That’s a very good idea. Still, there are sectors that I definitely do not want to invest in, even when going for the maximize profit approach. For example, I would not want to invest in Shell, even if that means I could donate some of the profit I made from that investment. And that makes investing in this way too complex and involved for me right now.
Good to hear that YOVA is an option. It seems to tick all the boxes for me (simple, sustainable, can choose relatively low risk). The 1.2% fee is the only downside I can see at the moment.
The Alternative Bank route looks too expensive to me. 1.55% TER is even more than YOVA, and investing would be more complicated going through a bank.
Would it be possible to build a good porfolio by picking only socially responsible funds from JustETFS? For example, looking at this page:
I see only two options for me, as I don’t want to invest in oil, coal, and any kind of weapon. That would leave only MSCI SRI and MSCI ESG Screened. The rest I would have to hand-pick from the UBS selection.
In the end you need to be clear about your priorities.
Do you want to maximize the positive impact on the world or do you want the feelgood knowledge that you don’t make money of off oil companies?
You can’t really have both.
ESG investing tries to increase the cost of capital of “bad” companies. It is very difficult to define what is “bad”. It is also very difficult to estimate the effective impact. You pay for this with additional cost and lower expected return.
In my opinion, ESG investing is more about feeling good than doing good.
* Because CHF government bonds are pointless due to zero or negative yield and corporate bonds will probably not conform to your criteria. If you have to have an ETF instead, you, maybe iShares USD Corporate Bond 0-3yr ESG UCITS ETF CHF Hedged (Acc) IE00BMH5T376.
I respect your decision. My priorities are different. Profiting from oil companies to donate some of that profit to NGOs/companies fighting climate change doesn’t make sense to me. There are sectors that I definitely want to exclude, and I am prepared to pay for it with lower expected return.
@San_Francisco thanks a lot, that is very helpful! Would this be a well diversified, relatively low risk portfolio? Also, with 25% cash, do you mean I should keep 25% on my bank account? Or does it mean I should invest 25% of my total investments in foreign currencies?
That was just my quick take on - and if you want to have - a low-cost ETF portfolio, based on your OP.
MSCI ACWI Socially Responsible: Average risk for a global equity fund and similarly diversified
Clean Energy: Much riskier but that’s what you wanted
Cash: Low risk, obviously. CHF has been an appreciating currency, so you might just stay with that.
I still think Yova could be a good alternative, as it allows for more customisation, conscious choice and …“emotional connection” to the companies you’re holding, if that makes sense? Just not sure how suited they are for smaller amounts to invest (I assume they don’t invest in fractional shares?).
Yes, I respect yours as well. Feeling good about your investments can be very important. I just wanted to share a way to deploy your capital in a more effective and proven way to improve the world that comes at the cost of not feeling as good.
The energy sector makes up around 2.8% of the global market cap, and you can expect to earn around 10-15 chf per 10’000 chf invested per year from it. It is probably cheaper to go with a total world etf and simply short the energy sector and add a small portion of a clean energy etf.
I also wasn’t suggesting fighting climate change via NGOs, the proposed charities of givewell fight malaria and save a life per 3000-5000 USD or improve the lifetime earnings of children by distributing treatments for parasitic worms. $100 invested there improves the lifetimes earnings of these children by $1100 or around $300 if you discount the future earnings by 5% per year.
Additional ways to leverage your investment might be through lobbying, getting ICE engines banned quicker might have a ton more impact I don’t know the ROI, but it’s probably pretty nice (and political donations are tax deductible).
Ok, I took some time to digest all the great advice here. I also did more reading, and set up test accounts with a few brokers. Now that I am more clear about my priorities, I have narrowed it down to two choices.
Absolutely out of bounds are companies that directly or indirectly violate human rights. I am also firm that I do not want to invest in oil, coal, any sort of weapons, nor in companies that destroy rainforest or other natural habitats.
Option 1 is TrueWealth.ch
Positives
Easy to use for absolute beginner
Has choice of ‘sustainable investing’, which I would be using
Suggests a portfolio for me, which I then can adjust to taste
Security. It’s a Swiss broker. The money is parked in a Swiss bank, with depositor protection up to 100’000 CHF.
Automatical rebalancing.
Negatives
fees. They are 0.5% per year, plus the fees of the ETFs. For the portfolio I created in my test account, fees would be 0.82%.
Option 2 is DeGiro
I am firm that I would create a custody account. Then, hopefully with your help, I would try to create a simple portfolio of maybe 3 SRI ETFs. Then invest in them long term, occasionally rebalancing my portfolio.
Positives
less expensive than TrueWealth
Negatves
more involved than TrueWealth. No suggestions for my portfolio. No automatical rebalancing. No risk assessment. Would need to create my own portfolio with no knowledge about how to do so.
Not a Swiss broker. Meaning investments are only protected for 90% of the value, and up to 2’0000€ only if I understood correctly.
What would you all suggest for a beginner who doesn’t want to spend too much time on it? Is one option clearly the better choice for me?
IB looks too involved and complicated for me. DeGiro and TrueWealth both are much more accesible for an absolute beginner. VT includes oil companies (ExxonMobile). ICLN alone is very high risk, so I would need a meaningful way to balance it in my portfolio. TrueWealth would take care of all of that for me.
Personally, I’d question truewealth (even though they seem to use some efficient ETFs). Because…
…what are you paying for with your fees with them?
