So, I'm ready. Need a bit of guidance for the final steps

Hi everyone,
So enough lurking and reading, it’s time for me to start doing.
Since first learning about MP, I opened my 3a VIAC account end of 2019, then COVID hit, then I hoped everything would crash further but no, had too much work to allocate enough time to do anything so I simply didn’t move forward with my FIRE plans. So I missed opportunity of buying in at a 30% discount. On top of the missed opportunity of just starting investing when I got out of uni having studied management and finance…

Hindsight 20/20 and all that, anyways, here I am.

Current Situation
32 yo EU national living in VD since 2018. Love it here, planning to stay, my gf is doing her PHD in BE, she also loves it here.
I am a Finance/IT consultant and have been working from home since feb 2020. I would like to move to BE or ZH at some point this year and hopefully move jobs too as I can’t say I love what I do.
No plans to buy a place for the coming 5 years or any other major purchases I believe.

Financial situation
Cash: 65k
“Yolo account”: 7~10k crypto (mostly ETH) ; +2k fiat ready for the next buy opportunities.
Pillar 2: I believe it is maxed out by my employer, I need to recheck this actually.
Pillar 3a: 3 full years (incl 2021 contribution) @Glob100 ~ 21k VIAC
Debt free: no loans, borrowings, leasing, mortgage. Nothing of the sort.

Investment goals
I think I would be ready to allocate 50k for investment “immediately”, the remaining 15k being the emergency money.

Initial investment method: (need your advice here)
Should I entirely “lump sum” it immediately as statistics would tell me to ?
Or sort of “DCA” it over the next 6 months in three “lumps” of 20k (extra 10k from the additional cash saved by then) ?
Or initial 20k + bi-weekly/monthly buys spread over the 6month time frame or other ?
Any other strategy to “spreading out” the initial investment I should consider ?
Is one method better than the other from a fees perspective ?

Once the initial investment is “in”, how do I best proceed with my monthly savings ? Monthly or Quarterly ? Going forward, I should be able to allocate between anything between 1.5 and 3k. Depending on the month.

Broker (need your advice here)
I just opened an account at Degiro as it was supposed to be more interesting than IB if under 100k in assets. However I am also seeing contradictory posts.
Is it ok to start with that now and move to IB once I pass the 100k mark? (Not before second half of 2022 I assume) Or should I close my Degiro account right away and move to scary IB ?

Investment product (need your advice here)
This is where my current knowledge is still a bit lacking as I haven’t taken the time to correctly research best practices in portfolio building and DDing ETFs. I’d be greatfull for any links you might have to catch up on these topics. More than just replicating someone’s portfolio, I’d like to know how to build mine, why balance certain variables in a way etc… Even if end up if the same portfolio as initially advised!

But my understanding is that, SWX | VWRL | IE00B3RBWM25 | CHF is the holy grail of diversified “invest & forget” available on Degiro ?

Similarly to my crypto account/practices, I will also at some point allocate 5k to the “yolo account” for stock picking or other “WSB considerations” (no options or leveraged investments though, only stocks, my yolo has limits). Unless ETH/BTC crashes back to March/2020 prices, in that cas, that goes all to my crypto accounts :wink:
But this isn’t really relevant to today’s post anyway.

Is there anyting I missed and should take a look at ?
Also should I keep a certain amount of cash for the taxman or is this taken care of withing Degiro/IB ?

Thank you for your help!

3 Likes

Ask yourself this: if this money was already in the market, would you:

  • Keep it invested = lump sum today.
  • Sell everything today and DCA back into the market over 6 months = DCA over 6 months.
  • Keep 20k invested, sell the rest and DCA back into the market over months = …you should get the idea now.

It might not feel like the same thing, but in reality it is. Money is fungible.

Btw, I’m using IBKR with currently 22k in assets (probably ~40k by end of this year). Degiro custody account (you don’t want basic because of securities lending) will be more expensive than IBKR from ~35k due to dividend/FX fees.

4 Likes

Regarding your investment strategy with your monthly savings:

Let’s assume you’ll save 600k over the next 20 years. Looking at this chart from 1970-2020, what are the best moments to invest those 600k? In order:

  • Everything in 1970 (if it would be possible)
  • As soon as it’s available.
  • Waiting x weeks/months/years for y to happen.

If you came to the conclusion (after reading my 1st post) that lump sum is the right choice for these 50k cash, the next conclusion should be: I’ll invest everything what I’m able to save on the day it’s available. No market timing, no nothing, plain and simple. boring and automatic but boring investment strategies are those that will get you rich someday.

Regarding ETF choices: The obvious one is VT in IBKR: https://investor.vanguard.com/etf/profile/portfolio/vt But you are free to chose whatever you want.

4 Likes

That is a very cool way of putting it. Thank you!

Ok, I will look into opening an account this weekend. Is there any use in keeping Degiro for a specific asset class or whatever or should I straight up close the account ?

Indeed, my hesitation comes more from current state of us politics & corona situation. As in, could there be a dip to take advantage from ? And is there a was that’s more efficient than another from a point of view of buying fees.

1 Like

My degiro account is still active, eventhough I’m not using it. There is no harm in keeping it if it’s for free. But you could also close it again if it bothers you.

