Personal Rules for Long-Term Investors

Investing / Others
1

I make decisions like these only once a year:

  • Choosing the right broker
  • Choosing an ETF provider
  • Selecting my Pillar 3a provider
  • Deciding how much debt I’m comfortable with
  • Other major financial decisions
  • and so on …

That’s a personal rule for me.

Until then, I just collect my thoughts in a to‑do app. Why am I writing this? I’m surprised by how many people want to switch to the new Vanguard ETF RIGHT NOW and can’t wait. But this thread isn’t supposed to be about Vanguard, it’s about the question, do you have a similar rule?

When I look at my thoughts in the to-do app, I come to the conclusion that, without this rule, I would have changed my strategy several times already this year.

3 Likes
2

Interesting, have you defined what factors would make you change these? Seems a lot of decisions to regularely re-evaluate?

I wrote down my goals and believes and the derived allocation strategy and implementation guidance- investment policy.
A rule that helped me not jump to quick on new shiny things is a 30day cool down period. I cannot do any changes to my portfolio before 30 days of waiting. And if i do the investment policy must be officially adaptefd to reflect that change and how it aligns with said policy.
Helped me avoid some bad (in hindsight) quick shots..

2 Likes
3

In the long run

There’s still time to change the road you’re on

1 Like
4

No.

For one a year? That’s max one afternoon.

It’s not that I absolutely have to re-evaluate every piece in detail. It’s more like: I’m only allowed to make changes once a year and i have to wait until the time comes. The things I want to check out are piling up in the Todo app, so I already know what I want to check. For example, 3a: I don’t currently plan to change anything. ETF: I want to switch the provider, but i need to evaluate this first.

That sounds reasonable, too!

5

I have some rules:

  • Minimum 5 year holding period for a stock.
  • No more than 1-2 stock buys per year.
  • 50% savings rate maximum. Spend some!
  • Minimum 50% world etf allocation.
  • Don’t touch 2nd/3rd pillar. I also don’t count this towards wealth. It is money that will be needed to fund retirement.
  • No debt besides mortgage.

These rules combined already reduce number of necessary decisions.

5 Likes
6

My personal rule is wait for at least 3-4 years before selling an existing ETF position to switch to another ETF with lower TER%

For example I bought SSAC in past and now there are cheaper options , so I don’t buy new positions but I also don’t sell old positions.

Thing is every other month something new is launched. How long I keep switching

3 Likes
7

I’m giving myself leeway to adapt whenever I or the situation as I assess it change.

I like to keep in writing the reasoning behind my current setup and re-read and ponder on it before changing anything.

My current assessment/setup is:

Risk assessment

Need to take risks: high - I want to amass as much money as I can to exert the influence I can on the world around me.

Ability to take risks: high - I’ve got a good network that provides a safety net, Switzerland has a decent social net and I have no dependents. I have a poised personality, am not prone to panic and can take a higher view when things crumble to take a calm decision as to how to move forward.

Willingness to take risks: high - I enjoy gamification, theorycrafting optimized returns and getting actual data to pit my theory against.

Investing objective

Maximizing returns on the longer run while managing the risk of total collapse. Use leverage as appropriate to reach that.

Investing outlook and activist objectives

Not invest in the countries I don’t trust: no USA, no China, no Russia.
Support the European industry: prefer European brokers, fund/derivatives providers and exchanges.
Avoid unnecessary risk of being seen as dodging taxes: pay some taxes on my investments, avoid vehicles allowing to reduce that to near 0.

Setup

Choice of broker:
Access to cheap margin rates, derivatives regulated by European entities, low-ish fees, preferably European → Saxo

Choice of assets:

Using leverage:

All assets at the same exchange to avoid mismatching trading hours or holidays in case partial liquidation is needed, matching bonds and loan currency if applicable, ideally a mix of stocks, gold and as long duration as practical bonds, backtested to resist bigger drawdowns and offer top leveraged expected returns (my way of assessing it is very amateur, I’m fine with it - it’s my risk to take).

Current:

108% EXUS, -8% CHF.
Leverage increasing in case of drawdown (no rebalancing on the way down, new investments at an adjusted leverage ratio taking into account the drop that has already occurred), must be able to sustain an unlevered 84% drawdown (the fall in USD of a simulated S&P500 with dividends reinvested during the Great Depression) without the need for additional funds or rebalancing. I’m fine with not taking additional safety margin above that because I expect the CHF to be a bit more stable than the USD in 1929-32 and I expect being slightly more diversified by having exposure to more markets and countries.

2 Likes
8

Whenever I feel like changing my asset allocation, I create a todo item to prepare things (which was due in 3 months). At this todo, I then set up a backtest and model the impact in my Investment tracking Excel. This is painful work, so I only do it if I after these 3 months still feel like changing things. Post this, I set myself another date for in 6-12 months (depending on the magnitude of impact). Once this todo was due, I evaluate the backtest again and only if I still belief in it, I act accordingly.

Exceptions is like for like change in ETF where I simply stop buying one and go for another instead (but unless earnbacknof transaction cost below 3 years, I don‘t switch). The other exception is third pillar. There I have a bunch of fully passive viac account that I use as a benchmark, and another (small) one where I keep tinkering with the asset allocation (not % shares but regional mix, hedging, …). This to satisfy my tinkering need without putting my savings ar risk (its a tiny Portfolio) and as I there keep benchmarking that Portfolio against my fully passive ones.

1 Like
9

What is the main purpose you accumulate wealth? Isnt that also for (potentially early) retirement and or optionality (financial independence)?

10

An interesting topic.

