Where to invest 40k Euro and +50k Canadian Dollar, I live in CH

I live and work in Switzerland and am quite newbie in investment, I have been following the stock and commodity markets since long time but till now my only investment is my 3A account with VIAC. Don’t have any other investment account anywhere else.

my family wish to transfer to me about 40k Euros and some Canadian dollars(probably+50k) to invest as the money has been sitting there as cash doing nothing. For the moment I think of investing in these 2 currencies directly without echanging to USD or CHF if possible.

  1. Which asset would you invest in and with which bank/broker? I have my general CH account with UBS. 2. I am thinking to put it in the stock or commodity market, VIAC 3A performance has been satisfactory in the first 6 months (+10% for me) but I already paid the full amount for 2021. it is absolutely IMPORTANT to have the option of de-invest and cash out at any time, or at least at each month. This was also why I have chosen VIAC over Finpension as VIAC has the option of fully de-invested(100% cash) at any moment

Thanks!

…so has finpension!? :thinking:

Personally, since we‘re talking (1) personal finance (2) in a cross-border / multi-currency context (3) concerning funds that are not liquid (i.e. can not be „cashed out“, freely exchanged, transferred or used for consumption)…

I wouldn‘t call that de-invested.
You rather become invested in CHF cash and its returns.
(which does not need to be a bad thing relative to the EUR and CAD).

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Hi neutralname,

I’ve got three questions regarding your request:

Would you be investing for yourself (i.e.: that money is gifted to you) or on behalf of your family (which may warrant a more conservative approach)?

When you write that it is important that you have the option to cash out at any time, do you mean sell the investment and get whatever cash remains out (in the hypothesis of a market crash, meaning you want liquidity but can stomach loosing part or all of the principal in the process) or do you want to try and protect the principal as much as you can, sacrificing returns in the process (there again, warranting a more conservative approach).

In case this is relevant to your situation: in which time horizon do you expect to have a need for some of these funds (and in that case, how much)?

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btw if that’s the case, make sure you check any relevant tax implication (even if not taxable, gifts may have to be declared, either in country where it’s received or the country where the person who gifts it is located)

Esp. since it seems like a sum that will be above AML reporting threshold and will be noticeable due to wealth increase in tax filings.

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Thanks, I edited my post. For the moment I think of investing in these 2 currencies directly without exchanging to USD or CHF if possible.

I don’t really understand your statement in the parenthesis.

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Thanks. We are flexible on this point, would be better to avoid as much tax as possible of course. As with the money currently with my family, there is no fortune tax on it at all and there is a tiny interest.

The first, even for the 2nd point I think VIAC Global 100 is kind of my risk appetite(with the option of sell out in each month).

no we don’t have this need.
@Wolverine
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Thanks we will take care of the departure country, but it would be great if you could elaborate what we should pay attention on the CH side and its implicaition. in the canton I live it seems fortune tax is only applicable when we have +500k, even with these 2 cash-in I am still below +250k

@nabalzbhf

Why do they need you to invest it instead of investing it themselves?

Gift tax in Switzerland - www.ch.ch at a minimum each canton will have declaration obligations. As to the actual tax, it will depend on canton (and usually on what the relationship to the donor is, as there are amounts which are tax free, but that can for example be a lifetime exclusion which will be taken into account for inheritance taxation).

FWIW, even if there’s no wealth tax to pay, there might be filing obligation above some amount even if you’re taxed at source.

edit: summary is here: https://www.credit-suisse.com/media/assets/private-banking/docs/ch/privatkunden/finanzplanung/erbrecht-steuertabelle-de.pdf

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CHF can gain or lose value compared to EUR and / or CAD.

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@Wolverine Hi I don’t want to disturb you, just a reminder as I replied your questions in my last post, do you have any ideas/suggestion? Thanks

Sorry for the long post, I’d rather be thorough with this matter since there seems to be the money of relatives at stake.

I’m still not sure I truly understand your situation. My understanding is that your family would send this money to you with the understanding that it would be callable at any time, should they need it. This would warrant a conservative approach as it is easy for people to think their money has been mismanaged when a market crash occurs, even for family. Money matters tend to put a level of psychological stress on relationships.

