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.
Hi!
I wasn’t not sure, if I should start a new thread or ask my question here, since the title is super fitting :).
I am also new to investing and am trying to figure out a suitable portfolio for me. I like the Boglehead approach…
On this site I found some nice portfolios using ETFs. They seem to always use the same fund source. Is this some fee optimisation? The rebalancing might cost less, when using the same source?
Does anyone know more about this?
Yes you’re right I had a wrong number in my mind. Compared to a many different brooker and IB was definiticely a cheaper one. Still with low money invested TW is a convenient good choice in Switzerland in my point of view. With referrals you only pay 0.25% fee. TER with my portfolio is 0.15%
Let me chip-in. I started investing for the first time ~2 years ago and after evaluating many options I decided for TW. Through research I knew that IB and other options were cheaper after reaching a certain amount of money invested (there’s actually a good post in this same website), but for me personally TW had a lot of advantages:
IB is cheaper only if you are ready to lump-sum invest large amounts. With TW you can use dollar-cost-averaging and the fees are included in the 0.5%. Since I wanted DCA for the peace of mind it gives me (I know that lump-sum is actually better, but it was my first time investing and with DCA I feel more confident in case of a big crisis). With TW I can DCA relative small amounts without paying exorbiting fees.
At the time I wasn’t sure if I was ever goint to pass the threshold were IB and other brokers are cheaper than TW, and even if it was, it wouldn’t have been for some years.
TW gave me the confidence also regarding taxes. I had never invested and had no idea how to file taxes, and no one to ask for (without paying). With TW I get a document and instructions for how to file my taxes.
The company made me a great impression. Before investing I have sent an email called “2 questions about investment start and fees”; it ended up being a 50+ email conversation about all the questions I had. The support was amazing in answering all my questions, and it continued even after I invested with them. The guy from support even invited me to grab a coffee, and I was only investing the minimum to join them, I am not a big fish or anything like that.
If you want you can create your own portfolio (it’s what I did), I asked them a list of their ETFs and picked the ones I wanted in their app. My total cost is 0.61% if I am not wrong. In my personal opinion ok for my situation described above.
TW definitively helped me pull the trigger on investing for the first time by giving a lot of confidence. I can not recomend it enough if you are in a similar situation. If you are a seasoned investor with relatively high amounts to invest, ready to lump-sum it, then go with IB or other brokers. If you’re relatively new, want to DCA and/or in general don’t plan to invest that much, then TW is a good alternative, at least for starting out.
p.s. if anyone is interested write me for the referral, someone already mentioned it, it’s 50% off on 1 year of fees, so only 0.25% + your TER.
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