Portfolio advice - CSIF (CH)?

Hi All,

First, thank you so much for all the great information in this forum, I have be devouring so many great threads and discussion - thank you!

I opened an IB account and put together a portfolio, I have it below. I have two question I would really appreciate some help on:

  1. The CSIF (CH) Equity Switzerland Small & Mid Cap FA looks like it has very low trading volume and when I try to buy it on IB - it says it’s price is zero. Does anyone know why this is? I found the stock in one of the Mustachian ETFs forum threads and I want to invest a little into Switzerland but stay away from large cap as I get plenty of stock from the corporate I work at.

CSS1 (ISIN: CH0222624659) has a zero closing price?!

  1. Does this portfolio make sense? I go with a lot of stocks as I am still very young, and I already get stock in the big swiss corporate I work for - so I tried to get a well diversified portfolio with more weighting in EM as I have a high risk tolerance (and plan to invest for ~40 years minimum).

My portfolio strategy:

Really appreciate your thoughts and also if you have any other great ETFs to recommend!

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Nobody wants to buy this shit I guess

Home bias makes little sense outside of US

But why [meme here]

And you say next yourself you’re already a little invested in Switzerland. More than a little if you’d consider your CHF paying corporate job and benefits

EM does not unquestionably mean more risk more gain. Did you even look at the shit you’re going to buy? Banks, banks, lots of f’ing chinese banks, and just a few giant asian IT tech companies that turn top 10 into top 25%. Is that your idea of something that’d emerge you more wealth than S&P500? Pass

Small caps on the other hand…

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Thank a lot hedgehog! Really appreciate your feedback.

That makes sense, I was unsure if I was doing something wrong in IB or so, but probably just a not so popular ETF. Thanks!

Good point, also my pension savings are all in Switzerland so better to diversify.

This is really helpful, I had looked at the top 25 but as I have limited experience on what is a “good ETF” then I thought it looked fine (i.e. geographical spread and EM companies).

I was thinking that with the Vanguard Total Stock Market and STOXX 600 I am rather well covered for the S&P500 (correct me if I am wrong here though, I just thought that the companies in S&P500 are included in those two ETFs).

Do you have any advice how I can invest into EM in my portfolio? I felt it is important to have that aspect in my portfolio as I am living in a developed market and more than 50% of my portfolio is invested in the developed markets, that it could be good to have some EM exposure.

Really appreciate your helping out a beginner, thank you!!

CSIF (CH) Equity Switzerland (etc.) is a non-exchange traded index fund of credit suisse. Hence, trading volume should not matter - spreads are fixed (0.05). Assets under management are ~1800 million.
https://amfunds.credit-suisse.com/ch/de/institutional/fund/detail/CH0222624659

VTI covers the US market, the Stoxx600 etf the european market (with GB). Yes, S&P500 companies are included in the first.

Well then what would you recommend to invest the money I hold in CT into? Currently I have VUSA, but since I have IB, it doesn’t make sense to keep it. I also don’t want to close my CT account.

I thought about buying VFEM. If you look at the factsheet of FTSE Emerging, banks make up 18% of it, technology 16%, the rest is spread over many sectors. Emerging markets still have young societies, still profit from the “demographic dividend” (more people in production age than in school/retirement). Europe is full in debt, they try to cope with low fertility by importing people from Africa, not sure how is this gonna work.

Of course, the condition of the economies is not directly linked to how their stock market will perform, because the companies operate worldwide. But still, there will be correlation.

So, back to the question, what would you replace the VUSA with, considering I have VT at IB?

I mentioned small caps already. that’s a more stereotypical example of higher risk higher potential returns

Do top holdings look to you like they have much to do with this demographic dividend? India is only 8%! South Korea and Taiwan are emerging? Not in my book. Chinese banks have a debt problem bigger than Europe’s

Well, isn’t that a good thing that India is small? It can grow in the next years. South Korea is not part of EM in FTSE indexes. Didn’t know about Chinese banks. But I would say that Chinese companies should have a huge opportunity ahead of them. They have a potentially even larger home market than USA, which can act as an incubator. They are not so much concerned about ecology, human rights, patent law. And what if China’s military gets big enough, so that Americans can’t dictate the terms? Putting 50% of the portfolio in USA and only 3.5% in China seems like a considerable imbalance to me.