I often wonder about the strategy I’ve adopted for my investments. For instance, I’m very happy with my choice of 3a providers (4 accounts with VIAC, 1 account with Finpension). However, I’m considering closing one or the other to have just one provider for simplicity. But for now, I don’t see the point in doing it, so that probably won’t happen in the coming years. However, I’ll ask myself this question several times over the course of a year.

Another question I often ask myself is whether to switch my main ETF. I’m very happy with VT, but for the past 1–2 years, I’ve been hesitating to sell my entire position in it for a UCITS ETF, specifically the VWRL. Now that VALL is available, I plan to make this switch next year. I have no problem waiting several months before taking this step, since I’ve decided to stick with VT until the end of 2026.

Generally speaking, I don’t have any strict personal rules regarding my investments other than this one: keep saving and investing those savings, find trustworthy and reasonably priced providers, and stick to my defined asset allocation (which differs between my 3a account and the stock market). Stay informed about new products coming onto the market (new banks, new 3a providers, new brokers, new ETFs, etc.).

3 Likes
11

Thats why its called VT (or now VALL) and chill :slight_smile:

13

Care to explain for this change ?

14

Yes, of course!

I had no qualms about investing in a U.S.-domiciled ETF, given the existence of the CH-US CDI, which allows you to invest several million in U.S. financial products (ETFs, stocks, etc.) without having to deal with the IRS and its estate tax. The fact that I could also recoup the 15% withholding tax on U.S. dividends through a tax credit was another advantage that convinced me to invest in VT. However, I wondered what would happen if I were to pass away and my family or wife had to deal with U.S. authorities to claim my “inheritance.” I sincerely believe they wouldn’t know what to do, and that it would become more of a hassle and a source of stress to have to hire both a Swiss and an American lawyer to settle my estate. This is therefore one of the main reasons I’m switching to a UCITS ETF. The second reason is that I don’t see much of a benefit between VT and VWRL (now VALL), even with the 15% dividend refund. Depending on the canton, no refund is issued at all. The canton of Vaud is particularly strict, for example. I’ve had fewer issues in my current canton.

The final reason is that I’m becoming increasingly wary of the U.S., particularly this administration. I’m also considering transferring my ETFs to a Swiss provider and perhaps closing my IBKR account in the coming years.

After all, I’m a lawyer, and I know what it’s like to have to confide your problems to a lawyer. While the lawyer may not be particularly stressed, since they’re simply doing their job, which is to help the client, the client is often very anxious, even if they don’t show it at first. I remember very well several clients who were particularly at ease with me and my supervising attorney during meetings at the firm, but who, once they stepped through the courthouse doors, waiting in the waiting room and facing the judge and the opposing party, became extremely stressed. I also know that the longer a proceeding drags on, the more anxious, stressed, and irritable clients become. Of course, I’ve experienced this in the context of family law, particularly during divorces. But I think this is true in many types of proceedings, especially when money is at stake. All of this makes me not want to put my own family through that :slight_smile:

Of course, my choice and my reasoning may seem a little “paranoid.” But that’s how I feel right now, given my current psychological state and my current experience of my short life.

9 Likes
15

Thank you very much for your comment. I am not a lawyer, but I also work in a field where clients go through huge problems and are under massiv stress. For me it was a no brainer, reaching a certain size in my portfolio, to hedge against this risk. R/R is clearly even better now that we have low cost VALL at low cost Broker in CH.

1 Like
16

For the record: my life situation has changed and I have sold a bunch of stocks to have the cash cushion needed to absorb my short term needs (which include amortizing a small mortgage).

As I have cash on the side as a result of it, leveraging my remaining stocks doesn’t seem to make much sense to me (I’d keep less cash and not lever them if I could afford to take more risk).

My ability to take risks has evolved: moderate - I need to be ready to face an extended period of time without employment. I’ve got a good network that provides a safety net, Switzerland has a decent social net and I have no dependents. I have a poised personality, am not prone to panic and can take a higher view when things crumble to take a calm decision as to how to move forward.

2 Likes
17

Do you mind telling us more about why and how your finances need a change? Just bc of the amortization or other things?

18

Mostly amortization: I have started a new job, haven’t gone through 3 months of it, will leave before the end of the probation period and have a mortgage due for renewal in November. I don’t want the mental hassle to not have the ability to fully amortize it if the banks start being difficult.

Also, I’m leaving my job due to once again coming to the realization that my bosses don’t have the first clue about efficient team management. I may not be so eager to get back into employment and want to have the ability to pursue personal ventures if I go for it, so I want to have a full year of minimal expenses (36K) on the side + a 20K aside for potential expenses I might have linked to my ventures (stuff, travel, software, …).

9 Likes
19

I see and understand your decision, sounds wise to me. Hope you will find your way. Did you think about being employed part time and grow your own thing on the other side? Unless you need a real break, I think it could offer you more security and even possibility as you stay connected in your field.

1 Like
20

Currently evaluating what kind of jobs I could do at, say, 60% without a combination of high responsibilities and micromanaging bosses. I’m pondering opening a thread on it but suspect it wouldn’t be that productive. I’ll sleep on it through the weekend and reassess next week.

Edit: as an aside, this is a benefit from being on the path to FIRE (or getting a windfall while having a FIRE mindset) even when not having reached coast FIRE yet: I have enough assets and low enough needs to not feel stressed about doing what I actually want and not having to take orders and management I can’t stand.

Edit 2: another benefit from the FIRE mindset is that I’m motivated and eager to set a way to bring cash in in order to free more of my safety cushion for investing.

3 Likes