Seeking Advice on Asset Allocation as a Married Couple with New Life Circumstances

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1

Hello everyone,

I’m looking for some feedback and advice from the community on how we should allocate our assets as a married couple. Here is a bit about our situation:

  • We are both 31 years old.
  • Got married last year and welcomed twin girls this year.
  • I’ve been self-employed for about 12 months in consulting, generating around 200,000 CHF annually (no fixed costs). Before this, I studied and earned around 90,000 CHF as an employee (therefore only around 25k in Pension fund).
  • My wife will be employed at 60% and earns around 70,000 CHF annually.

Current Asset Overview:

  • Bank: 170,000 CHF
  • Viac 3a (100% Shares): 94.000 CHF
  • ETFs 70%/Bitcoin 30%: 102,610.59 CHF
  • Loan to family members: 80,000 CHF
  • Pension fund: 60,000 CHF

We are a bit unsure about our saving rate at the moment, as we recently moved into a new flat, and our kids will soon be starting at a daycare (Kita). We’re still figuring out how much support will come from family versus paid childcare.

Additionally, our investments are spread across various platforms like Swissquote, Degiro, and Bitpanda. We’re wondering if it makes sense to consolidate these or keep things separate as a couple.

Our Goal: We aim to purchase a house in about 3-5 years.

I would appreciate any insights or suggestions on how to best allocate our assets given this time frame. Specifically:

  • Should we consolidate our investments as a couple, or is it better to maintain separate accounts?
  • Any advice on managing our current savings and investments with the goal of homeownership in mind?
  • What would be a sensible approach to balancing risk with our current asset distribution, especially considering our new family situation and me beeing self-employed?

If there are any additional questions or information that would help clarify things, please let me know!

Thank you in advance for your help!

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You seem to be doing really well, congrats on the marriage, the girls and your overall situation!

What budget?

Was it a one time thing? Are there risks you would expand it and issue more loans to your family?

Should it be considered repayable on the short term or should it not be considered as available for the timeframe of your home purchase?

Insurance probably plays a big role in providing support in case things go south. I’d read what I can on the internet, contact an insurance broker, have them explain what is available in your situation (to both of you, of course) but not sign a thing. You could then talk things through with your partner, search for more focused information and decide how to move forward.

At first glance, I’d at least try to see what can be done to protect your income (and assess whether or not it is worth it).

With good insurance, your asset allocation can be more agressive (provided you have the temperament for it). Without it, I’d err on the side of a more conservative allocation.

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Thank you, Wolverine!

The house budget is the problem; we have no clear vision of how much we can afford. That said, we are looking for a small house close to the city, and therefore a budget of around 1.2 - 1.5 MCHF would be realistic.

The loan from family members could be used for the home purchase.

Regarding the insurance, as I just recently started, I only insured (health and accident) a base salary of around 90 TCHF (since I know that this is enough for our fixed costs).

Regarding the asset allocation, we are not sure if investing with a time span of 3-5 years makes sense, or if we should rather keep it as cash. However, it feels a bit odd to keep around 250 TCHF (including the loan) as cash in the bank with nearly 0 interest.

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Regarding the asset allocation, we are not sure if investing with a time span of 3-5 years makes sense, or if we should rather keep it as cash. However, it feels a bit odd to keep around 250 TCHF (including the loan) as cash in the bank with nearly 0 interest.

I struggled with this as well, and this was my thinking.

I guess the main question is: why 3-5 years? Why not now?
Is it because you’re not sure about actually buying a house, or is it because you want a house as soon as possible, but (believe) you don’t have the means right now, but should in 3-5 years?

Based on the budget you told us and your assets/income, it looks to me like you could start searching if not now, then much sooner than 3-5 years. Keeping your money safe/liquid makes sense in this scenario, you might need to deploy it quickly. But hopefully it doesn’t take 5 years to find something, so you’re not keeping 250k as cash for too long.

On the other hand, if you’re unsure, then I would invest. Worst case, markets dip, you don’t have enough money anymore, you can’t buy the house now, you might need to wait a few more years before it recovers, if it does. Is this acceptable? If it is, then the upside is potentially much better.

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Thanks for your answers. I’m not sure I understand the family loan properly, is it a loan you have made to other family members (you are the creditor, it is an asset to you) or that other family members have made to you (you are the debtor, it is a liability)?