If you start with IBKR now, it will cost you 10 CHF/month anyway (after 3 months of using it). Trading/FX fees are part of this minimum fee. So if you are generating 12 CHF of fees within a month (highly unlikely), the total cost will be 12 CHF. In reality IBKR is extremely cheap. 2$ for FX change and 0.0035$/share (min. 0.35$) for trading. VT is at 95$ right now. Investing 50k CHF into it, will cost you ~4.08$ in total (FX + buying fee). So you see, when using IBKR you don’t really think about the fees. Once you cross the 100k milestone, it will come down to 2.35$/month if you just buy VT once per month.

I was in your situation 14 months ago: https://www.bogleheads.org/forum/viewtopic.php?t=293747

I was afraid to lump sum, but came to the conclusion that it’s the most sensible thing to do. Despite doing it in a pretty bad moment (16k in December 2019 and 10k of my Bonus on February 21st lol) it turned out totally fine:


(this includes emergency fund and pension fund)

Investing my bonus on the exact peak before the crash and seeing my 27k drop to 18k (-33%) within 4 weeks was hard, but a good lesson! If I can’t handle such a correction now, what makes me think that I’ll be able to handle it with 500k in assets in the future?

Being hesitant/afraid of the market at the beginning is totally normal. But the sooner you get it out of the way (by just lump summing into it) the sooner you’ll forget about the markets. You’ll start ignoring everything what is happening and just invest every month what you’re able to.

Like John Bogle (the founder of Vanguard and the father of the index fund) used to stay: Ignore the noise and stay the course.

8 Likes

IB validation in progress.

Thanks a lot for the clarification and required “shove” ! :slight_smile:

1 Like

Don’t overthink it.
If you believe everything on random internet forums, go all-in lump sum now.
If you have doubts, split it up in some way. No point to overcomplicate though.

Surely there can be one. Especially at the tail end of bull markets that aren’t underpinned by similar strong economics overall (2001, 2007). Which is probably just what we’re currently approaching, if we aren’t there already tomorrow.

The exact timing of that dip however will still hard if not impossible to pin-point in time.

5 Likes

Unfortunately !
Is there such as thing as a generally accepted ratio of portolio size or periodic investment amount to what one should keep aside to take advantage of such dips? Or is this mainly left to the appreciation of each investor ?

I you’re happy with your career (I assume so) and you plan to work for the next 10 years at least (I assume so) and keep having a good income (i assume so), and you don’t have a huge capital at the moment (you don’t) then your best strategy is:

  • open an IB account, put all the money at work immediately as a lump sum, and pray for a market crash happening as soon as possible.
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That’s why you rebalance with your non-equity allocation.

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I think you missed the news that this “bull market” had 3 bear markets (2011, 2018, 2020).

Of course there will be a dip in the future. But will we be at a lower level than today?

Don’t love my career but I will continue to work for the coming 10yrs yes.
Would this strategy be any different considering a mid 6 figure windfall in the coming 5years?

Please explain! How do I rebalance my etf portfolio?

Yes if you’re 100% equity then there’s no rebalancing (but in that case you’re fine with those dips).

1 Like

It would make even less relevant your today deploy strategy of a mid 5 figure sum :slight_smile:
Cross your fingers for a strong market crash before your windfall comes!

Makes sense! Thank you!

PS:

A 50-year investment horizon as chosen by Cortana above is longer than most investors will live and be able to invest significant money in the stock market - let alone reap the fruits of their investments for early (if any) retirement.

To put this into perspective (and yes, I’ll just as deliberately be choosing my dates as Cortana):

Cortana could have been that random guy on your new friendly internet forum telling you just the same back then as he did today: that this - or any - time was just as good as any other to invest. Go all and do the lump-sum. Cause, you know, who can predict the future?

This is a popular MSCI World ETF’s performance, including dividends - on a CHF basis:

chart

There you have it: That would have been your 9-10 years of enduring a loss in your investment (remember that you’d have to pay taxes on dividends). Furthermore, you could have lost more than 55% within the first two years.

Now, surely I have deliberately chosen a worst-case scenario haven’t I?
Yeah, I already admitted to that. It’s easy to find such in hindsight, isn’t it? Indeed.

I am not even saying this should be basis for your investment decisions - yet 10 years are a long time, and losing more than half of your invested capital can be nerve-wracking. Would you have had the confidence and peace of mind, to “just stay the course” through that?

In the end, I think it comes down to your personal level of risk-tolerance - and what you feel comfortable with. Even if “all-in” lump sum investing may prove to be the best choice under uncertainty most of the time, statistically, it certainly isn’t always. And there’s nothing wrong in giving up a few “on average” expected returns for less volatility and lower drawdown on your overall portfolio through cost averaging (i.e. while you might lose out a bit from investing a part of your savings in higher-return assets such as stocks “later”, you will likely not lose as much in case of a bear market).

8 Likes

Going into finance is one of my career options but I seldomly meet people in finance who are really satisfied. Is that also your experience or are there a lot of colleagues who (intrinsically) love what they do?

There are plenty of investors with a remaining life expectancy of 50 years.

@San_Francisco
Most people who pursue FIRE will live 40-50 or more years. It’s not only about accumulating, the performance of the market will stay very relevant in retirement.

Btw, you didn’t chost the worst case scenario. As paradox as it seems: Experiencing a major stock crash early in your accumulation phase is something you should pray for and not fear for. Those 10 years of “no returns” would be ideal for all early accumulators.

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