Investing

Goal

What I currently do

Most of the money on ETFs. A little money on individual stocks. Some cash as emergency fund.

ETFs

  US Dev - US Eme
Market cap SCHB + SCHA SCHF + SCHC SCHE
Fundamental FNDB + FNDA FNDF + FNDC FNDE

All 6 table cells equally weighted, and all pairs of funds also equally weighted inside each cell.

Individual stocks

Selected based on P/E, P/B, Debt to Equity, Net Profit Margin.

How

Schwab broker for buying funds.

CapTrader (Interactive Brokers) for exchanging CHF to USD.

Buy every week, fixed cost, target the desired proportion.

Why

Market cap funds in general provide diversification at low cost. Weighting by market cap invests a quantity of money proportional to the market value of each company / sector / country.

SCH* funds have low cost (low TER, low turnover, low bid/ask spread – and at Schwab also no buy/sell fees). The 3 funds together can be used to emulate VT at a lower cost, with the downside of having to manually rebalance (upside of being able to choose a different proportion), and owning fewer companies (~4k vs ~6k).

The downside of market cap weighting is that when a company (or sector, or country) is overpriced (e.g. during a bubble) it ends up buying more of it, and less of it when it is under priced.

I choose to give equal weights to US, Developed (- US) and Emerging Markets. This currently means under weighting US and over weighting Emerging Markets vs the current market caps. This avoids bubbles across funds but not inside each fund.

Fundamentally weighted funds (like FND*) weight independent of the price, using other factors like sales, cash flow and dividends/buybacks. In theory this buys more of the under priced companies and less of the over priced companies. The downside is that those funds have higher cost (higher TER, higher turnover, higher bid/ask spread).

I choose to weight SCH* and FND* funds equally.

I choose to give equal weights to funds tracking large and small companies. This reduces concentration and likely increases returns, with the downside of increasing risk.

The downside of funds in general is that they have a yearly cost. Buying individual stocks avoids the yearly cost, with the downside of less diversification and more time spent choosing.

I choose to put a little money on individual stocks.

Summary:

  Market cap Fundamental Individual
Holding cost Medium Worse Better
Diversification Medium Better Worse
Value Medium Better < Medium

Past Allocations

Without small cap companies

  US Dev - US Eme
Market cap SCHB SCHF SCHE
Fundamental FNDB FNDF FNDE

With equal weights.

Without fundamentally weighted ETFs

  US Dev - US Eme
Market cap SCHB SCHF SCHE

With equal weights.

Without equal weights

  US Dev - US Eme
Market cap SCHB SCHF SCHE

With weights matching VT (i.e. more US and less Emerging Markets).

Alternatives

Name Main Problem
Savings Inflation
Bonds Inflation
House Liquidity
Retirement Laws
Peer-to-peer lending Default
Crypto Speculation

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