If this is not the case and you are free to loose whatever amount of that money without any expectation other than your own, then I’d pool it all, choose a broker (Interactive Broker (IBKR) probably has the lowest fees), assess my potential short term needs (emergency fund, real estate, family, travel,…), keep those in cash (CHF) and invest the rest in a widely diversified global ETF like VT/VWRL. If you are in a commited relationship, I’d assess the situation with my partner before taking a decision. Your short term spending is probably in CHF, if you intend to move later on, your retirement spending might be in another currency. I’d take my potential fixed income/cash portion in those currencies.

Your question about being able to disinvest makes me think you’re potentially not that OK with being 100% in stocks (VIAC’s global 100-like strategy) during a market crash. If so, I’d make sure to plan ahead for what I’m meant to do during a market crash and then stick with it when the time comes. Since knowing the future is hard, and so is timing good exit and entry points, the advocated path is to choose an asset allocation you can ride during the crash, i.e.: not disinvest at all, whatever happens. If so, 100% stocks might not be the best allocation for you. I like the way VIAC deals with the low interest rates situation too so you might get inspiration from their strategies if you want to build a more conservative portolio in the current environment: Pillar 3a: Strategies – VIAC

If your family is sending you this money thinking they may get it back at some point, then I’d go for a more conservative approach. If the EUR and CAD come from different people/branches of the family, I’d keep them separate and account for them separately.

That would warrant a discussion with your relatives about what they feel OK with:

  1. Do they want an european/canadian broker or are they OK with any broker you may choose?

  2. Do they want the money to be invested in EUR/CAD or are USD/CHF ok? Will they stay calm and let you manage the money without troubling you even if high inflation hits the US?

  3. How much of a loss are they willing to tolerate without puting any stress on you for it? Are they OK with not having access to that money for, say, 10 years, or do they expect to be able to withdraw from it before that? What happens if a family member faces hardship and needs part or all of that money?

'1) will define your choice of broker. There again, IBKR is probably your best bet but Degiro, if they want an european one, or a canadian one if that’s their desire might be better options if that’s what it takes for them to sleep soundly.

'2) defines your choice of funds and may help define your strategy: I’d invest my fixed income in the currency of the benchmark/expectations I’d be put against. Safe bonds in the eurozone seem to be negative too, so cash (in EUR) may be the better option there too. Canada seems to still have positive yields so government bonds are probably a better way to go (general advice is to match the duration of the bonds/fund with your time horizon. When in doubt, intermediate term is usually the advised way to go).

'3) defines what appetite for risk you may have.

If the answer from your relatives is “we’re not ok with loosing money at all”, walk away from the proposal. Nobody can guarantee gains in the stock market, taking that bet is not worth loosing good family relationships for it.

Otherwise, I would then try to define with them the growth expectations for their capital, keeping it conservative (1% may be reasonable, 2% would already have you take some relatively important risk, anything above that has significant risk of you not meeting that target on a regular basis). The purpose is to give them a benchmark that can ease their mind and help brush their questions/suggestions away to stick with your investment plan. Sticking with the plan is paramount and the more people feel concerned about the money, the more “advice” you may potentially get and that could be held against you if it lucks out that this was the one time that that “advice” was right (after having been wrong n number of times).

Then I’d do a risk assessment, that is, ability, need and willingness to take risks.

Ability
This is defined by your relatives’ max loss acceptance. If they say they could tolerate, say, a 10% drop, then 10% of the capital is all you can loose at any given time. The conservative approach is to keep the rest of the capital not invested and available at all times.

Need
What risks you need to take to hit your benchmark. Historical nominal CAGR for global world stock returns from 1900 to 2020 has been 8.3% p.a., in USD: Historical Returns of Global Stocks – Mindfully Investing

That’s nominal returns (which I guess is what you’d be benchmarked against), so it doesn’t take into account inflation (it’s a poor evaluation of the growth of buying power during that time). That’s in USD so may need to be adjusted for expectations in EUR, CAD or CHF. That’s also before fees and taxes.

If you are targeting, say, 1% nominal growth annualy (on average), then you’d need to have 1/8.3 %, or 12% (in USD), of your capital invested in stocks.

Willingness
In that context, your willingness to take risk would simply be your own tolerance for market drops.

