I didn’t explore it as well as I would like to, but here is some fuel for thought: use short calls as a substitute for bonds. For example you have 100% stocks, but sell XSP/SPX 1 year long at the money calls equivalent to 40% of stocks in the portfolio. You get a nice premium of around 10% of short call equivalent. If stocks go down, you keep the premium, if they go up, sell stocks and pay the settlement amount. Your upside is lower.
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I believe Carsten Jeske from Early Retirement Now does something similar, definitely worth a thought.
I’m curious, are you in early retirement already or planning for it? What’s your preferred setup? Of course, there’s no right or wrong, just curious about Swiss FIRE portfolios, because lots of FIRE discussion is US-centric (US overweight stocks/bonds, using TIPS, US funds etc.)
I’m 100% VT at the moment, but plan to move to a FIRE portfolio gradually
Exactly! And I don’t know if the standard US 60/40 (say VTI/BND) is ideal for Swiss investors
Very interested in your bond strategy, it’s been really hard to figure this part out for me.
Fortunately, stocks seem easier to me 
I’m just gonna go with a passive global index fund, and maybe a small cap value tilt.
- Do you use individual bonds or bond ETFs?
- Only Swiss bonds or also intl. bonds?
- Treasuries or corporate bonds?
There are too many questions that I need to answer according to my particular FIRE situation 
- how much allocation to bonds
- bond etfs vs. holding individual bonds
- govt. vs. corporate bonds
- ideal durations: how much short-term, long-term etc
- if and how to hedge inflation? inflation-linked govt. bonds to maintain purchasing power not available in Switzerland
- currency hedging: yes or no?
- international diversification?
→ probably I’m overcomplicating this and might aswell just invest in a total international bond etf such as BNDW, CHF-hedged
No you are not.
- Ideally you should hold bonds issued in your base currency, not just hedged.
- There are very little Swiss government bonds. Even with cantons and communes there are not many bonds, and those could be illiquid, sometimes extremely. And if I remember correctly, some Swiss communes got defaulted on their bonds in the past (?).
- There are no inflation linked bonds in CHF (?).
- CHF is the least depreciating currency in the world (?). Until recently all safe freely traded bonds in / hedged to CHF had a negative yield to maturity.
- Buying and holding individual Swiss bonds is expensive.
That’s why I keep coming to the same conclusion: use medium term notes instead, up to 100k per customer relationship with a bank (depositors’ protection).
(?) = I am not absolutely sure and happy to be corrected.
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Leukerbad in Kanton Wallis. I can’t find a good article about it in English but in short:
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CHF 346 mios of debt in 1998.
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Of which 166 mios (48%) were written off as not due (there were big political shenaningans and misuse of public money at work).
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The remaining CHF 180 mios one was bought for CHF 40 mios (24% of their face value) by Sanag Leukerbad AG, a society created to clean the mess. This was funded by the liquidities from the Gemeinde and a CHF 24 mios loan with a guarantee from the Kanton (that the Gemeinde had to repay).
So, some “creditors” lost 100% of their loans (the “hey, let’s meet at the restaurant, Mr. President, I’ll pay for dinner and you’ll support my awesome and financially not viable project” kind).
The others lost roughly 75% of it.
Good articles in at least German or French can be found about it with a quick Google search, it’s worth digging into. Gemeinden and Kantons can default, local politicians often have to handle more financial responsibilities than they are really able to so I would consider bonds issued by Gemeinden as fairly risky. There are some Kantons I wouldn’t trust either.
I’d join with Dr.PI and consider medium term notes as the fixed income investment vehicle of choice for retail investors.
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I consider CSIF Bond Switzerland AAA-BBB 1-5 an interesting option. Current YTM is 1.73% p.a. with a duration of 2.87. Gross dividend was 0.74% in 2022, which is what you’re taxed on. There is obviously some credit risk but lower duration risk than total market bond funds. Can be traded on Swissquote for a flat fee of CHF 9 (and there is no stamp duty tax as it’s a domestic mutual fund).
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Interesting! Is it only for 3a investing?
What do you think of iShares Swiss Domestic Government Bond 0-3 ETF (CH)
No, you can buy it at Swissquote with a regular trading account. It’s presumably also available at other Swiss banks with higher commissions.I don’t know whether it’s available at any foreign broker.
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I started with individual bonds and still have them, but will let them mature and have now switched to buying bond ETFs. Much less hassle and better liquidity. I have only USD denominated bonds (mostly T-bills and a bit of Corporate).
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Article about financing retirement from NZZ.
(didn’t want to open a new thread, and feel it fits this thread ok’ish)
Quite surprisingly, this guy’s Scott Cederburg’s research claims that a 100% equity, 50/50 home/international mix (US perspective) is optimal also for after-retirement phase - 1st half of the pod:
Paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4590406
Of course, hindsight is a wonderful thing.
But I doubt many would feel comfortable with such an agressive portfolio in the decumulation phase.
(Big ERN would definitely disagree )
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