As with many other situations, it is a risk assessment: the risk of you not being able to afford the house you want in your desired timeframe (because the market dropped and you don’t have enough own funds anymore) vs the risk of not reaching longer term goals because of insufficient returns on money sitting on the sidelines longer than expected because you ended up buying the home much later, or not at all.

I’d say it’s important that you and your partner are on the same page on this, as misunderstandings can lead to resentment. What risk is the more unbearable to take depends highly on psychological factors. Is it worse to you (as a family) to realize you have left a significant chunk of money on the table or to see a home you’d really like pass by and continue renting as the own funds you’d have needed for its purchase are no longer available due to market conditions?

I can’t find the graph I’d like to illustrate this (volatility propagation, to show the variability of outcomes of different allocations over longer time periods) but Lazyportfolioetf allows for some representations allocation by allocation.

For example, 100% stocks (in USD, inflation adjusted):

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Since 1970, the annual returns for 3 years periods have ranged from -18.61% to 43.17% (in real USD). It’s been negative more than 15% of the times (not visible on that graph, you have to use the general page for the portfolio for that).

Here’s a 40/60 portfolio:

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-5.75% min, 4.97% median and 18.38% max annual returns. Negative a bit less than 15% of the time.

It’s only a very rough illustration and there are many problems with it (in USD, most people won’t use the portfolio used that uses unhedged globally diversified bonds including EM) and so on. I tend to use inflation adjusted results to very abusively and grossly simulate returns in CHF (as inflation is usually low in Switzerland but high in the US). It’s obviously not perfect.

If you want to take a look at it and see how it plays with your own parameters, here are the globally diversified portfolios (click on any of them for their specific data): Balanced Lazy Portfolios: All Country World

The section I tend to focus on are the rolling returns. You can click on the “For a detailed rolling return analysis, click here” light blue box to get a detailed view of what the past had in store for that allocation over those lengths of time.

Of course, the future isn’t bound to follow the past and just because we haven’t met worse conditions between 1970 and now doesn’t mean we won’t in the future.

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I’d consider buying repeatedly into the pension fund to lower income tax for several years before buying home. This should give you sizable one-time tax savings. Then pledge part of pension fund as own capital. Invest whatever future money you will make in stock exchange. Pay back mortgage whenever interest rate goes higher than profits from stock investments.

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Thank you all for your help!

Timeframe: The 3-5 year timeframe is because of the kids, as we currently think it’s more convenient to live in a flat with them. However, I see the major benefit of a house for the kids when they are between the ages of 5-20. So, if we have to wait too long, I’d probably prefer to rent a house instead.

Loan: The loan is an asset for me (I lent money to my sister to buy her house – now she would be liquid enough to pay back the loan).

About the risk assessment: This is a very good perspective! It’s quite challenging, as there are many unknown factors, such as whether we would find our ideal house and how it would be priced. I believe I would be able to manage the risk of investing, and in the worst-case scenario, continue renting.

Buying into the pension fund: Very interesting idea, especially since there is still a lot of capital “missing” with only 25k contributed from my side. However, I’ve heard in the past that additional contributions only make sense after a certain age and not when you’re younger. Would this not be the case for me?

Additional Question about investing: We currently have most of our ETF money in VWRL. Would it make sense to expand our ETF portfolio by investing, let’s say, 20,000 CHF per month for the next five months to add an additional 100,000 CHF, or should we start to think about alternative investments?

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Given a potential home price of 1.5 Mio, you will need to have 20% (300k) liquid assets available in a timeframe of 3-5 years. Up to 10% can be pledged assets, the other 10% have to be hard cash.

Given your hesitation to invest shorttime, you may also consider investing longtime by financing part of the home with a lombard loan, based on pledged securities. You would need to keep only 150k as cash or cash-like (such as money market investment).

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Sounds interesting! Definitely worth looking into. I guess we just need to speak with the bank to see what options we have. I also have the feeling that I am not very creditworthy since I just started working self-employed and don’t have a long track record.

In the end, I guess we have to decide, as Wolverine stated, what’s more important: the dream of a house in the near future or having our capital work efficiently for us.

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I’m not actually sure about the specifics, but wasn’t it like if you buy into your pension fund, you cannot use that for 3 years buying a property? Or its at least taxed?

Oooor, because it’s pledging only, you could actually do it