% Marginal Tax 0.95% 0.80%
Case 2 -: 40% Marginal Tax 0.81% 0.69%

Two comments

  • I am assuming your decision to invest in S&P 500 is not driven by historical returns and are driven by your conviction about future returns. If not, then consider regional diversification. Ben Felix S&P 500
  • Brokerage -: Saxo does not allow buying US domicile ETFs for standard investors, you would need to sign a waiver. Please check upfront with them. IBKR & Swissquote allow US ETFs to standard clients. IBKR, Swissquote, Degiro, Saxo and more brokers allow UCITS ETFs
2 Likes
38

Even more tax efficient than SPDR is Invesco S&P500 as it replicated the index with 0% US Witholding tax and has a TER of 0.05%

39

Sure
I didn’t mention this because this is a „swap based“ ETF and not physical holding of stocks.

In my view swap based ETFs are like derivatives. But sure for some it doesn’t make any difference, so for them it should be fine

40

I think stock volatility is not a big deal here if current portfolio is $0 and you put $200k in and it goes down 50% to $100k, then next year you can average down and put in another $200k and you’ll have $300k in the market and decades left for it it compound.

41

They have some indirect cost in form of a swap fee though. It‘s something along the lines of 0.1% afaik