Please allow me to introduce myself: the story of Dr. PI

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Hello everybody! I am going to repeat after many newcomers here: it was great to find this forum, I wished I found it 10 years ago. I am pleased to see people thinking rationally about their finances, and in particular people living in Switzerland and exposed to the particularities of this country. Looking forward for interesting conversations and hope to contribute myself.

About myself: I am not so young, have a wife and children, we bought an apartment (not too big, not too expensive) we are living in with a mortgage (more or less equal to our second and third pillars combined, not too high interest). Professionally I stayed all my life in an academic environment, my wife’s job is also not related to profit-generating. With our background we are very good at not wasting money, but not so good in investing it. It does not look an earlier retirement is in the cards for us, but I would like to increase our financial potential.

My financial knowledge is mostly coming from many years of reading cash.ch, which is Swiss- and active trading-biased. But I did learn a lot. Googling for explanations of financial concepts, I often ended up at investopedia.com. I am become somewhat more familiar with index fund investments reading this blog: https://www.etf.com/contributors/allan-roth , which did help me to understand few things better. The last two resources are very US-biased, so I could not find answers on my questions concerning investments specifically in Switzerland. Reading this forum and related blogs helped me to find answers to many questions and to grasp few things I did not even think before.

Here I would summarize these things that I figured out for myself reading this forum:

  1. For a person living in Switzerland, 2nd pillar and (not invested) 3rd pillar money may be counted in some way as secure assets, so, bonds. Before figuring it out, I kept scratching my head thinking about what kind of bond allocation I need and if I should buy bond funds with negative YTM. Now it is clear to me that comparing how much money I can invest in stocks and how much money I (we) have in 2nd pillar and 3a cash, I can go 100% stocks for long time before reaching any reasonable stocks/bonds ratio. So now I have to sell all bonds that I accumulated and use these money to buy stocks.

  2. No currency hedging. Currency hedging does not prevent long-term changes of rates between currency pairs, it just smoothens out short-term fluctuations and incurs additional costs. In fact I compared performance of few index fund classes, which have exactly the same composition but with and without currency hedging to CHF. After few years unhedged classes performed better than hedged classes, even shortly after Frankenschock of 2015!

  3. The trading currency of a fund is not relevant. The “true value” of fund’s share did not change if you recalculate it into other currency. But what important are currency exchange fees if you are buying not in your base currency.

  4. More dividends or less dividends is not important. If a company generates a profit, they can distribute it as dividends, use it to buy back shares or do something else. It does not matter as long as its value grows. Dividends are even disadvantageous because they are taxed more expensively as income as compared to the capital growth.

  5. (A conclusion drawn also from pandemic news) Human brain cannot handle exponential increase :slight_smile:

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I have a feeling I was quite often lucky in my investments.

When I started to have some money left after my monthly expenses, I figured out that I should invest them. I went for mutual funds proposed by Postfinance. Until very recently the depot for funds was free at Postfinance, what is TER I did not know. So, I opened an account at Postfinance and started to buy funds. My first transaction was in November 2008, shortly before the markets bottomed in March 2009. I was all the time buying and selling many different funds without any consistent strategy, but gradually my main investment become “PostFinance Fonds Suisse”, which is basically a SPI-tracking fund with TER of 0.6%. I did not know what is TER, the main reason to hold it was that following SPI I was able to estimate the change of fund’s NAV. So when SPI significantly changed during the day, I was posting a subscription order for the current day. First few years I was buying and selling it, but then came to my senses and did not sell anything since 2013.

Since 2009 I was also paying maximum to 3a. Some years I was looking for 3a accounts with a maximum interest rate. Then in 2013 I started to buy 3a fund at Postfinance (Postfinance Pension 45), then I transferred all 3a money I could move to Postfinance 3a and started to buy Postfinance Pension 75, then in November 2019 switched to Postfinance Pension 100 at its launch.

By the beginning of 2020 I had 70+ kCHF invested in stocks with PostFinance Fonds Suisse and PostFinance Pension 100.

(to be continued)

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Welcome Dr. π,

I’m now curious how your story ends up until today, and what questions will be the end game :slight_smile:

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That is how the story continues. When I think about it now, it feels like it happened ages ago - so much had happened in the world since then, and I also went through many stages of experimenting, learning and reevaluating my ideas about the meaning of investing.

