Updated ETF portfolio for Switzerland – Bonds and Dividends

Investing, SwitzerlandUpdated on

(Disclosure: Some of the links below may be affiliate links)

Updated ETF portfolio for Switzerland - Bonds and Dividends

Update: I have now made some changes to make my investment ETF portfolio much simpler. I would recommend you check it first.

In 2018, I wanted to add a few bonds to my portfolio. I am in long-term investing. I only in my 30s, and I do not plan to retire for at least ten years. And I already have some very safe investments in my second and third pillars. Therefore, I do not need a lot of bonds. But I wanted to add 5% of bonds into my portfolio to be safe and to allow for more re-balancing opportunities. Also, I do have bonds in my third pillar account.

Moreover, I wanted to improve my ETF portfolio. More specifically, I also wanted to get rid of my crypto-currencies. So, I updated a bit my previous portfolio to reflect this. Moreover, I also wanted to depend less on the dollar. In this post, we are going to see exactly what I have changed in my portfolio.

Remember that it is only one example of an ETF portfolio. I am no financial advisor. I am just sharing what I am doing for investment. What may work for me may not work for you.

My new ETF portfolio

After the changes, this is the new portfolio I have settled on:

  • 50% World Stocks – Vanguard Total World (USD)
  • 10% Switzerland Medium-Cap Stocks – UBS SMIM (CHF)
  • 10% Europe Stocks – iShares Europe (EUR)
  • 10% High Dividend World – Vanguard High Dividend Int. (USD)
  • 5% High Dividend Switzerland – iShares Swiss Dividend (CHF)
  • 5% Tech – Vanguard Information Technology (USD)
  • 5% Pacific – Vanguard FTSE Pacific (USD)
  • 2.5% Europe Corporate Bonds – iShares Core Euro Corporate Bond (EUR)
  • 2.5% Europe Government Bonds – iShares Core Euro Government Bond (EUR)

I would not recommend a portfolio precisely like this. Indeed, for now, it is still too complicated, I think. You probably should get rid of Tech and Pacific. I have shown this portfolio to a few people, and they all think it is too complicated. In the coming months, I am going to think about improving this portfolio. I am starting to realize that for investing, simpler is better. So do not do it like me!

Update: I have now made some changes to make my investment portfolio much simpler. Moreover, I am not so sure anymore about the dividends in my portfolio. In Switzerland, we pay more taxes on dividends than on capital gains. I may change my Swiss dividends fund in the future.

As for the bonds, I decided to split in half between corporate bonds and government bonds. I chose to go with Europe bonds because it is a bit wider than Switzerland. And also because Switzerland bonds are in negative yield right now.

In the beginning, I wanted to select the bond duration myself. But then I decided to keep it simple and use the iShares Core ETFs. I also added 5% of Switzerland’s Dividend stocks, again using an iShares ETF. I removed 5% from Vanguard Total World for this. The reason for this is that I wanted a bit more passive income from my investments.

My actual portfolio does not entirely reflect this model. I still have a Bitcoin ETN that I will sell if it gets back to earning. I also still have a small PostFinance Emerging Debt fund (less than 200 CHF) that I am also waiting to get rid of.

Finally, it is not balanced yet. But it is getting there, and a small imbalance is not a big problem. I will only do re-balancing at the end of the year if it gets out of control. Since I try to invest a bit every month, I use this investment as a balance mechanism as well. Unless one of my positions in my portfolio gets too high or too low, I should not have to rebalance at all.

Here is the current state of my portfolio:

Portfolio Status 06.03.2018

And here is what it should look like according to the new portfolio I have designed:

Portfolio Allocation

As you can see, I still have some work to rebalance the portfolio. Since the portfolio is currently tiny, it is not easy to reach the right numbers. Indeed, I can only buy complete shares and thus cannot choose exactly the value. It should get easier as the portfolio gets larger. I also realize that small percentages are not very convenient. I will fix this by simplifying my portfolio.

At the end of this month, II will invest more in Vanguard High Dividend International, which is my most imbalanced ETF now.

What do you think of my new ETF portfolio? Do you have any advice for me?

If you want to start investing, you will need a broker. I recommend Interactive Brokers as the best broker.

Update: I have now made some changes to make my investment ETF portfolio much simpler.

Mr. The Poor Swiss

Mr. The Poor Swiss is the author behind thepoorswiss.com. In 2017, he realized that he was falling into the trap of lifestyle inflation. He decided to cut on his expenses and increase his income. This blog is relating his story and findings. In 2019, he is saving more than 50% of his income. He made it a goal to reach Financial Independence. You can send Mr. The Poor Swiss a message here.

