Hi, I’m 25-30 years old and was a while back sadly in the position to inherit some money (~450k CHF). Up to now, it was managed by a Swiss bank with high fees and relatively low return. I started looking into self investing and found the MP I now made an Interactive broker account and put myself a portfolio together and would like to know your feedback on the portfolio and my ideas before pulling the plug on my old bank.
20% Cash on a savings account with some interest rate (maybe some day when interest rates go up: CSBGC3 (iShares Swiss Domestic Government Bond 0-3 ETF (CH))
14% ESGV (Vanguard ESG U.S. Stock ETF)
14% AVUV (Avantis U.S. Small Cap Value ETF)
25% VSGX (Vanguard ESG International Stock ETF)
18% AVDV (Avantis International Small Cap Value ETF)
9% EMCR (Xtrackers EM CarbReduc&ClimtImprvs ETF)
Some explanations on my thoughts when building my portfolio: I wanted some ESG criteria in my portfolio, this are the reasons for ESGV, VSGX and EMCR. In addition to that, I was also inspired by the factor investing strategies of Ben Felix from youtube, which also already was featured here in the forum. The small cap Value ETFs AVUV and AVDV together make 40% of the Equity part.
I also wanted to get somewhat closer to a GDP weighted portfolio rather than a pure Value weighted, because I think 60% US stock like eg VT offers seems like too little diversification. Because of this the Equity Part contains 34% US Stocks, 46% Developed ex-US stocks and 20% emerging markets. (VSGX contains 26.8 emerging markets with the addition of EMCR I arrive at the desired value). Is the EM Part too big? The US part too small? The small Cap Value paort too big? I’m not really sure and looking for opinions.
Save up for a mortgage?
Because I might want to buy an Apartment or a House in ~5 years I’m planing to increase the cash/low-risk-CHF part every year by 2% to 30% in 5 years. In this way, I’m not too dependent on a good market situation when I require an estimated 200k for a mortgage payment. Do you think this is a good Idea, or would you do something differently?
2nd and 3rd pillar
Since I mostly studied up to now, the 2nd and 3rd pillar are currently negligible in my portfolio. However, I’m planing to invest monthly ~500CHF in the portfolio and I will have to start taking them into account when rebalancing.
I also have some random questions which I gathered on my search journey:
Interactive Broker 500k insurance limit
What do you do, when you reach the 500k insurance limit from interactive brokers? Do you just take the risk and hope IB stays afloat, do you transfer some Equities to another Bank or something else?
Do I need Home Bias?
I have no home bias in the Equity part of my portfolio, I only have some Swiss shares in VSGX (I know this is not tax efficient for Swiss shares, but they only make 7% of the ETF) I also haven’t currency hedged anything. I read that currency fluctuations are expected to be much smaller than stock price fluctuations and I think that there is no reason to increase costs to prevent a minor fluctuation in an asset where I’m ok with it having fluctuations as long as it is expected to rise in value. However, I have my home bias purely in the “risk free” part of my portfolio. Is this enough home bias? I feel like I missed something, because I’m reading everywhere about home bias from 20% to 50%. I don’t really understand why, since this is clearly a bet on the home market doing better than the world (or at least that it will not suck). In addition, the value of the large Swiss companies with international focus got corrected when the SNB lifted the CHF Euro corrections so that no advantage of holding them over non-Swiss companies. However, as I already said, I feel like I missed something, and maybe you can help me in finding what I’m missing.
Irish vs US ETF for International and emerging markets
In my portfolio I have only US ETF. For me, it is not clear if they are better regarding the tax situation and TER over Irish ETF and I could not really find any good material on this. Interestingly on my research I found that the few US ETFs on emerging markets tend to have a higher tracking error than the European counterpart(EG VWO vs VDEM). However this might only be right now, with the crazy situation in Russia or just the volatile markets. At least some vanguard funds performed even better than the benchmark over the last 15 years so its probably not a systematic problem. But I might be missing something here.
Thank you very much in advance for taking time and giving me Feedback