Investing

Goals

Grow more than 4% per year above inflation.

Pay less than 0.1% per year in fees.

Invest 25x my future yearly expenses.

What I currently do

Most of the money on ETFs. Some cash as emergency fund.

ETFs

World (25%) US + Dev + Eme (50%) Small (25%)
Vanguard VT VTI + VEA + VWO VB + VSS
Schwab <empty> SCHB + SCHF + SCHE SCHA + SCHC

All cells weighted equally inside each column, and all funds also equally weighted inside each cell.

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 approximate 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.

For 25% of my investment, I choose to buy VT with world stocks.

For 50% of my investment, 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 partially avoids bubbles across funds but not inside each fund.

For 25% of my investment, I choose to give equal weights to funds tracking small companies. This reduces concentration and potentially increases returns, with the downside of increasing risk.

Past Allocations

With fundamentally weighted 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.

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).

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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Updated on 2019 Oct 16.

DISCLAIMER: This is not professional advice. The ideas and opinions presented here are my own, not necessarily those of my employer.