22 thoughts on “Updated ETF portfolio for Switzerland – Bonds and Dividends”

  1. Hi Mr. The Poor Swiss,

    Seems like a nice safe portfolio, personally I’m 100% stocks. And I don’t plan to change it.

    Why did you go for VT and then more Swiss and European funds, intentionally overlapping & overweighting these ?

    Also what do you think about Degiro ? I have an account there but I’m glad I went with Interactive Brokers… Can’t see benefits with Degiro except maybe a cleaner and way more simplistic UI…

    1. Hi Cashfl0w,

      Thanks for passing by :)

      I don’t think it’s a bad idea to be 100% stocks.

      The Swiss and European funds are to provide for an home bias. I’m not really sure anymore that they are really that useful. I also wanted to avoid having all my funds in USD, I wanted some CHF and some EUR. If you are comfortable going all VT, that’s what you should do. As for Pacific, you can simply forget about it, it’s a previous mistake of mine and I’ll probably sell it in the coming months.

      DEGIRO has one big advantage over IB, the price. Everything is very cheap with DEGIRO and there are many free ETF that you can use each month. So far, I’m really satisfied with DEGIRO. The interface is very simplistic especially compared to IB, but sometimes it’s not very well designed, but I have always found what I needed.


      The Poor Swiss

      1. Of course, it’s not a bad idea to be 100% ETF & stocks hehe.

        I don’t have a moustachian/boglehead/fire mindset so I don’t believe in world diversification, currency hedging and bonds but I respect your choices. (Until I’ll proven wrong.)

        And yeah Degiro is a tiny bit cheaper on some things. Though I prefer a more established, more professional and with a huge range of products and still super cheap (compared to what our swiss companies provide…) so it’s why I will stick with IB.

        Commissions as low as USD 0.35 / order, USD 2.00 for the Forex, no custody fees over 100k, no stamp fees, I think it’s more than cheap.

        I will see how my strategy goes in few decades.

        Looking forward to read your future blog posts. Keep writing.

        1. For the same reason you mention, I hesitated to use IB instead of DEGIRO. In the future, if DEGIRO becomes more expensive, I’ll probably switch to IB. I personally don’t use any other product, so I don’t care, but otherwise I would have taken IB because Standard profile of DEGIRO is really bad in my opinion.

          May I ask of what is your portfolio composed ?

  2. I don’t think Degiro will become more expensive in the future, it’s just I really don’t like the uber cheap “EasyJet / Ryanair” feeling with them.

    And they have some “hidden” cost like the annual cost for owning securities on each exchange or the taxed on the dividend (it’s couple euros there and there but still to be taken in account). The ultra basic UI have things like the chart graph works barely (it’s the base for any broker I mean….) or not at all and is awful, and they provide close to zero informations on the securities. And like you said their “basic account” vs custody business model is really weird… But hey you get what you pay for I guess. I don’t think it worth the let say, 50 bucks gain you might get at the end of the year…

    About my portfolio, I won’t go into details. I don’t want to influence you because I have zero legitimacy and I’m building a way more risky / agressive portfolio in accordance with my risk level I’m ok with and my knowledge level compared to a lazy / boglehead portfolio. And I’m starting with pretty much nothing to lose but a lot to gain and at least 4 decades ahead of me.

    What I can tell you is at the moment I’m 100% in equities and 100% in USD on US exchanges. About 1/3 in ETFs and 2/3 in pure stocks. (I will adjust in the future if my stock picking underperform the market or my ETF). I’m between 80-90% in the US market, 10-15% China. (I don’t believe in the Europe & Switzerland market…)

    I can tell you I have some VOO, QQQ, KWEB for example and some stocks like BRK.B and an other dozen in various sectors across large/mid/small caps like tech / semi / online services / energy and other crazy stuffs…

    Sector and stock picking is on another risk level. Again it’s a riskier play, please, don’t trust me and don’t do it. :-)

    1. I don’t think either, but it’s something I’d rather be prepared with.

      It’s not really hidden, but you have to read everything very carefully. I agree that the UI is less than optimal, but I think they are getting better. Since I’m not an active trader, it does not really matter to see since I don’t spend a lot of time on the website or the mobile application. For active trader or more complex trading strategy, this would probably be a no-go. For more, it’s worth the saved bucks.

