Seeking Advice: Building a Semi-Retirement ETF Portfolio

Investing / Portfolios
1

Hello everyone,

I’m currently 30 years old and, while I’m not aiming for an extremely early retirement, my goal is to build a substantial capital to enable me to reduce my work commitments to part-time status by the age of 50.

To achieve this, I’m considering investing approximately 2,000 CHF monthly into ETFs to construct my investment portfolio.

Here’s my proposed portfolio strategy:

  • 65% in Vanguard FTSE Developed World UCITS ETF Distributing (ISIN IE00BKX55T58)
  • 20% in iShares Global Corporate Bond UCITS ETF Distributing (ISIN IE00B7J7TB45)
  • 15% in UBS ETF (CH) - SMI® (CHF) A-dis

I’m seeking insights on a few points:

  • Does this portfolio seem well-balanced and sufficiently risk-mitigated in your opinion?
  • Given my aim to reinvest earnings rather than draw on them, would you recommend opting for distributing or accumulating ETFs?
  • Could anyone provide guidance on the tax implications in Switzerland for this type of investment? Specifically, how to efficiently declare these investments and ensure compliance without oversights?

I’m using Interactive Broker and am very much open to any advice or suggestions you might have.

Wishing you all a good day.

2 Likes
2

Just few comments

  1. You might want to consider SPI index instead of SMI for CH home bias. It’s more diversified.

  2. For the World portfolio , you have not included Emerging markets. So question would be why? If you want emerging markets too then VWRL would also be something to consider which is a global ETF. Otherwise what you have is reasonable.

  3. Your portfolio seems to be using Ucits ETFs , just be aware that there is a bit of tax disadvantage compared to US domicile ETFs. Try to read about it and understand impact of (a- withholding tax loss, b- US estate tax law application)

  4. For bonds, you are not using hedged funds. Some people prefer currency hedging their bond allocation. There is some discussion about it on this forum too. Again nothing is black and white but something to consider.

From tax return perspective - you would be easily be able to file IT return using these ETFs. In Zürich tax software, you start entering one line for each of these and then process is quite simple.

Accumulative vs distributing

  • no difference from tax perspective if you are Swiss resident.
  • of course accumulating ETfs have lower reinvestment costs. So if you use an expensive broker then something to consider. IB is quite cheap in general. So I wouldn’t worry.
  • you will be investing every month anyways, so you will use dividends and reinvest them too.

Last point -: Risk management

It’s very personal. You are using 80-20 for stocks and bonds. Some might say it’s too aggressive, some might say it’s conservative. It very individual. My advise would be to go with your gut feeling and what makes you feel comfortable. And if you want solid research based knowledge, then you need to read a bit about asset allocation strategies. However always focus on expected return in future and not realized returns from past.

One thing you should keep in mind is your 2nd pillar and 3rd pillar. And when you look at your allocation between equities and bonds, be aware how the total looks like and not just your IB portfolio. If you don’t want to count 2nd pillar then atleast 3rd pillar should be considered.

4 Likes
3

First of all, thank you very much!

  1. Understood, I’ll look into that.
  2. That’s an excellent point. My portfolio idea was inspired by Mustachian suggestions; I haven’t specifically excluded Emerging Markets. It’s definitely something I’m open to considering.
  3. Sure, what would you recommend in its place? Are there similar options you’d suggest?
  4. Appreciate it, I’ll explore that further.

I’m contemplating making investments in larger sums every few months (e.g., 8,000 CHF every 4 months) to minimize fees if that proves beneficial.

Regarding my 2nd pillar: I have a favorable arrangement with my current employer, Swisscom, and I’ve also made provisions for a 3rd pillar (7,056 CHF for both my wife and me to optimize tax benefits).

Upon reflection, you might be right that an 80-20 stocks/bonds ratio is somewhat aggressive; I’ll consider adjusting it.

Honestly, my objective is a “set and forget” approach, aiming to invest with minimal time commitment for maximum profit, which is why the portfolio may appear somewhat simplistic. :slight_smile:

4

For IBKR, I don’t think there would be material difference in terms of costs. But you can calculate and see.

1 Like
5

I didn’t say it is aggressive :slight_smile: I just said it’s personal

1 Like
6

Simple is best and it works

VT is one of the most diversified world stock ETF with US domicile. I use it on IB. Using Da1 form you can reclaim credit for withholding taxes.

But again - please be aware that if you invest in US domiciled ETFs, you will be subjected to US estate taxes. It doesn’t mean you will be negatively impacted. It just means you need to learn about it. That’s all. Poor Swiss and mustachian have done lot of discussion about it

1 Like
7

That plan looks good to me. The only suggestion I would have was to introduce 5-15% of Swiss Real Estate Funds. They are a fairly solid hedge against a crazy rental market - in case you aim to stay in Switzerland. If you did so, would probably take Swisscanto’s or Credit Suisses Index Fund (but not the UBS ETF) and would count the allocation 50% against Shares and 50% against Bonds.

1 Like
8

Check what’s in your 2nd pillar, it’s probably something like 35% Swiss bonds, 10% international bonds, 20% cash in CDs, 10% Nestle/Roche/Novartis/Lonza/ABB/UBS, 20% Swiss real estate, 5% international stocks. Look how much CH you already have baked in your 2nd pillar (probably enough to put a blue whale to sleep) and then decide.

VWRL is a great all-in-one if you’re not a nitpicky min-maxer.

2 Likes
9

See here an interesting post about the asset allocation:

It seems as if the big investment companies would be more agressive.

1 Like
10

Great plan! I didn’t have one at age 30, but I realized your goals for age 50 (at age 51).

Any reasons you’re picking distributing funds? This would only make sense to me if you want to actively allocate your distributions in one investment versus another. It’ll also probably be slightly more expensive as you’ll have higher trading fees compared to the ETF manager. If you don’t want to actively over-/underweight, I’d just go for accumulating.

Your portfolio choice looks balanced to me. Two comments:

  • If I could give advice to my younger self at age 30 who didn’t care about investing, I’d tell him to go all equity. Since I know my younger self at age 30 would fail with picking stocks, I’d tell him to also just go with ETFs, but a little simpler, and no home bias, e.g. 50% VOO, 50% VXUS (or a 60/40, 20/80, see the next comment) allocation in the two ETFs, rebalance every year or so (or rebalance as you DCA invest along the way).
  • However, any advice on portfolio construction is really useless unless you yourself have the conviction yourself to stick with your plan. Hence pick the portfolio such that you feel you can stick with it even when it has a 20% (or larger) drawdown over the next 20 years or so.
    Unfortunately, you can only really test your conviction during an actual drawdown …

Good luck!

4 Likes
12

Once again, thanks a lot to all of you for your kind advice.
It helps me a lot to develop my portfolio !