Hello. I have enjoyed browsing the blog and this forum and thought maybe I can get some advice here. I’m about to start investing after accumulating cash mindlessly for a long time and thanks to resources like this community I have a pretty good idea how to go about it, but still a few outstanding questions.
My situation is that I’m 40 years old, have a decent salary, am not really into the frugality part of FIRE, but wouldn’t mind retiring at 50-55 instead of 65 which should be possible just by making what I have work. My assets are roughly 50% cash (25% CHF + 15% EUR + 10% GBP), 30% 2nd pillar and 20% 3rd pillar (invested in a generic bond/equity mix – might need to upgrade this too but it is performing well for now). I intend to employ a buy-and-hold strategy and do as little as possible after completing the investments, just living my life as usual, and topping the portfolio up with savings once I build a little cash reserve back up. I want to take on a moderate risk only. Something like 5% annually is all I need really to retire at 55.
I opened a Swissquote and a Degiro account and am almost ready to pull the trigger and invest in mainstream ETFs, but still have a few questions outstanding and it’d be great to get your input:
Should I bother with bonds at all at the current returns? Or is it better just to hold cash for now?
I have an aversion to currency exchange and quite like having CHF/EUR/GBP, but Degiro only lets me trade in CHF. Should I just swallow Swissquote’s fees and stamp duty?
Should I invest everything at once, or in chunks, and if so, how big with what frequency?
In addition, I’m curious what is the prevailing opinion about buying back your 2nd pillar years, a.k.a. “rachat”? I did it once in the past when I had a large one-off income, and this may happen again soon. Tax is brutal in this situation, especially since the rate goes up on everything else, but cumulative interest is magic after all, isn’t it?
Happy to clarify anything. Thanks for your thoughts.
If you are planning a portfolio which is based on World ETF , Swiss ETF and Swiss corp bond ETF, then you can buy all of them at Degiro in CHF. I think tickers would be FWRA, CHSPI and CHCORP. I did not mention VWRL or VEVE etc because even though they trade in CHF on SIX, they will pay dividends in USD which you might not like FWRA is accumulating, so no issues of dividends in USD.
Swissquote also have these ETFs.
Regarding one time purchase vs. buying in chunks. I suggest to watch the video below. Research says buy all at once. But emotionally, you might be better of doing it slowly because if market suddenly crashes, you will not feel so bad.
Well. if you want moderate risk, you might need to take lower equity allocation appropriately. What is lower? its individual decision. But the problem is that to get 5% return in CHF terms is not very easy. CHF is strong currency. So it would be tough to get such a return without indulging in equities meaningfully.
Is there a reason you did not open an IBKR account? It probably has not escaped you that it is one of often recommended things to do, mentioned on this forum.
The theory states that lump sum (everything at once) performs better, the practice (IMO) is that investing in chunks works better for human psychology.
You’ll feel a lot better if the market tanks after your first investment chunk compared to if you invested everything at once.
OTOH you might have some FOMO if the market takes off like a rocket after your first investment chunk.
Size wize (for chunks) go with what you personally feel comfortable with? Start with 10%, see how it feels being in the market for a couple of months or so, then adjust the chunk size for your next tranche accordingly.
Not sure what the prevailing opinion is, but I feel the closer you are to your desired retirement age, the more it makes sense to pay into pillar 2 – you’ll have no drawdowns whatsoever, a guaranteed (albeit small) return, and tax savings can be significant. Given your description, I would do it. I regret only getting smart about this a couple of years before FIREing.
The only reason maybe not to pay into pillar 2 is when you’re at the start of your career and – if you already know about investing (kind of rare at a young age) – you have a decent chance to make a better return (taking into account taxes) than your pillar 2 given your super long investment horizon.
Oh, and as @SwissMousse has suggested: go with a real broker instead of Swissquote. This has already been debated heavily on the forum, you’ll find the topics easily.
Thank you all for your answers. More perspectives welcome of course!
