Julianek's journal



Ok, I guess then investing in bonds is better option. I have only objections about bonds, as interest rates will gonna rise soon, as inflation is slowly but steadily growing. Thus it seems that it would be better to find something else for “safe 20%” than bonds. But I don’t know if there exists anything like that.


It accelerates the demise of your portfolio. Let’s say you have $100k own capital and borrowed $100k to buy in total $200k worth of stuff (max of what you can carry overnight). A 20% drop in a single day (black Monday was -22%!) would mean a 40% net loss to you. To recover from it, you’ll now need a whopping 66% gain… And what if it happens a couple of times in a year - 2008 had seen an annual drop of about 40%, it’s a very recent history

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Thanks @hedgehog for the explanation!

By the way, do you have any alternative to government bonds? It seems that government bonds will suck during coming years: inflation growing -> interest rates growing => bond prices/yields go down. Are corporate bonds better option for inflation-protected money equivalent in the current economic environment?


It’s pretty hard to find safe-haven assets that don’t suck these days. But if you don’t have any, you won’t be able to buy low in next recession. Maybe gold and cryptocurrencies?

You could also in some sense consider pension fund and job as bond-like assets, just very illiquid and special. You can cash out pillar 2/3 by moving out of the country or taking up self-employment, and job - you have some guarantees from unemployment insurance on getting paid for 2 years if you stay in swiss job market

They tend to go down together with the stocks, especially high yield.

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Ist’s tricky with bond. If the rate rise, the value should go down. But if interest rate rise, more money will flow from stocks to bond. So short term mixed duration bond may not even suffer so much because of all the extra money flowing in.
I have to search for it but I saw a chart of the 60s or 70s where rate were really low and when they increased the value of bonds was almost unrelated. Because with higher rates, bonds​ were more attractive. So they are not so easy to anticipate, particularly broad index fund. And you have to add the currency effect on it. Really tricky.

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This isn’t how bonds work

Bond prices are directly related to yields, it’s a simple mathematical relationship: cash flows are fixed, the more you pay for them, the less is your return/yield. And yields are related to prevailing interest rates on the market - this is basic economics: if rates rise why should someone buy your low yielder for the same price you paid when they can get a better bargain elsewhere now? You’ll have to lower the price to make its yield match what’s offered on the market for similar bonds, if you were to find a buyer. And vice versa, if rates fall, its higher coupon becomes more attractive and it appreciates in price.

The longer the remaining maturity, the more sensitive prices are to rates changes, as there’s just more future interest at stake. And you always have the option to hold to maturity, pocketing exactly the yield you’ve bought it at, or less if issuer defaults; and this is exactly what index funds would normally do. They only need to trade when money flows in or out of the fund or to reinvest when principal is returned.

Bond market is, like, an order of magnitude bigger than the stock market, influence will be not as big as you think, and it will actually also propagate to the interest rates due to arbitrageurs

More generally, there’s inflation risk - with bonds you’re buying fixed return in a particular currency. In 1980s US bonds paid almost 15%, which is in hindsight a very good rate, but inflation was also high. If things would get out of control and a higher or hyperinflation ensued, you’d be glad to hold on to some real assets like stocks and not worthless fiat money created out of nowhere by central banks left and right even today

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Bonds: yes, no, maybe?

I agree and I know how it works.

But an aggregate index of bonds != from pure bond. The mathematical transformation apply for pure bond, not for index of different bonds of different grade and maturity.

There are a couple of good chart here, not only about the 80’s but about the 50-70’s to. Is not always a given that an increase in interest rate means that bond index fund crash:

Is just market timing. Prepare you investment plan, and stick to it, and cancel the noise.
With currency effect I meant that if interest rate rise for Switzerland, then the franc is even more attractive and this has all kind of impact on our export/import. We are using interest rate to try to devaluate the franc, not to boost the stock market. So it doesn’t follow the strategy of the Feds.
But I’m sorry we are hijacking Julianek’ Journal :slight_smile:


Funds are just sum of parts, exactly same math applies, it just gets more diversified. The more long-term bonds a fund holds, the more sensitive it is to interest rate changes. On the graphs on your page the drop isn’t very visible because the rates start at 6% there, so there’s some baseline profit that would have been made either way - $10k are guaranteed to turn into $16k+ over 10 years of holding