At the beginning of 2020 I started to think that I had already invested too much in the stock markets to just let it go by itself, and decided to be somewhat more active. I already knew what TER means, but until then continued with “PostFinance Fonds Suisse” because I could often invest small amounts with insignificant transaction costs. So, I opened a Postfinance E-trading account with the goal to use market ups and downs to sell funds and buy ETFs.

In the financial media there was quite a lot of concerns about the bull market being running for 10+ years and that soon it might crash. So, I paid more to 3a at Postfinance and invested all 3a money I had at Postfinance to “PostFinance Pension 100”, continued to purchase more of “PostFinance Fonds Suisse”, but at the same time was buying out-of-money put warrants on SMI. SMI went up, I sold my previous put and bought a new one with a higher strike. SMI went up again, I did the same and also sold some fund units to cover my losses on warrants.

On Friday, February 14th, another all times high was marked with love by SMI. During the following weekend I read some very bad news about “the new coronavirus”, I think it was about the fact that it is spreading like crazy in Italy. I expected markets to crash on Monday, 17th, but instead SMI marked another ATH. And another one on Wednesday, 19th, to never come back to this value again (so far, and only because of the dividend deductions). On this day I had 84 kCHF in my two funds. Thursday and Friday markets went down. Monday 24th markets went to free-fall mode, and I finally bought my first ETF (SMI from UBS).

Markets were falling free, SMI volatility V3X was growing to insane values (max 84.xx vs 28.xx in 2008). I don’t think I would otherwise panic and sell all I had or sleep worse than warranted by being in a global pandemic caused by a deadly virus, but it was nice to have those put warrants. My major mistake at this point was that I was selling put warrants that were very much in-money and buying those that were not in money (yet). The reason for it was that I did not do my homework and did not study Black–Scholes model for valuation of financial derivatives, its application to warrants and corresponding Greeks. When I finally managed to study it, I realized that in a falling market I should have held my warrants as long as possible, because the further it goes into money, the steeper is the value increase of a warrant; maybe sell a part of it. So, my tip: if you happen to own put warrants while the markets are in a free fall all over the world, do your home work and study Black–Scholes model before doing anything.

Nevertheless, on March 16th, when SMI reached its bottom and V3X was almost exactly at the peak, I had a highest profit for 2020 to date. I also managed around this date to invest 15+ kCHF in bad and expensive global stocks 3a fund on a 3a account in a big bank. We use it for mortgage amortisation contribution and so I cannot transfer it away. I did not want to buy this 3a funds before, but this was a golden opportunity. One purchase transaction happened on March 23rd, when S&P 500 and respectively all global indices bottomed. I also bought some individual Swiss stocks and CHF bonds. When the recovery was on its way from May on, I was buying and selling put warrants for too long. In June-October I was also doing all kind of nonsense like buying and selling individual stocks, trying to speculate with derivatives. But I was also doing my home work (fundamentals, technical analysis, indicators, candlestick patterns, Black-Scholes model, futures, …) and learning from my experience and, most importantly, finally learned to keep my finger away from the “Trade” button, and decided to focus on index ETF investments. All this time I was also selling my both PostFinance funds on highs.

Meanwhile I figured out that Postfinance E-trading is using Swissquote platform anyway and Swissquote have a very good flat price for ETFs from Vanguard and iShares. I hardly need anything else. So I opened a Swissquote account, started to sell individual stocks and transfer money to Swissquote. Probably out of habit I first went for CHSPI, bought European stocks ETF in Euro, and due to the lack of large picture was also buying some bond ETFs.

I was also looking for a better place to invest my 3a money and came across VIAC. So I sold the rest of my “PostFinance Pension 100” funds on October 13th. During the next 13 trading days S&P 500 dove almost 8%. This time it was not luck, I saw it coming. Then I opened an account with VIAC and send a form to transfer my 3a money to VIAC. Second half of October I was looking at falling indices and wondering if my money will reach VIAC before the investment round on November 2nd. On October 30th, last trading day of that month, markets reached the bottom. My money were still not at VIAC. Monday November 2nd: my money had arrived! And than they even got invested at the same date! Again, I had concerns about safe assets/stock allocation, so unfortunately I did not invest all I could into stocks: from the previous minimum S&P 500 jumped +12.7% and then finished the month with +12%. For December I changed my allocation in VIAC to max stocks, S&P was +3.7% that month.