Isn’t that portfolio management (even if automated) and rebalancing, primarily?
Now, that might a good idea for someone looking to open and maintain a diversified portfolio that runs “automatically” (so to speak), by reallocating between different constituents.
The thing is: I doubt you’re that person? I think you voiced investment exclusions that are going beyond even “normal” ESG equity ETFs (as I demonstrated in the case of AWESGS). You’re limiting your investment universe so severely that I’d question whether off-the-shelf automated portfolio management makes sense for you.
Simply put: Why pay fees for a robo-advisor juggling your investments, if you’re unable/unwilling to use 95%, 99%, maybe even 100% of their ETF offerings due to ethical or moral concerns anyway?
Did you look into specific ETFs on Truewealth, whether they fulfil your your requirements?
EDIT: To illustrate:
There are roughly 1000 equity ETFs listed on JustETF for CH.
161 of them are listed in the “social/sustainable” category.
Probably 150 of these 161 will still not fulfil your personal criteria, due to including big positions in Facebook, Alphabet and the like.
The remaining number of investable funds might be in the single digits. Let’s say 10. If only one of them is available at your Robo-advisor, why pay them management fees?
You could just zero in on your one, two or three preferred funds and then find the brokers that’s most efficient to buy them through.
ESG is probably not what I am looking for in a certificate. I assume SRI woule be good though.
No. After opening this thread and getting feedback, I opened test accounts with TrueWealth, Selma, and Investart to see how they work and what kind of portfolios they’d suggest.
I probably didn’t make it clear enough, but I somewhat readjusted/clarified my investing criteria. I can live with investing in Alphabet and co. Definite no-goes are the ones mentioned above: conflicting with human rights. Oil/coal. Any sort of weapons. Deforestation or destruction of natural habitats.
I do hope that TrueWealth sustainable ETFs do conform to that. But I will doubke check.
@San_Francisco it looks like you would suggest choosing maybe three ETFs and then buy through DeGiro then? I am seriously considering this, but am a little concerned about the risk as I don’t know the first thing about portfolio-building. In any case, the ETFs you mentioned above would certainly be a good start (MSCI ACWI SRI looks very good to me).
On DEGIRO, I invest in UIMR which might be a good match depending on your SRI criteria. It is also listed on the commission free ETFs of DEGIRO. Have a look here:
I think you know enough.
Also, no rocket science to achieve “average” results.
It’s well-diversified - if you want to invest in stocks at, you can’t really go very wrong with that.
Regarding risk, you can, you could look at last year and the emerging Corona crisis as kind of a worst-case scenario. Markets - or funds like the UBS MSCI ACWI SRI ETF lost about a third (33%) their value. It’s probably not going to get much worse than this on any short-term basis. You could have lost 50% buying S&P 500 at the height of the 2000 bubble and then lose almost half (50%) of your investment. Probably the worst worst-case scenario in recent times. But then markets recovered somewhat quite swiftly. If it get’s much worse than this, you’d other things to worry about anyway (job, war, food shortages, hyperinflation etc.)
Again, these are worst-case scenarios - and we’ve just about experienced one last year.
Not trying to scare anybody but I’m certain there are worse case scenarii on the table that have some of their required criteria fulfilled on the short term. Not saying they will happen, things could very well be fine on the short-medium time, but they also could.
Inflation, amount of money in circulation (currently stored in the stock market and other skyrocketing investments), interest rates already low limiting the tools central banks have at their disposal. We could be drawn in on a slow, not so quickly recovering, deep dive scenario on the short term already. Not saying we will, not saying we should change anything to our investing strategy (these events are factored in the returns we expect when buying and holding, not every year can be a +14-30% one) but we should definitely steel our mind against it in my opinion.
ETA: to clarify my meaning: irrational exuberance seems to be everywhere. A 2000-2002 scenario seems more likely to me than a march 2020 one for the next crisis. Though a totally different beast than anything we’ve known before remains on the table at all time too, of course.
@Linos
There’s nothing arcane in portfolio building. Risk mitigation means building the portfolio in a broad, diversified way, geographically, across sectors and if possible market caps. Nothing amazingly complicated, just pick the funds that fit your criteria and match those who make sense (geographical and sector data are available in the factsheet).
If you are not ready for a fall, choose an allocation that allows for volativity mitigation (make it 60% stocks / 40% cash if you need a number, the reverse if you’re really risk averse). Otherwise, just be aware that such a fall could happen, that the market is likely to recover, that your money is invested for the long term (provided it is) and that riding the dive and the recovery coming next is a much better deal than 0% interest bearing cash. This could be easier if you have the feeling to be actively supporting the companies/projects you’d want to.
By reading and partipating to this forum, you confirm you have read and agree with the disclaimer presented on http://www.mustachianpost.com/
En lisant et participant à ce forum, tu confirmes avoir lu et être d'accord avec l'avis de dégagement de responsabilité présenté sur http://www.mustachianpost.com/fr/
Durch das Lesen und die Teilnahme an diesem Forum bestätigst du, dass du den auf http://www.mustachianpost.com/de/ dargestellten Haftungsausschluss gelesen hast und damit einverstanden bist.
I don’t know the ROI, but it’s probably pretty nice (and political donations are tax deductible).
Simply put: Why pay fees for a robo-advisor juggling your investments, if you’re unable/unwilling to use 95%, 99%, maybe even 100% of their ETF offerings due to ethical or moral concerns anyway?