I started reading about investing on the MMM blog and found my way here. I read a bunch of posts and a bunch of articles on investing, and while everyone says this doesn’t have to be complicated, I find myself very confused. So I figured I start a thread to clarify some of my questions I’m sure many of them are answered somewhere on the forum, but right now searching for answers leaves me even more confused.
A bit of background on me: I’m male, late 20s and I moved to Switzerland Zürich a couple of years ago. I work in tech and I have 0 financial experience except for the “don’t spend beyong your means” mindset. I’ve been putting money away and now I figure it would be a shame not to invest what I have or at least my upcoming income.
A couple weeks ago I opened an account with IB and wired 1000 chf to get me started, but I found myself very unsure of what to start with.
here’s my first question: how come I didn’t lose any money transfering the 1000chf from my UBS account to the UK based IB account? Weren’t there supposed to be some bank fees?
I know about diversification and I think it totally makes sense: I’m thinking I go with 25% bonds and the rest in various ETFs. Problem is, I have no idea which bonds and which ETFs to choose.
is there any thread or article or any other resources which could shed some light on what the bonds and ETF options are?
TrueWealth seems to have some automatic way of investing based on a general schema you can choose at first. That kinda sounds like what I would want considering I don’t know much about this stuff.
would you recommend TrueWealth instead of IB to someone who just started looking into this subject?
any tips and reading material you found to be a good resource as you started out?
If this post should be in some other category I’ll gladly move it if I can.
Thanks so much! I think this might be one of the first times I actually post on a forum, but this seems like a helpful community that’s worth being part of
Alex
If you transferred using the Swiss IBAN account number, it is completely free.
Forget bonds for now. I believe you should only be investing in government issued bonds of the country you reside in (or intend to retire in). For Switzerland, the yields are negative at the moment, so better keep cash.
For stocks, just buy VT. Nothing more and nothing less until you feel confident.
No, you will learn quick and it will be a hassle to revert back.
Hi @azrael, we’re also new to this method of thinking/investing, will be following your thread - when I read in the investor threads, it all just flew over my head. Completely. So don’t worry, you’re not alone .
I think it really depends on your interests. Do you have the time and interests in looking more into the financial topics? Then you should create your own portfolio with IB. There you have the full flexibility and control to buy any traded instrument (e.g. ETFs, stocks, FX). But you need to time to select the “correct” instruments by studying the fact sheets or read suggestions and time to keep your portfolio rebalanced, buy new instruments when you want to invest more money, sell when you need cash.
If you simply want to invest money broadly diversified, then an ETF based robo-advisor (like you mentioned TrueWealth) is a nice solution for a low price. But you will not be able to select specific ETFs there. It will suggest a strategy which should fit your situation and keep it always in balance. I’ve created a free virtual portfolio at TrueWealth some time ago and it’s nice to see how it works.
My advice is go for IB (because it pays off long term due to costs and taxes) and don’t overcomplicate this - choose a lazy portfolio. I’m extremely lazy, so my portfolio consists of only VT ETF.
I like it how TW creates a risk profile and I would recommend it to anyone to sign up for a trial account in order to see what asset allocation they recommend for you.
On the other hand they
sell you swiss federal bonds which are A LOT worse than cash on a 0% savings account (but they don’t earn a lot if they recommend you savings accounts).
are pretty heavily home-biased
wanted to sell me an UK stock ETF I believe is pure BS
recommend stuff like 1.2% of the Portfolio asia/pacific stock ETF which makes no sense at all.
I drew a couple of conclusions from my trial account where I would see my demo portfolio
(and I found out all the ETF they use) but I believe they have to make their recommendation looking too complicated than a simple 1/2/3-ETF allocation. I may be a bit influenced by Mr. Gigerenzer’s book where Banksters confessed that they invest their own cash in an 1/N-Portfolio but sell complicated Monte Carlo models to their customers because they can not admit to the customer that they have no clue what future brings but for an 1/N the customer don’t need them.
I used to work for a financial company that builds complicated models to optimise allocations in portfolios and funny enough I haven’t met there anyone who investing in anything. There’s one guy who’s doing algo trading on options but everybody else is just spending everything they earn.
You know (hopefully) your product better than your customers, and not only its shiny side.
There are multiple examples:
Steve Jobs did not want that his children use iPhones or iPads
The “Einstein of the stock market”, the iconic veteran of the NYSE you see on every other picture, said in an interview: “I have never owned a share of stock in my life. I do not eat my own cooking.”
Back to the retirement + Switzerland topic, some people who have worked in the 2nd pillar business won’t throw more than the mandatory sums into it.
Can second that - a good friend of mine worked in investment banking for years and private banking later on, making astronomical amounts of money (compared our income), huge bonuses and so on. She always lived very expensively, I think consciously or subconsciously influenced by her clients AND her colleagues, and has very few savings besides the mandatory.
That does make me feel a bit better about this I guess the idea is to just start somewhere and adjust from there. It’s just that money is involved, and it seems like the returns are small enough, that taking the wrong decisions at the start might cancel out the rewards for a while
Good luck!
Yeah, I’d like to go with the lazy approach as well. To me it seems that being financially okay means you don’t need to give money too much though.
So you went with just VT? I might go with the same at first. I plan on investing a part of my salary every month and I guess this month I’m going to go with VT. I guess VTI should be a bit less risky and with lower returns, right? The fact that it tracks international market sounds to me like it is more diverse.
If you want all world through separate ETF, the best combinations are VTI + VXUS or VTI + VEA + VWO. You’ll need to take care of proper balances though, the reward being slightly lower TER (ongoing fees).
I really recommend starting with a TW account until you are little more experienced before moving to IB. If you have invested less then 100k you probably pay less fees with TW anyway.
TW does sound tempting because it’s simple, but it does seem a pain to change my mind in a year or two. If a year from now I decide to move, then would I keep what I invested with TW there, or would I take everything out and move it to IB? Seems like taking them out and reinvesting doesn’t really go well with the whole long-term investment idea.
You got your math wrong.
TW charges 0.5% + product fees, meaning you land at around 0.7% TER.
IB will charge 100 CHF per year on deposits below 100k and much less once you cross over. VT cost is 0.1%.
easy math:
100/(0.007-0.001) = 16666
this is the threshhold where TW becomes more expensive. Considering that you need to deposit 8000 CHF to start with, you’ll cross it in no time.
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I’m sure many of them are answered somewhere on the forum, but right now searching for answers leaves me even more confused.
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