All in all, I finished 2020 with 167 kCHF in various assets and +21 kCHF in profit. Not sure if this is completely correct though, it was very chaotic and I might have missed something. I was also proud that, besides VIAC rebalancing, I managed not to do a single trade from mid-November until the end of the year.

(to be continued)

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In all honesty, you describe that you are rather susceptible to Mr. Market
Combined with the very high trading costs in Switzerland, I’d suspect the best you could to is find an automatic robo-investor like True Wealth or the others, and on the side have a small portfolio at DeGiro for trading, where you cannot do any harm :wink:

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I doubt that this is true.
Depends of course what you compare it to.

What exactly did you “see”?
All this sounds to me like you are trying out many things, thinking you know what you are doing, and getting lucky or unlucky along the way.

Your profits of 21k with 167k final amount mean your rough growth rate for 2020 was ~14.4%.
Which is in fact exactly the same as VT achieved.
That is - just VT’s capital return; total return incl. dividends was plus another 2.3% - 16.7% overall.
So all your fuss was for not much, and you would be even much better off if you continued purchasing “through the dip” of March.

I see there is a TBC though, so hope all these learnings come to life towards the end. :slight_smile:

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Compared to Postfinance and Cornertrade, that is.

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That news are bad and the price is not going up that steep anymore. Was a good moment to sell, which I had to do anyway. Of course, markets could have gone another +5% next two weeks.

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Yes, exactly. Don’t get me wrong, I am not bragging about my trading gains. Just telling my story how I finally decided to be more “active” (that means, think about what I am doing, not day-trading or so) and it happen to be in 2020. Yes, I should probably have studied more about investing, but it is not what people are talking in my environment and not what you find if you dumbly search internet.

If I would grade my past performance as investor, I would probably give myself “satisfactory”, but only because I did not gamble with all I have. Now USDCHF and EURCHF are running up and I am sitting on a CHF-hedged bond fund, which I should not have bought in the first place. That fund is not exactly drops like a stone, but it is falling.

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The rest is not so interesting, fortunately.

I was not completely satisfied with VIAC (strategies are inflexible, currency exchange mark-up) so I was looking for alternatives and saw a mentioning of finpension. While looking for the review of finpension, I came across this site. Was reading a lot and now I have to rebuild the portfolio. Big chunk of it is 3a money being transferred from VIAC to finpension this month. I also have started to move other 3a money with the goal to deposit them at finpension.

For the broker, I am staying with Swissquote. I perfectly understand that I overpay in comparison with IB, but I feel fine paying up to 250 CHF/year premium for a major part of our family wealth being parked at a Swiss bank. To reduce costs, I also plan to buy only once per trimester using trading credits generated from the use of a digital credit card.

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Thanks again everyone here, you really twisted my mind in the right direction when it comes to investments in stock markets. So far I had a feeling that this is a game and never treated investments as a significant part of our family wealth. Another thing I realized: whenever I was reading about investments, I had a feeling that it was always a portfolio with a fixed starting amount. With time you rebalance it or you just let it run. I think so far not once I saw even a hint that you should continuously (well, at least while earning) add savings to your portfolio and restore balance by buying most underweight assets.

So, why do I want to invest?
To secure future well-being of our family, actually, which is much easier to achieve when you have enough money. We still live in a capitalistic society, and there are seem to be no reasonable alternative. I don’t want a product of our labor, earned and saved through decades, to be eaten away by inflation and zero-interest rates. I don’t mind taxes on earnings, at least in Switzerland and developed Europe in general they are used quite well. But it is nonsense if a wealth tax on an asset is higher that a return on it!

I could have maxed my 3a and paid to my second pillar every year, get tax reductions and repeat it again. It is also compounding! By the retirement age I would achieve a return of maybe 3% p.a, get my 3.5% conversion rate and live fine until the end of my life. But I think I can do better, get a better return on my wealth and leave a significant part of it to my children. So, I want our wealth to at least grow with the economy and, if we are somewhat lucky, thanks to compounding perform long term better than that. That means I want to invest in stocks.