My own approach would be:

  • Invest the accepted loss in a globally diversified ETF (like VT/VWRL), keep the rest on a savings account/in short term bonds.

  • Make sure my relatives understand the returns they can expect, take some safety margin for myself here (if the average annual growth I could expect was 2%, I’d probably not raise expectations above 1%-1.5%). If they’re not OK with it, have them redefine the maximum loss they’re willing to accept, help them understand that returns come with risk and that risk free returns is what they’re getting on their savings accounts, with which they’re apparently not OK (so they need to take risks).

  • Benchmark myself against those expectations.

  • Reassess periodically with my relatives their tolerance for loss and growth expectations, given the new capital and current situation.

Example:

Say my family lives in CH. The USD lost 70% of its value vs CHF from 1971 (end of the gold standard) to the end of 2020, for roughly 2.42% per year compounded loss of value. Historical CAGR for an investment in a global worldwide ETF would be in the 5.7% area when assessed in CHF.

My family is willing to tolerate 10% losses, but no more. They are searching to invest 100K CHF.

I can invest 10K CHF (what they are willing to loose) and expect on average 0.57% returns p.a. (nominal, before fees and taxes) if I keep that allocation.

Now, the 90K I absolutely can’t loose is a hard limit, I don’t really need to keep that allocation on the long run because accumulated gains will give me some leeway. I haven’t found global data but, historically, the max drawdown for the S&P500 has not been 100% but rather a bit less than 60%: A Brief History of Bear Markets

Since it’s not my money I’d be investing, I’d plan with a conservative 80% max drawdown for these investments. That means that in my model market crash, stocks would retain 20% of their value, so my hypothetical target allocation to stocks would be : 10% (max accepted loss by my relatives) / 80% (max drawdown expected) = 12.5%.

With a 12.5/87.5 allocation, I would expect 0.71% returns per year (5.70%*12.5%).

With that in mind, I would approach my relatives suggesting we target 0.5% returns per year. I would then invest 10K in a broad diversified ETF and keep 90K in a safe savings account and let it ride until the stocks part outgrows 12.5% of the total portfolio. From then on, I’d keep my allocation at that and rebalance occasionally (either with bands or annualy). With this approach, expected yearly returns of 1% would require a tolerance to a loss of 20%.

Overly conservative? Yes. But investing for others bears a whole set of relationship risks that makes a more reckless approach, in my opinion, not worth it. There’s a reason banks don’t offer 5% interest rates on CDs and pension funds invest overly conservatively.

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I have seen too many families torn apart by money and inheritance disputes. If this is family money that they expect to get back I would not accept the request to invest it and point them to an independent, 3rd party advisor.

Wolverine’s approach is the best one but this sounds like a no win situation. You will have non financial savvy relatives but who will still have opinions who will suspect neutralname underperformed and others that if you invest in stocks and lose that you gambled etc. Resentment is almost guaranteed

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@Wolverine @Barto

Thanks a lot for your help. Apologies if my post was not clear. The only focus point on my question is the currency issue:

  1. The money comes from my parents. They may not be able to transfer it to me, say in 5 years as smoothly and with the current cost. And currently that money is just sitting on a savings account bearing a tiny but still higher than CH interest rate. If I simply put the CAD and EUR on my UBS savings account, then not only there is no appreciation of the real value, I may need to pay a 1% fee each month, this is why I ask my question. I

  2. We think it is better to invest in the CAD and EUR assets directly without converting to USD/CHF. And I don’t know well what services are offered in Switzerland to invest in these 2 currencies directly.

Would be great if there is a CAD and Euro “VIAC” available in Switzlerland…if you understand my metaphor…

Please tell me if my statement is still not clear for you

There are other threads about this but currency exposure is kind of difficult to avoid in today’s global economy. If you buy a Euro zone ETF that includes multinationals like L Oreal you will have exposure to other currencies because a large % of sales are outside EUR zone

Options I can think of to get max Eur exposure could be a Eur bank account (your current solution), Eur bonds (terribly low yields) or you could look for ETFs on indexes tracking small cap euro zone stocks since they are likely to have more of their sales domestically

Note that changing between currencies in IBKR is almost commission and spread free

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Unless you’re investing in fixed income, the currency won’t matter. As was said earlier you need to define the expectations for this (do you need to give it back, max losses, benchmark currency) then there are well known ways to deal with it from roboadvisors to diy.

