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 donât want a product of our labor, earned and saved through decades, to be eaten away by inflation and zero-interest rates. I donât 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 donât want additional risks on top of normal market risks. Thatâs 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 donât 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 donât 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 donât 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 donât 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 donât care for such fine details.
That is the only ETF that I am going to buy with ânon-boundâ (taxed) money at Swissquote.
In addition, I am taking âCSIF (CH) Equity World ex CH ESG Blue ZBâ (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 âCSIF (CH) III Equity World ex CH Small Cap Blue - Pension Fund DBâ (unhedged) from finpension.
For (3) (emerging markets) I am taking âCSIF (CH) Equity Emerging Markets Blueâ (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 âCSIF Equity Worldâ, âCSIF Equity World Small Capâ and âCSIF (CH) Equity Emerging Marketsâ in finpension. As I am planning to increase only (1) with non-bound money, I will gradually sell âWorldâ to buy more of âSmall Capsâ and âEmerging Marketsâ.
Well, thatâs it for now.
Please feel free to comment and criticize
Dr. PI