Dear all,
I’m back with an updated plan following the excellent advice I received from so many of you. Thank you again!
The main points raised were:
1) Real estate should be included
This was a very valid point. I agree that the recurring rental income I’ve specified is tiny compared to the value of the asset, because it is not really included yet. However, we are currently waiting for:
- an updated valuation of the commercial property,
- an estimate of the required future maintenance investments, and
- the outcome of the upcoming multi-year lease renewal with the current tenant.
Given these uncertainties, I’ve left the real estate out of the current plan for now. We’ll evaluate it separately once we have all the necessary information (we may consider selling it).
2) The two-pot strategy received good feedback from most
Noted on the point that the withdrawal amount is small compared to the total portfolio size, hence the set-up may be more complicated than it needs to be, and potentially a 100% stocks approach could work. However, I think this is the right approach for my parents. They like the idea of having a separate, more volatile investment pot that they don’t need to monitor regularly. It will provide them with peace of mind, knowing that they are not all-in on stocks only. I’ve complemented it with the cash / liquidity pot now, because as @Wolverine pointed out, there will be higher cash needs in the coming years that they need to plan for.
So here is the final plan (3-pot strategy):
Pot 1: Liquidity
Designed to cover cash needs for the next 3–4 years, which will be elevated due to higher tax bills because of 2nd Pillar withdrawal, and real estate investments.
Allocation:
- 30% Cash
- 70% Short-term bonds (if worth the hassle, I need to look into it a bit more, otherwise all in cash)
Pot 2: Retirement pot
This pot will fund all recurring living expenses. I’ve increased the target size to CHF 2 million, which should comfortably cover their spending and theoretically never run out.
Draft allocation (something like 65% equities / 35% bonds) could look like this
- 55% Global Equity ETF (MSCI World)
- 10% Swiss Equity ETF (SMI/SPI)
- 25% iShares Core CHF Corporate Bond ETF
- 10% Swiss Government Bond ETF
The Swiss equity allocation may still be somewhat high, and the exact allocation may in any case not be fully replicable depending on which RoboAdvisor they choose.
Provider options
I’ve excluded True Wealth, even though my parents have been happy with it so far, because it doesn’t allow the level of portfolio customization I’m looking for. They include unsuitable US bonds for the bond portion, as @gaijin helpfully pointed out (thanks!).
For Pot 2, we would prefer a robo-advisor that automatically rebalances the portfolio and makes tax reporting straightforward. As several people pointed out, convenience is probably more important here than achieving the absolute lowest possible cost.
Current candidates:
- VIAC Invest: 0.25% management fee + product costs (TER), VIAC investment products available
- Finpension Invest: 0.39% management fee + product costs (TER), using their standard 60/40 strategy, standard products available
Let me know if you have any suggestions here!
Pot 3: Wealth growth / Future Generations
A single global low-cost UCITS ETF held with a Swiss broker (they already have Saxo Bank).
I’m waiting for the outcome of the other thread regarding the most suitable low-cost, tax-efficient, and robust long-term ETF choice.
Thanks again for the good advice given so far, let me know if you have any other comments on this plan!
Best,
Frog