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:
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Do they want an european/canadian broker or are they OK with any broker you may choose?
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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?
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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:
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Invest the accepted loss in a globally diversified ETF (like VT/VWRL), keep the rest on a savings account/in short term bonds.
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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).
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Benchmark myself against those expectations.
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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.