There are also always talks about the death of capitalism and future global catastrophes. I prefer to prepare for a most probable outcome, accumulating wealth for the time when we are old. If money will be useless one way or another, no problem. But I am also not sacrificing our current quality of life for future accumulations.

How do I want to invest?
We have a lot of cash and cash/bond-like assets, as well as an apartment, so I am not talking about these here. When it comes to growth assets, now I am building a basis of our stock portfolio. I want a global, as diversified as possible, capitalization-weighted portfolio. I also want to invest responsibly if the premium is not too high. And I also want to have it as simple as possible considering other factors.

As it is all about security and holding positions hopefully forever, I don’t want additional risks on top of normal market risks. That’s why I prefer to have a portfolio at Swissquote, more expensive than at foreign brokers, but also more secure. Thanks to a flat fee for ETF purchases, I don’t see currently a cheaper alternative in Switzerland. For 3a-bound money, we are arranging its transfer to finpension for investments in stock index funds.

I am not going to buy VT, which is possible with Swissquote. The reason I don’t want to do this is that I do not want a major part of my stock portfolio to be invested in funds not authorized for sell to Swiss residents, because there is a legal/legislation risk, however small it could be. I don’t want in future to be forced to sell these assets because it is now forbidden for me to hold them.

I would go for VWRL, but TER is somewhat too high. On the other hand I also don’t think it makes sense to overweight or underweight any specific country, a region, and even less a sector. The market is global, and in the long run everything smoothens out.

So, finally I converge on dividing global market on 3 segments:
(1) Large and Mid Cap stocks of developed countries;
(2) Small Cap stocks of developed countries;
(3) Large, Mid and potentially Small Cap stocks of emerging markets.

For (1) (Large and Mid Cap stocks of developed countries) I am taking Vanguard FTSE Developed World (VEVE).
Pros:

  • TER 0.12%, there is no global ETF (allowed for Swiss residents) with lower TER;
  • Flat broker fee when buying at Swissquote;
  • Quoted in CHF in SIX, which makes things easier;
  • More stocks in fund/benchmark than in the equivalent MSCI World.
    Cons:
  • Index definition is different from MSCI, so there are some overlaps with other segments. But I don’t care for such fine details.

That is the only ETF that I am going to buy with “non-bound” (taxed) money at Swissquote.

In addition, I am taking “CSIF (CH) Equity World ex CH ESG Blue ZB” (unhedged) at finpension for (1). It is ESG, the major cost here is finpension fee anyway.

For (2) (Small Cap stocks of developed countries) I am taking “CSIF (CH) III Equity World ex CH Small Cap Blue - Pension Fund DB” (unhedged) from finpension.

For (3) (emerging markets) I am taking “CSIF (CH) Equity Emerging Markets Blue” (unhedged) from finpension. I would prefer to have also small caps included, for example by buying EIMI or its variants, but for the sake of simplicity I will leave it like this for now.

The weighting of segments in my portfolio should correspond to capitalization of corresponding segments. I calculated it to be 77% (1) : 11% (2) : 12% (3).

To maintain a desired weighting, I am planning to adjust monthly the percentage of “CSIF Equity World”, “CSIF Equity World Small Cap” and “CSIF (CH) Equity Emerging Markets” in finpension. As I am planning to increase only (1) with non-bound money, I will gradually sell “World” to buy more of “Small Caps” and “Emerging Markets”.

Well, that’s it for now.

Please feel free to comment and criticize :slight_smile:

Dr. PI

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That’s not what the legislation would be about anyway, you won’t be forced to sell, worst case you won’t be allowed to buy more (but even that would be unclear, at least the swiss regulation allows changing existing positions). And the legal risk is not for you (you personally do not risk anything, those are regulations for brokers to protect you).

Up to you whether it’s worth losing 15% in US taxes on the US part of the fund.

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Thank you for the feedback. I was thinking alot about it, but:

Whenever on Swissquote I open a trade page for, say, VT, I get a big fat warning that these are funds not allowed for distribution to retail customers, only to qualified participants. Don’t want to go this way, because then I might go against the regulations.