      Thanks for sharing these details :)

      Don’t worry, although I’m already sold to the low-cost index funds strategy, I’m very interested in individual stock pickings. I follow a lot of blogs that focus on it. Although I find it very interesting, I will never invest like this, I’m probably too risk-averse.

  3. I like your portfolio. Why? Because you have low cost index funds in it. I know much more about Vanguard funds. From the looks of it they look like cheap (ER) ETFs. Secondly, you are well diversified. Which is awesome.

    I agree that your portfolio is over complicated. It is one thing to slice and dice to add diversification, but having overlapping assets make re-balancing very difficult.

    I have not read your blog completely. Are these investments in a taxable account? If so re-balancing could lead to a taxable event. And like you mentioned since you cannot buy fractional shares it will take quite sometime to come up with the portfolio you have mind.

    Its the first time I have seen a portfolio with a Pacific bias. Curious to know your reasons?

    1. Hi Mr. dividendgeek,

      Nice of you to drop here :)

      Yes, they are in taxable account. However, we do not have capital gains taxes in Switzerland. On the other hand, we are taxed on dividend.

      For pacific, it’s an error of mine… I wanted to bet on China and I bought Pacific ETF, without realizing that China is still considered Emerging Markets :(

      I’m already planning to simplify it. I plan to sell Tech, Pacific and High Dividend International to simply reinvest them in Total World. This will make my portfolio simpler already.

  4. Looks like you’ve given thought to creating an approach tailored to your preferences. Well diversified with the ‘weaknesses’ identified. One thought though – your ‘home country bias’ is slanted towards Swiss HQ more so than Swiss sales or revenues. With PGHN being nearly 10% of SMIM, other than further diversification, why not change out saving 0.25% in fees?

    1. Hi seekingreturns,

      Thanks for stopping by :)

      By HQ, you mean Headquarters, I guess. Then, yes, it’s entirely slanted on the Swiss companies. And indeed a lot of them are doing revenue outside of Switzerland.

      I don’t understand what you want to change out ? Remove SMIM ? Replace SMIM with something else (what?) ?

      1. My preference is stocks (avoiding even low cost fees). And yes I meant Headquarters. With the significant percentage PGHN as part of SMIM (about 10%) – unless I wanted a minimal part of the other holdings for additional diversification, I’d be inclined to just go with PGHN.

        1. I can understand the attraction to stocks and their no-fees, but you also have trading fees if you trade a lot. It doesn’t apply if you buy and hold like you seem to do.

          PGHN is only 10% of SMIM, it’s significant but not large enough to consider having only PGHN. It’s still a large diversification with all the other holdings. If it was 50%, I would understand the logic, but 10% is not enough to consider this as not diversified.

  5. Very interesting portfolio, Mr Poor Swiss. I have many questions about it.

    First of all, let me indicate my portfolio. Relatively simple and based on Bogleheads. And I live in Germany, by the way.
    30% Vanguard S&P 500 UCITS ETF
    30% Vanguard Developed Europe UCITS ETF
    30% iShares Core Euro Government Bonds UCITS ETF
    5% Cash
    5% Cryptocurrencies

    A rule of thumb that I read somewhere said that a percentages below 5% are not really useful, because in case of rebalancing they would have a minor effect on the total portfolio. That is way I avoid percentages below 5%. Do you find useful those small percentages?

    You have bonds in euro currency, but you live in Switzerland (CHF). I always read that bonds are the conservative part of our portfolios, to be there in case of crisis. To provide always “purchase power” in your everyday currency. But the value of your bonds is affected by currency fluctuations (EUR vs CHF). Therefore I would prefer to have CHF government bonds (bonds in my own currency), even considering that they provide negative yields.

    I own ~1/3 in bonds because it decreases a lot the volatility and its impact on the total return in minimum. The PortfolioCharts web gives nice plots about this. It is the standard Bogleheads “your age in bonds”.

    Regarding my bonds, I own 100% EUR government bonds. However I was considering to buy at least a part of EUR corporate bonds. Nice that you are already doing this. I saw the diversification of the EUR corporate bonds is quite high, there are plenty of non Euro-zone companies issuing these bonds (19% USA, 10% UK, 3.5% Switzerland, etc.).

    I saw your Vanguard Pacific ETF, and I was thinking about something similar. I think Asia has a great economic potential, and I am considering the Vanguard Developed Asia ex-Japan. I prefer to avoid emerging markets, and that is why I do not consider China directly (but it should be quite correlated with South Korea, Hong Kong, Singapore, etc.).