Here’s a better illustration of how bond funds crash - TLT, which is exclusively long-term US treasuries, and the recent history where interests are much lower

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Yet, from the moment that article was written (5 years ago) bond index like AGG returned 2.27% annually. More than US cash on the sideline, and slightly more than inflation (1.8-2%)
You can call it whatever you want, but deviating from your Investment Plan because of some feeling that interest rate “must rise” (5 years I’m hearing this) is still market timing.
Which is ok if you acknowledge it, and accept the consequences. But is not the “truly” passive way of investing that focus on IP and cancel out the noise. And, again, that’s fine if you are fine with it.
But the usual plan (stick to an AA, like 80% stocks and 20% bond), invest automatically and cancel out the noise, that’s what Bogle is about, and for most people that would be fine and much better than what they are doing today.

I’m going to open a thread about bonds!

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Hi @Julianek, thanks for sharing the numbers. It’s really great to have the perspective of other guys heading towards financial independence! I am Polish, also living in Zürich. You wrote that you moved in from France to Switzerland, so I assume you are French. For me, when I moved from Poland to Switzerland, it was also a huge boost in my monthly savings. Suddenly, FI at age 40 seemed possible. :wink:

Anyway, keep the updates coming. Maybe I will also share my numbers to motivate others. I’m hesitating, were you not afraid that someone would link the facts and recognize you and suddenly they know your how much you earn and how much you have saved?

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I thought about this in the past. I realize that I don’t have any money tabou, so I don’t care if people know my financial position. The only question that was pinching me was “What if someone from work recognizes me?”
And then I realize that :
-If this person from work is on this website, then we have most probably the same mindset
-And if this is not the case, and from some reason I would be denounced to my bosses (highly improbable), I have FU-money stashed anyway, so I would not be in a dire situation…


It’s not actually a secret in Switzerland by default - you can ask the tax office for last reported income and wealth of anybody, so long as he hasn’t specifically instructed them to block this data from the public


oO thats an interesting fact


That’s interesting. Can you really do it? No questions asked? Will the person who is getting checked get informed?

But usually nobody will go through the hassle to check up your wealth if you’re inconspicuous. But if you share this information with the people who know you, they may become envious. Many people go month by month spending all their salary. The only way they could accumulate any wealth is by a fixed-time mortgage. And if the wrong people find out, they may to rob you or con you (I admit that I might have watched too many movies).


Ok, I searched for it, looks like something recently changed and it’s not a default opt-in anymore. But a few years ago it wasn’t like that and I had to fill special form when registering with Gemeinde to request to block this data from the public.

“Die im Steuerregister aufgeführten Werte unterliegen ab dem 1. Januar 2016 dem Steuergeheimnis”



Looks like it may vary by canton, here this link says the tax data was public in ZH, BE and a bunch of other cantons at least as recently as 3 years ago


August 2017 Update :

A lot has happened since June. Biggest news : We are expecting a baby! This made us reconsider a lot how we should structure the family finances. In particular, the FIRE project is not only mine, but the whole household’s from now on.
So Mrs Julianek is onboard as well now, even if this implies a lower average saving rate.
We decided it would not make any sense if one retires entirely while the spouse is still trimming in the rat race.

Thus we made a combined „Income Statement“ for 2017 so far :

A few remarks :
-We expect to spend on average 1564 CHF/month per person this year, which makes 37,5k CHF/year for the household. If we want to retire, that would require a Net worth between 938k CHF and 1,2 Million CHF, depending if the Safe Withdrawal Rate is 4% or 3%.
-This depends a lot from Taxes/Social contributions! As you can see, we pay currently more than 10k CHF of taxes and contributions per year. Our investment strategy relies so far on capital gains, on which we are not currently taxed.
We could expect to not be taxed anymore during FIRE. However, if the tax authorities consider that for some reason we are „professional investors“, then we will need to pay a lot more in taxes : we would need anywhere between 250k and 330k CHF more in net worth :pensive:

Where things are likely to get better financially :
-Finally next year we won’t have to pay former French Taxes again! This should go away from our budget.
-I have a legacy healthcare insurance that is far from the cheapest option available : I will switch this year to the cheapest one.
-My wife has found a part time job as a music school teacher! This should allow for more revenue :smiley: So far she was doing small jobs with kids, mainly in order to learn german.