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Why VIAC?

With 3a products such as VIAC there’s a maximum yearly contribution of ∼ 6800 CHF (unless you’re benefitting from higher limits for self-employed. Your posting history suggests you’re not). With that, it would take about 13 years to fully invest these amounts.

Side note: finpension have emailed me writing they’ll be trading weekly from the beginning of August. That more closely aligns with your stated goal of being able to shift to cash.

Why?

Especially CAD will severely limit your investment options. And since you are…

…the cost of currency exchange (about 0.5%, maybe 1% through) is very minor compared to the volatility and returns you can expect by investing on the stock or commodity markets. And as others explained, even companies listed in EUR/CAD will regularly have large exposure to currency fluctuations (unless they’re hedging them).

Putting it a bit provocative here: It sounds like a cognitive bias to me. Isn’t your main or only reason to invest in these currencies that that’s what you (your family) are currently having?

If your family gave you the equivalent of CHF 90’000 in the currency of your choice, would you tell them to give you 40k EUR and 50k CAD?

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Thanks.

This is just a metaphor… I mean investing in the portfolio that VIAC is investing behind. I don’t mean litterally in the 3A as I was aware of the limit.

Does Finpension allow at any moment to switch to 100% cash? (no stock, no bond etc, everything in cash)

because the initial idea is just to put them in CAD or EUR which gives more than 2% annual interest rate with 0 or little risk of losing a cent.
you are right, it may be a cognitive bias, as if we invest them in stocks,which is a riskier asset, the currency conversion cost doesn’t matter any more.

Sorry for the misunderstanding. If I understand correctly, you are searching for a solution that would automatically invest transfered money into a given strategy and allows for quick changes in the strategy toward cash?

I’d simplify the currencies, convert them through a cheap service like Revolut or Wise then use a cheap broker, like InteractiveBrokers, and buy a single widely diversified fund (or just a few if you really want to add commodities).

JustETF has a pitch on the ACWI index that I find convincing: https://www.justetf.com/uk/academy/how-to-get-a-globally-diversified-portfolio-with-just-one-etf.html

If you want the buying to be done automatically, I guess that takes us in robo advisory territory. I am in no way knowledgeable in that field so take anything I write with a grain of salt. @investinghero has a blog post comparing their services: Switzerland’s Best Robo-Advisors - Comparison

You could also use services by other brokers. I understand some German banks offer it: Why are there no ETF Sparplans (ETF savings plans) in Switzerland?

Others have more experience and are way more knowledgeable than I am in those fields.

As a side note and for 3a assets, Frankly. invests new funds and allows for the selling of stocks (going all cash) on a 3 days basis for index solutions and 2 days for the active ones. One can theoretically change strategy in 4-6 days (I haven’t tried it: 2-3 for selling assets in an active/passive solution, then 2-3 to buy them again).

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First, you’ll have to determine the tax implications of the cash transfer. Gift vs loan (remember that the amount is callable).

The setup looks complicated (transfer from your parents, amounts callable at any time) to me with the obligations to stay invested in EUR/CAD.

I don’t see the added value of the investment’s on behalf of your parents.

Can’t they invest directly with their brokerage account ? If they don’t have any, it’s the perfect timing to open one. Depending of their home country, I’m sure they can access to cheap mutual funds/ETF.

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You can give them the instruction at any time - but they’ll execute it on a weekly basis only.
With VIAC it’s just once a month. For comparison: Last year’s COVID-induced stock market crash only lasted a month in total.

In other words: VIAC or finpension seem not what you’re looking for in multiple ways.
Except for the diversified index funds they’re offering. But so do most other brokers.

And with many brokers you can even (let’s not say “manage”) administer the account for them.

My mother opened up a brokerage account with a bank in her country of residence. She’s paying into it in local currency - and the tax is automatically taken care of by the bank for her.

I have (my own, separate) login details for her account and do the buying / selling for her, as she doesn’t want to deal with the technicalities. But it’s her money and she ultimately makes the decisions.

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