    You bought a Bitcoin ETN, I guess you refer to the Swedish XBT. It has a TER of 2.5% per year, quite high. I bought some cryptocurrencies and I keep them in “cold storage”. Basically paper wallets, like typical bank notes (and therefore there is no TER). Anyway, this is what I do, I do not necessarily recommend anybody to buy cryptocurrencies.

    I read somewhere (I think in J.L.Collins’ blog) than passive investing is so boring that he recommended a small amount “play money” (<=5%, that is why I bought cryptocurrencies). And somehow perhaps you are doing the same with the Information Technology, Pacific, and High Dividend Switzerland ETFs.

    Nice porfolio, good luck!

    1. Hello,

      Thanks for stopping by :)

      Since I’ve published this portfolio, I’ve come to realize it’s highly suboptimal and I’m planning to do some changes, such as removing Tech and Pacific.

      For the small percentage, you are right. I have come to realize that percentage below 5% are not useful and now I think that percentage below 10% are not useful.

      I agree that bonds in CHF would be better, but I will not buy negative yield bonds. On the other hand, I’m now rethinking this bond position. I’m starting to be dubious about Europe bonds, because a very significant part of them is from the Italian government with an economy that is not great. I’m thinking of either holding this in CHF cash or using a global bond fund. I’m not totally sure corporate bonds is a good idea, because it will be more correlated to the

      Here is only my investment portfolio. I also have retirement assets for which I cannot control precisely what is invested and these have a lot of bonds, that is why this portfolio only has very few bonds.

      For pacific, I bought it by error because I was thinking it contained China but it does not. I will sell it. I still want to get invested in China, probably with KWEB, but this may be part of my 5% fun money as you state. I think it’s a great idea, but I want my portfolio to mature before I integrate this inside it. It was not for this reason that I invested in the funds you mentioned. I don’t want a lot of general emerging markets, but I want some more China.

      I regret having bought the Bitcoin (not really because of the ETN), but because of cryptocurrencies. I will sell it too if it ever goes back to profit, otherwise I’ll keep it as a reminder of my mistake.

      I also have a question for your portfolio: Why only Europe and US ?

      At least for currency, it seems easier to invest in Europe countries, you have a lot of choice in your own currency.

      The Poor Swiss

      1. So far I only own index funds related to USA and Europe because of tax efficiency, in particular for 2 reasons:

        * I pay taxes in Germany, and the system is quite complicated. Brokers perform many operations in my account (and colleagues’ accounts); sometimes brokers retrieve money for taxes, sometimes they return money afterwards (!), different transactions per ETFs, many times per year. Unpredictable, it is not an easy percentage of dividends or the total investment, therefore I prefer to avoid complexity and keep it simple.

        * Index funds compare themselves with very particular benchmarks. Usually the “net total return” index, this is: the index considering reinvesting dividends after paying 30% taxes. Fund managers in well developed countries do not really pay this 30% of dividends, and therefore well-established index funds outperform their benchmarks. Example (see their factsheets): Vanguard S&P 500 UCITS outperforms its benchmark 0.27%/year, and Vanguard Developed Europe in 0.26%/year. However, Vanguard Developed Asia ex-Japan underperforms its benchmark in 0.14%/year. Since I expect the same long-term returns from all these developed countries, and I notice that passive investing in about 0.4%/year less efficient in this Asian ETF (and similar ETFs), therefore I focus on the more efficient ETFs.

        Finally, my answer is yes, I would like to diversify into more world regions.

        By the way, my partner is very happy with a simple Bogleheads approach: “[MSCI World] + [local bonds, % of age in bonds]”. And basically we get the same return.

        1. Wow, seems complicated system in Germany.

          I didn’t know about this difference in index funds, with performance and taxes. It seems quite a good idea to focus only on these that outperforms their benchmark :)

          Good luck with your future diversification ;)

  6. A few remarks: I think it is too complex with too many funds. Have you really thought through what you want to achieve?

    As you are young and in Switzerland, the high dividend funds do not make sense to me: it’s tax inefficient and you don’t need the income yet.

    1. Hi Phil,

      Yes, I completely agree this is too complicated. In fact, this is my old portfolio from last year, I have now an updated portfolio. This first portfolio was quite bad. I have learned more since that point!

      I now only have three funds. CH, US, and World :)
      I completely agree that dividends are not efficient in Switzerland. I do not have the High Dividend Yield World anymore.

      Thanks for stopping by!

Leave a Reply

Your comment may not appear instantly since it has to go through moderation. Your email address will not be published. Required fields are marked *