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Why not overweight BRICs then? I started a separate topic on this, but not much interest.
Russia may be the questionable component here, but … well, it’s Russia. Business will go on even if the people are starving.

As to China, this article nicely states a couple of problems with their tech giants:

  • the article gives examples as to how tech giants are favored by regulations and at the same time under state supervision

  • they might hence be huge, but not ready for competition

The big question: Can China’s tech companies dominate the world, just like they have the Chinese market?

The quick answer: These companies are “like a species that developed on an island that’s far away from everything else and uniquely adapted to fit local circumstances without much outside competition,” says Martin Chorzempa, a China expert at the Peterson Institute for International Economics. Scaling their business models for global success will present big challenges.

Two such challenges are combating tougher regulations in the West — something Chinese firms are unprepared for — and competing for consumers with foreign companies on foreign turf, Ruomeng Wang, a China specialist at the market research firm IHS Markit, tells Axios.

Yeah, that’s what I call “incubator”. They can develop in perfect conditions, and when their products are good enough, the World will buy them. Wasn’t it the same with Japan and South Korea? First you start with mercantile/protectionist policy and let your own companies satisfy the home market demand. At first, their products have shit quality, but with time they get better. And when you’re ready, you lift the barriers and join “free market”. What Poland did in 1990 was opening the market too soon, which killed many local companies, which weren’t ready for it.

The people governing China are technocrats, they are no dummies, and they can focus on the important stuff, not worry about reelection etc. They invest heavily in things like solar power. They tackle problems with unimaginable momentum: like they had a problem with desert taking more and more land, so they decided to plant millions of trees along thousands of kilometers. Also, historically, a few hundred years China was already responsible for 30% of the World’s GDP. I have a fear that the Chinese might leave many other developed countries in the dust.

Of course, history is so unpredictable, so many things can go wrong, that I’m not gonna bet a lot based on that prediction. It’s just what I’ve been able to read and watch recently.

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I find this an excellent point - free trade might in fact not really help developping countries.

Yes, but it immediately reminds me of the cultural revolution and the “big leap ahead”. Mao perhaps was more of an ideologue than a technocrat. Still, autocrats may get ahead faster - but who is to tell them that they took a wrong turn?

Do you think that american ingenuity and creativity can be easily replicated in China? (Or do you question that such traits exist in the US economy - is that just propaganda?)

The IMF has a system of regular expert reports reagarding national economies. It’s called article IV consultations. The full reports really go on debth regarding problems in each economy, in a diplomatic language but no-nonsense.

Here is the latest IMF staff report regarding China, some of the important points:

We welcome the authorities’ strategy to more decisively shift the policy focus from high-speed to high-quality growth. In particular, shifting from excessive, debt-financed investment to consumption will sustain growth in an environment of rising living standards, a cleaner environment, and much reduced risks. We very much support this focus and we encourage the authorities to persevere.

Achieving this goal of high-quality growth requires building on the existing reform agenda and taking advantage of the current growth and reform momentum to ‘fix the roof while the sun is shining’. In particular, this requires:

  • Following through on stated intentions to deemphasize growth targets and focus on high-quality growth. Rebalancing the economy will likely mean somewhat slower overall growth. This should not be resisted, for example, with credit-fueled investment stimulus–this would make the debt problem worse and undermine growth later on.

  • Continuing to rein in credit growth. While credit growth has slowed, it remains too fast. Slowing it further will require less public investment, tighter constraints on SOE borrowing, and curbing the rapid growth in household debt.

  • Further boosting consumption. China needs to increase government social spending, for example on health, education, and social transfers, and finance it with progressive and green revenue sources like taxes on income, property and carbon emissions.

  • Allowing market forces a more decisive role. This means reducing the dominance of the public sector in many industries, opening up more markets to the private sector, and ensuring fair competition. The importance of the private sector was reinforced by the IMF team’s visit to the dynamic and prosperous city of Shenzhen, where it has been private, not public, firms that have driven China’s global leadership in frontier industries such as e-commerce, fintech and hi-tech consumer goods.

  • Accelerating opening up to the rest of the world. China’s integration with the global economy over the last 40 years has lifted China from one of the poorest countries in the world to now an upper-middle-income country, and world’s second largest economy. Yet China’s trade and investment regime remains relatively restrictive. Faster opening up would not only support China’s own high-quality growth agenda, but also benefit the global economy. Recent efforts to defuse trade tensions are welcome and efforts should continue to seek a negotiated settlement that strengthens the global economy.

