Thanks for your comment. There are big work needed coming up for the home - the entire electric switchboard must be moved and replaced, and other stuff as well. This require to take out an additional mortgage, and will dampen return for the next 10+years. This is the cause the home is possible worth only 400k - would it be completely new, it would be more like 700-800k.
Keeping this in consideration, the necessary investment, make selling and invest more attractive.
That’s true - that would be considered leverage, one of the 5 infamous points to be considered professional trader.
I thank everybody for the valid feedback. As a summary, I see following automated option for my parents to invest:
avadis (with possibility to generate monthly income)
Well, in some European/German brokers you can create a pay out plan to regularly and automatically sell ETFs (or mutual funds, but they are more expensive) units. I know about DKB and Flatex. So you buy once Vanguard all-world or developed world accumulating ETF and then make an order to pay out 500 Euro or so every two weeks.
The main disadvantage is that they operate in EUR. On the other hand it could be nice vacation/shopping in Italy money.
If you go for it, I recommend DKB: plan executions are cheaper and money automatically go to the bank account.
Of course there are solutions in Switzerland with mutual funds and pay out plans, but I don’t know about them.
Same setup as I described. Fees are much higher than EU banks, but at least they offer ETFs, for example iShares Core MSCI World , and not expensive shitty mutual funds.
Actually you can use Yuh for it, but the selling of units should be done manually. I wouldn’t be surprised if soon they implement an automatic selling plan.
Yet another option. CS or ZKB index funds at a Swiss broker, should work with Swissquote. Selling should be done manually, but it is not expensive. As it is a bank, with a Swissquote credit card money can be used directly. And if you use their card, you generate trading credits that can be used to pay their commission.
I will quote my self on this topic because things are slowing moving to a conclusion. The home was sold in september, and now my parents are reading on the topic and understanding more of it.
I noticed two things:
Interactive Broker is available in italian UI, which is a must (or at least french)
You can setup a “recurring withdrawals” - and if you don’t have enough cash, they will “go negative” using margin loan.
I’m leaning towards this plan:
discussing a portfolio with them: stock, bond. Making sure they understand what they are investing for, and that is their choice.
Picking distributing ETF, quarterly or six monthly.
Helping the opening interactive broker, and setup a one time trade of the two/three selected ETFs.
leaving some cash as buffer between dividend distribution
setting up some recurring withdrawals ~= the estimated yearly distribution. So that they should not incur too often in margin loan, if ever.
They will get a monthly check to spend and complement their pension, while they know their money is invested. I will tell them to never check the current value of the etf, like they would never chek every day the value of their home, and that should do it. Fully automatic, extremely cheap, I will login when I visted them every 4-6 months to make sure everything is ok, and so on.
I think this is the most solid plan, but they must be willing to open an account on interactive brokers, outside switzerland. I think this would be the part they would be least keen on.
any other swiss broker that can setup recurring withdrawals like IB, even oging into negative balance with low margin loan rate?
The only thing I see :
the return of stocks is not only distributions, but also capital increase (especially the american part). How will you deal with that ? I guess your parents are not so interested in capital increase anymore ?
Instead of the automatic account maybe go a different way, and pay them out a yearly (or half yearly) bonus ? (like dividends accrued over the period+ the capital increase by selling ETF parts). This would also forego the need of having a margin account, and the amount of work is still manageable (10-20 minutes/period). I can imagine that the margin story might leave some worries with your parents, especially if they are conservative.
Another advantage with IB : you can make a family account which allows you to manage their accont via your own account (which gives accountability, because everyone sees who did what).
EDIT : just reread the first post. We are still talking about 300k to invested and a need for 6k p.a., right ? Assuming a 5% return on stocks, you need to invest around 120k in VT, the rest in Bonds/Cash. If you invest lets 200k in VT, leave the rest in cash (I assume bonds/cash the same), your plan should work pretty fine with virtually no risk to get into margin (even if there is 0% return, you would need nearly 17y to get to zero, making them approx. 81).
Question is, don’t they want to use up more/have more fun ?
(-> personally I tell my parents that I do not want to inherit anything, but in the end it is not our choice)
Sure in Switzerland (and other countries) you can renounce an inheritance! It would then go to your heirs - can even make sense tax-wise (at least in France for example)
I meant more in the sense they should use up their hard earned wealth by themselves. But transferring the inheritance would actually make sense to a younger generation, also on an macroeconomical aspect (young people with the possibility to take risks have not access to much capital since inheritance from parents are shifted into their 50s or later, thus not creating new companies/innovation, there have been some studies about that).
Swissquote supports recurring withdrawals. The current margin interest rate is 3.45%¹ for CHF. I would assume the combination of margin loan and withdrawals is supported like at IBKR but I haven’t tried.
You might miss one thing. Global Market ETFs typically distribute USD, European ones may distribute EUR. Only Swiss ETFs distribute CHF. So you might need to convert currency every 3 months. You can also withdraw EUR to be used in Europe, though.
Otherwise it looks like a solid setup if your parents agree to open an account with IB. Like others said, I also recommend you to manage their account from your account.
as far as I understood, lombard loan at Swissquote is much more unflexible and only to purchase equity, not for withdrawals like IB.
Thanks for the point. I need to test this, but if I’m withdrawing CHF with negative CHF balance, would I start using margin loan even if I have cash USD to compensate for? But yes I may need to convert USD dividend to cash every x months.
If your base account is in CHF, IB converts cash balances automatically to the base currency in some cases. To be tested though and your amounts might be too high.
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