On top of it: CHF to USD conversion fee, broker fee is higher than for ETF bought at SIX.

Moreover, as we pay interest on the mortgage, looks like we are not allowed to request reimbursement of these taxes anyway.

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So, time was passing and I kept thinking. Considering that

  • I cannot add 3a money whenever I want as much as I want
  • Finpension rebalancing happens once per month

I decided to keep each Finpension portfolio (I have one already funded and very soon I fund another one) self-contained.

For each portfolio I take 1 fund per global market segment:
(1) Large and Mid Cap stocks of developed countries:

  • CSIF (CH) III Equity World ex CH Blue - Pension Fund ZB (unhedged, plain index fund, not-ESG)

(2) Small Cap stocks of developed countries:

  • CSIF (CH) III Equity World ex CH Small Cap Blue - Pension Fund DB (unhedged)

(3) Large and Mid Cap stocks of emerging markets:

  • CSIF (CH) Equity Emerging Markets Blue DB (unhedged)

I was also thinking about a Finpension portfolio containing 85% (1), 14% (2) and 1% cash, and a smaller second portfolio containing only (3). The allocation of the 1st portfolio would perfectly correspond to Large/Mid/Small Cap definitions by MSCI. Additionally, the Emerging Markets fund have a higher “Redemption spread” than others, so it would be good to avoid selling it. But finally I did not go for it because of what I wrote above.

For each fund I took capitalization of respective “parent” benchmark index, reduced it by CH part and renormalized to 99% total. The result is 76% of (1), 11% of (2), 12% (3) and 1% cash.

finpension
finpension1099Ă—223 9.09 KB

This 3 funds portfolio holds (as of now) 7151 stocks. The capitalization covered by the portfolio corresponds to 95% of capitalization of “all stocks counted by MSCI”. Absent are obviously Swiss stocks and Emerging Markets Small Cap.

I don’t mind the absence of Swiss stock, as they are heavily overweight in my second pillar anyway.

Now the goal is to keep this allocation fixed. I might check numbers every few months, but I don’t expect that any significant adjustments will be required.

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After 2 months any idiot with 100 CHF can install yuh application and buy VT without any warning whatsoever. Pure hypocrisy.

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Do you know if customers break any laws if they act as being “qualified participants” and just buy the funds?

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That’s a very odd position to take from them. So they’re an execution/reverse sollicitation only service, but you can’t decide what you buy there’s just a handful of stuff you can buy?

I’d expect such a broker to be a pure broker, you give them a ticker and you buy it, no preset or allowlist.

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I was thinking for a long time if I should add an update to this post, and finally decided to do this. There is really not much exciting in it, but this is good, as I am convinced now that a successful investment should be as automated and dull as possible.

First, many thanks for the wealth of information and advice from this forum! It was and remains a really eye-opening experience!

I don’t want to give many specific details on a public forum, but if you are interested, I am happy to share details in private messages.

After a few years of deliberation and negotiations with my wife, we have converged to the following setup:

All 3a money that are not used for the indirect mortgage amortization are deposited into max stocks portfolios at finpension.

Taxable holdings are in a joint account at Interactive Brokers. No other brokers for now.

We have also converged on the target assets allocation for the portfolio ex. pension funds. It is a certain, rather high percentage of stocks and the rest is cash and cash-like instruments (mid term notes from Swiss banks).

The goal for the cash part is to be as safe as possible (do not go over deposit protection limits) and not to lose value at least in nominal CHF terms.

The stocks part is leveraged by a constant ratio using UPRO. Later, when we are closer to the retirement, the leverage ratio will be decreased at market highs.
The geographic exposure is done via many different funds, but the goal is to be very close to MSCI ACWI.

There are good chances that we will be able to keep this assets allocation going forward and investing new savings.

Well, that’s it, I think.

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I’d avoid using any leverage. Also be aware of what you are buying with leveraged/inverse ETFs. Many are to be used only for short term hedging/speculation and are not suitable for long term holding (lookup volatility decay EDIT: found a link: https://www.etf.com/etf-education-center/etf-basics/why-do-leveraged-etfs-decay#

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I agree. Not having leverage gives peace of mind. You know that even if markets go down a lot you don’t risk any margin call.