@Abs_max Naturally I will invest a meaningful part in equities. The comment about moderate risk was to give an impression of my objectives.
@SwissMousse I know IBKR is many people’s favourite, but I’d rather not have a connection to the US. Are there European brokers that will let me trade in EUR and GBP, and is it worth the trouble or is it better to convert everything to CHF and stay on Degiro? Instinctively I don’t want to convert, I think that holding multiple currencies is good, but my instincts in this space are not well developed.
@Your_Full_Name Thanks a lot for your answer, esp. on the 2nd pillar. Glad to read it and it is going to make my life simpler.
Sure, I just wasn sure if you missed it. DeGiro is a bit limited in some things (I do have an account, but I moved it from CH to degiro.de as I only buy at XETRA (lower costs than SIX), and do the currency conversion myself with Wise. However, it is dormant now.
Saxo might be an alternative, they recently seems to have reduced prices, but I don’t know the details. Using a foreign broker makes sense in any case, avoiding stamp tax and generally lower costs.
If you want to have no connections at all* to the US, I’d recommend going into the Tehran Stock Exchange. The Moscow Exchange would be an alternative, but it’s currently closed off for foreigners.
I’m saying this half** tongue-in-cheek but I actually heard a really fun and interesting Odd Lots episode – What’s Been Happening With the Iranian Stock Market | Odd Lots (youtube.com) – about it where Tracy Alloway and Joe Weisenthal speak with a London-based fund manager who specializes in Iranian stocks.
One gem I distinctly remember from the podcast: the fund manager is based in London but he needs to have local people on the ground in Iran because for some companies’ dividend payments, you have to collect them in person, and for some other companies you need to go nudge the company and remind them that the dividend was already due but hasn’t been paid yet …
* The US doesn’t have direct or indirect connections, but probably still influences companies listed there via sanctions, etc.
** Half tongue-in-cheek because all financial systems are not only well interconnected, but really intertwined and woven together. The string that the US can pull on is by far the largest and strongest thread of them all.
I have a little follow-up about currency diversification/conversion.
Thanks to the forum I understood that the trading currency of the ETFs matters little and I was happy to just convert my substantial GBP and EUR (and soon USD!) holdings into CHF, dump them into Degiro and have a single, easy to oversee portfolio.
Then I started counting and it seems to me that this would mean multiple currency exchanges, which could add up to a lot:
initial conversion to CHF (that’s ~0.5% with e.g TransferWise)
conversion within Degiro whenever I buy a non-CHF ETF (0.25%)
coversion of non-CHF dividends back to CHF (0.25%)
conversion at retirement to whatever my retirement currency is, since it might not be CHF (~0.5% again, on a large amount long-term)
In this situation, is it not better to pay 0.15% stamp duty and CHF 10/month custody with Saxo and buy ETFs in the currencies I hold? Am I missing something?
The issue you have is that Degiro only allows one base currency and converts everything into that currency. That’s why you have these exchanges
On IBKR, Swissquote and Saxo, you can maintain different currencies and hence ETFs with different underlying currency
For example -:
ACWI is sold in CHF when bought at SIX
VT is sold in USD when bought at NYSE
SSAC is sold in GBP when bought at LSE
All of these can be bought easily on IB, SQ and Saxo without converting anything. But if you are trying to maintain everything in same currency then it’s different issue
IB of course have no stamp duties. Saxo and SQ will.
IB has lowest trading fees , Saxo a bit higher and SQ higher than Saxo
Saxo has lower currency conversion fee vs SQ
Saxo is trying to sell its trading division. Something to be aware of. As it might mean fee structure might change with new buyer
As you don’t like connections to US brokers, then Saxo or SQ might work for you.
For example I buy SSAC at SQ in CHF when I have CHF and I buy SSAC at SQ in USD when I have USD. And I don’t need to convert anything
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FWRA is accumulating, so no issues of dividends in USD.