  • Modernizing policy frameworks. Financial sector reforms have made strong progress recently—this should be continued, for example, by ensuring the new institutional structure of financial supervisors is a success. Monetary policy should continue to become more price, rather than quantity, based, and the exchange rate should continue to become more flexible. The central government should share more of local governments’ spending responsibilities while increasing their ability to raise their own revenues. Policymaking would also be improved by strengthening China’s relatively weak macroeconomic data.

“The Belt and Road Initiative is a welcome and potentially transformative initiative. Its success will be enhanced by having an overarching framework, with good coordination and due attention to debt sustainability in partner countries.

http://www.imf.org/en/News/Articles/2018/05/29/pr18200-imf-staff-completes-2018-article-iv-mission-to-china

Here the latest concerning Switzerland

http://www.imf.org/en/News/Articles/2018/03/26/ms032618-switzerland-staff-concluding-statement-of-2018-article-iv-mission

Exit from the SNB’s accommodative policies during the current economic upswing is unlikely to return the pre-crisis configuration of tools. If—as markets currently expect—policy rates of major central banks peak well-below pre-crisis levels, scope for the SNB to raise its policy rate may be constrained, especially if re-widening the negative interest rate differential against other currencies is desired. The SNB, alongside other central banks, is likely to maintain a considerably larger balance sheet than prior to the crisis, with divestments falling well-short of the previous buildup to avoid excessive tightening of monetary conditions.

A clear assignment of policy tools would enhance effective communication and avoid the impression of targeting the exchange rate. Given lags in policy transmission, the interest rate is best suited for addressing slow-moving cyclical conditions and expected inflation. On the other hand, intervention should be reserved for responding to foreign exchange market surges that would otherwise cause temporary volatility in inflation and output, while still accommodating a modest secular trend real appreciation.

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Really interesting discussion, it is clear there is no silver bullet here!

There is definitely some risk with wherever you place your money, otherwise the market would most likely have corrected for it.

I had a look at VFEM that @Bojack suggested, this looks interesting, I couldn’t find the TER in the fact sheet though. I found the Vanguard one, VWO and that has only a TER of 0.14%, that could be a great FTSE Emerging market ETF to invest in, what do you think?

Does @hedgehog have any suggestions for ETFs that cover the small caps of EM? I had a look around but this seems like a hard area to cover through an ETF…

I am invested in VWO if you want to count this as a recommendation. :sunglasses:

VSS is the global ex-US small cap solution from Vanguard with a TER of about 0.13 last time I checked. It also contains 20% EM small caps. The best deal on the market, in my view (TER/for this type of equity). Now, did I mention that I am also invested in this fund ?! :wink:

How did you look? Type in “vanguard vfem factsheet” in google and it’s the first result. The OCF (TER) is 0.25%.

Of course VWO has a lower TER, but as I’ve said, I have some CHF on Corner Trader, and so I’d like to buy an ETF that trades in CHF. I’m looking for an ETF that would compliment VT. So the question is what should I overweigh. Ideally, I would invest in something like VXUS for Europe, but Vanguard does not offer it in Europe (weird, btw).

Interesting. I was comparing some SPI Extra funds out of curiosity when I stumbled on this CS fund. I was comparing it to the Swisscanto SPI EXTRA fund (CH0315622966). What I don’t understand is that even tough both are non-exchange traded index funds, they are not traded in the same way. When I search them in my eBanking i find the following:

CH0315622966
Anteile -FA CHF- Swisscanto (CH) Index Fund V - Swisscanto (CH) Index Equity Fund Small & Mid Caps Switzerland
Stock Exchange: PRIMAERMARKTT2

CH0222624659
Anteile -FB- Credit Suisse Index Fund (CH) Umbrella - CSIF (CH) Equity Switzerland Small & Mid Cap
Stock Exchange: SWX

What is the conceptual difference between those funds? So why is the CS fund traded on SWX and available on IB even though it’s a non-exchange traded fund (and not an ETF)?

Thanks!

Probably you found the CS fund as sponsored fund?

https://www.six-group.com/exchanges/funds/sponsored_funds_en.html

Would make sense. Thanks for the link. I was not aware of this offer.

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