VT in 3a and IBKR with, is This a Good Strategy?

Investing / Others
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Hi everyone,

I’m still very young and currently building my long-term investment strategy. Here’s my setup:

  • Pillar 3a: 99% invested in a global equity strategy, essentially the same as Vanguard’s Total World Stock ETF (VT).

  • IBKR account: ~80% in VT and ~20% in SMMCHA SW (Swiss mid-cap ETF).

So overall, I’m heavily invested in VT, with also some Swiss exposure.

I read that on the Mustachian site he doesn’t buy bonds in taxable accounts because he considers the second pillar (pension) as bond-like exposure. However, he hasn’t really addressed the situation I’m facing:

I feel like I might be “investing double” in VT across 3a and IBKR. I’m not sure if that’s optimal. Since I’m still young, it makes sense to go all-in on equities in 3a, but should I also be allocating heavily to VT in my IBKR account? Or would a different approach make more sense?

Thanks for your thoughts!

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Hi Robin, welcome.

You can be pragmatic and leave it as is. VT is a good choice and VT + “some” home bias is fine.

If you would like to be more precise, you need to look at the overall picture:

Add all your stock market investments up, regardless of where you hold them.

Decide how much home bias you want with the Swiss mid caps - and calculate the percentage on the sum of all ETF positions (broker+3a).

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Okay so you think my strategy is fine if i mostly just have VT plus a bit CH in broker and pillar 3a only VT?

I just thought maybe its too much US exposure or i maybe should do Pillar 3a different than my other investments…

Im still very new so forgive me id my questions are stupid :slight_smile:

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I’d split the problem into two:

  • What total asset allocation do you want to have in your portfolio? So this is the question about whether you should or not go full in on stocks, have bonds, whether US is overexposed, CH is, etc. There isn’t a perfect answer here, you might get different opinions - but I think it’s safe to say that what you are currently doing is nothing unorthodox (if else, it comes probably very close to the average suggestion you’d receive on this forum)
  • Once you decided on the allocation, which part of it to put into pillar 3? It’s a bit of splitting hair at this point, but if you have high marginal income tax rate you should put instruments that generate most interests into pillar 3 and the ones that generate mostly capital gains outside of pillar3
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You’re doing fine. Check your asset allocation after 100k, 200k, 500k, etc. As you progress with wealth accumulation, you can deploy capital to other assets. Maybe buy a home along the way, take a year off, study some more - whatever makes you happy.

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It‘s very much fine. You also basically have one big portfolio after all essentially.

I personally don‘tvlike SMMCHA though, it‘s just 30 stocks on an already small subset of swiss midcap stocks.

SPMCHA has 80 midcap stocks in it as a conparison. Better diversified.

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Thank you for your response ill look into it.

But so for a young guy like me its fine to just bang my money into something like VT?

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Absolutely fine.

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Please,

I know it’s not going to sounds cool and sexy, but hear me out:

In your situation, it is mostly your income and savings that determine the growth of your portfolio. One reasonably low cost globally diversified fund will work totally fine for you. You don’t need to dig into superoptimization of your investment strategy until you are 30-35 and your portfolio will be 100k+.

Another simple rule of thumb about the composition of DIY portfolio: make use of not more than one fund per 50k invested. Below that, you just don’t have the scale to profit significantly from the optimization.

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Care to explain this a bit more? I realised that organically my own portfolio evolved like that but what are you thinking about? Third party risk? Provider risk? Or something else? Inevitably fairly soon all these 50k chunks will outgrow the 50k though won’t they?

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The reasons you mentioned are also important, but the main point of splitting a portfolio onto multiple funds is fees (TER, taxes) optimization. Well, you know how difficult it is now days :sob::sob::sob:, because existing one fund solutions are already well optimized :partying_face::partying_face::partying_face:.

If you save 0.1% p.a. of fees on 100k CHF portfolio, you save 100 CHF in a year. If your portfolio is 10k CHF, you save 10 CHF. Probably won’t even enough for a Starbucks Latte, AND you most probably incurre some extra fees when buying 2 (3, …) funds instead of 1.

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Okay sorry, I misunderstood what you mean. Not to use 2 different global funds, but to make a split such as Developed + Emerging; US + DM ex US + EM etc.

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Thanks for your time Dr.PI, but i think im almost exactly doing this no?
My question was more related to if i should have different strategy for 3a vs normal investments.
But as far as i understood im doing quite fine with my VT strategy in 3a and in IBKR my VT plus the SMMCHA SW.

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I think it is not a big deal to have more than one. if you want to start with 3, then to avoid extra fees, if you pay monthly into your investments just rotate between them. pay jan in fund1, feb in fund2, march in fund3 etc.

By paying in round-robin instead of splitting montly payments across 3 funds, you don’t increase transfer costs and number of transactions.

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So you wouldnt buy two all world funds but rather have maybe 1 developed fund and 1 emerging markets fund? And is this still about 3a or also for normal Broker?

Im so sorry this is still all quite overwhelming for me. Im trying to just boglehead but i want to understand you aswell :slight_smile:

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Almost. The home bias you introduce will hardly make any difference in the (early) accumulating stage, but you can see yourself how much it preoccupies you already.

You should consider both 3a and taxable account as one portfolio and obviously have one strategy for it.

I do, but it can help to save fees only in order of 0.1% per year. There is no need to do it, I just like calculations :laughing:.

And please understand: you are doing very good already!

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Right, but this puts the OP back into the rabbit hole of weights, markets, factors, tilts etc which makes everything complicated again, so while Ben Felix has said (paraphrased) that “100% VT is a good start” I’d argue that it could be all one needs to do to ride the market with as little thinking and costs as possible.

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Hahaha yes it kinda does but im interested anyways because i really want to understand and learn.
But anyways i think im just gonna proceed how i did because as far as i understood im doing quite fine lol, just put every month money in my VT on ibkr and in my pillar 3a which also has VT as strategy :slight_smile:
BTW. i only just started buying the ubs etf so im just gonna stop buying it i think lol

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Well, if you want some CH bias on easy way, you can just go 100% VT with IBKR like you do now and choose the Global 100 with your 3a (guessing Finpension or Viac). Global 100 have 40% CH

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Yes im with VIAC atm.
For Pillar 3a i have to make different pots anyways after a certain time so maybe then ill ill go with the Global 100, currently i built a strategy which is pretty much the VT.
:slight_smile: But good idea thank you