Where things are likely to get more difficult financially :
-Obviously, the baby :grinning:. I have a hard time to estimate how much costs this will add, and we will have to adjust our budget next year. However, we are decided to not follow the consumer craze for baby related items : we already found a free second hand crib, and we plan to use cloth diapers and to breastfeed.

Any suggestion to optimize further is welcome!

Net worth :
A good progression since last time, our net worth is now at 172 900 CHF!

Books read since last time :
-How to win friends and Influence People, by Dale Carnegie: the title is cringeworthy, but the content is great! I had seen this book recommended a lot in the past, but never bothered to read it. That was a mistake, there is lot of value in this book, especially for an introverted person like me.
-Influence, by Robert Cialdini : This is a marvelous book. Surely in my top 10 so far. Cialdini manages to explain all the main bugs in our brain and how sales people take advantage of it to make us comply to their requests. Brilliant.
-Pebbles of perception, by Laurence Endersen : how a few good choices make all the difference
-Margin of Safety, by Seth Klarman : a reference in value investing, and a lot of wisdom in this book!

-On the origin of Species, Charles Darwin
-Guns, Germs and Steel, by Jared Diamond : a very interesting inquiry into how humanity and civilisations evolved and why Europe managed to conquer the whole world.
-Sapiens, by Yuval Noah Harari : same as above, but covering a wider timeframe.

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I also looked again at the maths used for personal finances. Let’s consider the following :
My initial capital is C0.
Each year, my savings are S and my average annual return is r%.
Let’s define C(n) by the Capital I have at year n.

Obviously, we have
C(0) = C0
C(1) = (1+r)*C(0) + S

C(n) = (1+r)*C(n-1) + S, because each year i gain r% of the capital I had the year before and I saved S as well.

We can prove by recurrence that C(n) can also be written:
C(n) = (1+r)^n * (C0 + S/r) - S/r
Which is more practical to solve equations!

Time needed to reach FIRE :

Now, let’s say that we want to reach a target capital T after N years. What would be N?

C(N) = T = (1+r)^N * (C0 + S/r) - S/r

Solving for N, we find :

N = ln((T +S/r)/(C0 + S/r)) / ln (1+r)

In my case, with the following parameters :
C0 = 172 900
r = 10% (let’s hope!)
S = 84 924 CHF
T = 953 220 (if we assume a 4% SWR)

I find N = 5.95 years. Which is quite good!

If I change my SWR to 3% to have a target T = 1 258 251 CHF, then N = 7.59 years.

So it looks that we should be able to reach our target before being 40! Good news then, even if it is only a mathematical model and a lot can happen in-between (especially regarding the value of r parameter) …

Tipping point :

Another value I find very interesting is what I call the tipping point : It is the moment when your revenue from your investments are equaling your savings.
When we reach this point, it is clear that we are very close to FI or already FI.

Let’s translate that into an equation. At tipping point moment,

r * C(n-1) = S with n = Tipping Point
we replace the value of C(n-1) to get to :

r* ( (1+r)^(n-1) * (C0+S/r) -S/r) = S

solving for n, we get :

n = 1 + ln( 2S/(S+rC0)) / ln(1+r)

Using S= 84 924 CHF, C0 = 172 900 CHF,
If r = 10%, then tipping point = 6.32 years
If r = 7%, then tipping point = 9.27 years
If r = 10%, then tipping point = 5.18 years

Let’s see in future posts if these indicators are reliable!
(and sorry in advance if this post was too geeky for some readers… :smiley: )

Unrealistic savings goals

Awesome! Congratulations and welcome to the parents club!!! :slight_smile:


Congrats Julianek! And may you guys have an easy pregancy :slight_smile:

If you’ve got Lidl and Otto’s close by you’re pretty much set, won’t really have huge expenses at first. My wife always gets diapers and wet wipes that are on sale from one of these stores and it’s actually marginally cheaper than buying in DE/FR. Also look for used stuff on ricardo, sometimes you find real gems there.


ps.: also don’t buy too many clothes of the same size for the first 3-6 months. we’ve got twins and we barely needed 3 sets of bodies (per kid) during that timespan. kids grow very fast in the first year. we learned to sort of wing it :smile: