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You didn't miss anything.
I follow the indices in a top-down approach. If the index as a whole is too expensive or in a bearish phase, I don't look any further. On the contrary, if it is cheap and in a bullish phase, I put on my glasses and look for good candidates.
For beginners or those who don't want to bother, they can stop directly at the ETF. Which is what I personally do for gold, bonds and real estate.
For more details read my series of articles on portfolio diversification in the tutorial.
No, the S&P 500 with inflation has a historical average annual performance of 9-10%.
And I advise you against technical analysis, you will waste time and money. Not only has it been proven that it does not work, but I also unfortunately speak from experience. My friend dividinde would tell you the same. If you can avoid making the same mistakes as us, that would be a good start.
However, I strongly advise you to read Jeremy Siegel's book "Investing in Long-Term Stocks", which you can find on my reference works page:
My god, this is all complicated. If you put all this energy into studying fundamental analysis, you would already be a worthy disciple of Benjamin Graham :)
You say the stock market has an average annual return of 3.5%… By return, that means dividends only. The total average annual performance on the S&P 500 is for example in the order of about 9-10% in nominal terms, 7-8% in real terms.
To avoid the hassle of transaction/exchange fees, why not invest directly in Switzerland in a Swiss ETF, listed in CHF?
I still don't understand this back and forth you want to do between IB and Postfinance, it doesn't make sense (send cash every month, buy the ETF, sell it, then send the money back to CH and buy the ETF back). I understand that you want to do dollar cost averaging, it's a good strategy, but you don't need to have such a complicated system to do it. Buy either in Switzerland or at IB.
You don't have to buy every month either, every other or third month is also fine. Just so the fees don't represent too much compared to the position purchased... That's what I did at the beginning.
I have a Postfinance account for my large classic positions that I keep for a long time and an IB account for small more exotic positions that I keep for a shorter time. And I assure you that I am well beyond the 3.5% average that you quote.
We misunderstood each other. I was talking about what was written on the link you sent. I know you didn't talk about limit order.
1) OK, I understand, well I try… But why do you want to go back and forth several times? Since I opened my IB account I have never sent any cash back.
2) Same as above. Yes indeed it would be better if we could not change the currency during transfers, but in the end if you only make a round trip every ten or twenty years your difference is quite negligible compared to the gains generated on the stock market. I will perhaps ask myself the question when I live off my dividend income, but certainly at that time I will repatriate my foreign funds to Switzerland. But perhaps you are already an annuitant??? I would understand better then!
That's what I meant to say to answer your last question. The important thing is to invest in investments with a good quality/price ratio, to diversify them and to hold on over the long term. You also have to be prepared to suffer losses and therefore your investments correspond to your propensity for risk. Yes, you may lose 0.75% on foreign exchange, yes you will also leave commissions along the way and custody fees, especially if you choose your intermediaries badly (but there you are well on your way), but you must be prepared to lose even more.
What will happen when your investments have plunged by 10, 20 or more %? Will you be strong enough not to sell and continue to buy as is apparently your strategy? Or will you also be strong enough to sell and cut your losses as another strategy could also? Are you diversified enough to avoid too big crashes… etc.
Don't worry, you don't need to answer all of these questions. In fact, you will only be able to answer some of them once you have experienced them.
Hello I looked at this link and it seems to me to bring more confusion than answers. As I said, you have to practice and not get bogged down in false problems. Winning 10 balls on a transfer of 50,000 balls is 0.02%... It's always good to take but if you worry about that, you'll overlook bigger problems. Ditto when they talk about whether to place a limit order on forex to change currency... It doesn't really make sense on such a liquid market and on such small positions. And again, there's no point in worrying about open forex positions if you're using IDEALPRO, because you can hide them very easily via the app, if that's what's bothering you. You can also normally use FXconv to do 'normal' forex if you have a simple cash account. I can't with my margin account. Well, I don't think so, because I use IDEALPRO and in the end it doesn't make much difference.
An interesting link: https://ibkr.info/node/1267
For your questions :
1) You can't, and there's no point. In any case, current account transfers to trading accounts are instantaneous 24/24.
2) I don't know, but you're actually giving me the idea of transferring chf to IB next time, rather than USD.
3) The tax statement is not delivered by default. You have to request it once, and then it's sent automatically every year, unless instructed otherwise. I recommend it when you start having several positions, especially abroad. It costs a flat fee of 90 francs, regardless of the number of positions. It's really not expensive compared to what's available elsewhere in CH.
Let's get to work 😉
I don't know Strateo.
To return to the points:
1) Right. You don't want to throw 100k at IB all at once. You gradually build up your positions and buy your shares with their corresponding currencies. You shouldn't leave 100k in CHF on IB. I currently hold shares and cash, but in JPY.
2) I promise you that the APP is very easy to use. In any case, if I compare it to Postfinance's, which offers almost nothing, it's simpler and faster.
3) yes, whatever the amount, you choose the account. You can even easily change it later, in any direction.
4) I don't know what this is about, I don't have these problems. I trade forex pairs. In my opinion you should take the IDEALPRO cash option, but not CFDs. It's supposed to be the closest thing to how I trade forex. On the app it's very simple, you type USD in the search field, for example, and the first thing it suggests is "USD IDEALPRO", which you select, and underneath that you choose forex, and then you have all the dollar-related pairs displayed, so you choose e.g. USD.CHF if you want to buy (or sell) dollars against the Swiss franc, and that's it.
Precisely. The risk of ETFs is not where you think it is. It's hidden.
You say the cost isn't huge, with 0.3% or less. That's true. But you have to realize that there's a lot of manipulation behind these low rates, which is well explained in your article. We even see in the case of Invesco that their manipulations are so good at artificially lowering management costs that they even improve the profitability of the underlying index! You're a scientist, you know that 2+2 will never add up to more than 4.
How does one arrive at this paradox? Your article talks about it too. What's best known, and I've already mentioned it in one of my previous posts (see below), is that the positions that make up the ETF are lent to third parties, for example to carry out short sales. What happens if the third party is no longer able to honour its claim...? Oops... The other point, as seen at Invesco, is the use of swaps. So it's a derivative...!
Some people say that ETFs are the next subprime crisis. I wouldn't go that far, but you need to be aware of the risk, and not just focus on this type of instrument. Diversify! That's the key to the stock market.
See also:
How to diversify your portfolio to avoid market risks (18/20)
How to diversify your portfolio to avoid market risks (19/20)
Yes, that's a lot of questions all at once. Don't worry, you're a novice and your brain's all over the place. Don't try to solve everything at once, you'll have to go your own way and experiment. On paper, you'll find lots of nice things and good advice, but until you've really tried things out for yourself, you won't know if they're right for you. Practice makes perfect. Nevertheless, to save you some time and trouble, here are a few answers.
For the broker, check out this topic if you haven't already: https://www.dividendes.ch/forum-2/topic/frais-de-courtage/
I advise you to have two financial intermediaries, one in Switzerland, for rather classic, buy & hold oriented securities with large positions. Postfinance is a good option. Swissquote too. Migros is too expensive (watch out for custody fees). Then you need a cheap broker for smaller and/or less long-term-oriented transactions and/or for more exotic stocks (Japan, emerging countries) and/or if you want to have fun shorting certain indices or stocks (which I wouldn't recommend, at least for the time being). IB is a good option.
I've never had a problem with my Swiss accounts since I've had accounts in the USA. Well, I haven't opened a Swiss account since, but I don't see why that would be a problem. In any case, automatic exchange is now mandatory in both directions.
For detailed questions about IB :
-I've found that IBKR allows you to transfer CHF to a Swiss IBAN (since 2017), but some people say they have problems. Do you have any feedback on this?
=> never tried it, I didn't even know it was possible. Personally, I make an international transfer, which is fairly easy to do, no problems found, money transferred quickly. I created a payment template so that today I can do it in a few seconds.
Have you had any problems sending to IBKR or receiving from IBKR on your Swiss current/savings account?
=> Never any problem to send. It's fast. I have never tried to credit my account again.
Is it possible to make a withdrawal/transfer from IBKR in a currency other than CHF?
=> Yes, in fact in my case, I had to skip a step during the account opening process, but I have a cash account in dollars. So I send USD to IB from my personal account. Maybe if I send CHF it will create a CHF cash line. I've never tested it yet because IB charges negative interest on CHF, like all foreign banks. Anyway, whatever the currency, you can easily buy/sell forex pairs to build up your liquidity in other currencies.
How do you declare the account (or accounts in different currencies?) to the tax authorities? Do we receive a certificate or can we print out a document? If not, how do you declare it on the tax return?
=> There are many predefined reports, but you can also create your own templates, which is what I did (as you indicate below).
Is the "recipe" ( https://www.dividendes.ch/forum-2/topic/interactive-brokers-et-declaration-dimpots-suisse/ ) described by our host here for obtaining year-end data for the tax return still current?
=> Yes
Or is it simpler to enter each position in the annual tax return?
=> I was doing this at first, but you'll see that the above-mentioned report or the tax statement from Swiss financial intermediaries will save you an awful lot of time. Filling in the tax return for each position becomes very cumbersome, especially when you have to note quarterly dividends!
Is the base currency better in CHF, USD or EUR?
=> I think you mean the currency displayed for the account for valuation / performance calculation. I'm using CHF since it's my reference currency, but you can change it in a few seconds. It's purely indicative.
The IBKR site deals with information about interest in this page "Interest rate scale" ( https://www.interactivebrokers.co.uk/fr/index.php?f=39726&p=schedule ), I'm not sure I understand. Is this the daily fee I'll be charged on uninvested cash balances (interest paid on inactive cash balances), based on the value of the assets in my portfolio?
=> no, interest is credited to you according to the currency in which you have cash (charged for CHF). IB, on the other hand, charges fees on accounts of less than 100,000 USD or which don't have many transactions (less than 10 USD in commissions per month). In this case, they will charge the difference up to 10 USD. See: https://www.interactivebrokers.co.uk/fr/index.php?f=6780
Nevertheless, even if you're not very active and don't have 100,000 USD, IB doesn't charge any custodian fees, and transaction fees are derisory.
I tried it with a demo account and didn't really find the interface easy to use. This comes from me and my almost zero experience, for sure, but if any of you could enlighten me on these various topics, I'd be grateful.
=> you amaze me. I'll surprise you too: I never use TWS. I only use the smartphone app. It's super simple and user-friendly.
How can I avoid being fooled by margin or leverage? I don't intend to use them, but is there anything I can do to surely disable or control each order to avoid this?
=> just open a cash account (not a margin account). You won't be able to short sell either. In any case, if you don't have at least 25,000 USD, you can't open a margin account. See my next article, which explains several points about opening an IB account, including account types: https://www.dividendes.ch/utiliser-interactive-brokers-avec-le-trading-auto-signal/
How do I exchange/convert CHF to USD or EURO and vice versa? I've seen the CASH or SMART (CFD) option, but with CASH (what I think I should use) there are two options(IDEALPRO or FXCONV )and I'm not so sure I really understand how to do it, could one of you give me a procedure?
=> as explained above, you need to buy/sell forex positions. It may seem a bit complicated at first if you've never done it before, but in the end it's exactly the same as changing money at the bank.
There are several types of account and a minimum of 10k$ is required for registration, but I seem to have read that an amount of 20k$ is needed to have access to all the markets and products, is this correct or do you have any other information?
=> you can start with 10,000 USD. I don't remember being limited (except for the margin and short-selling thing).
I also don't understand their system of borrowing when you don't have the right currency, which sounds automatic, but how can I avoid it? My aim is to make long-term investments and purchases, so if I can avoid paying interest on money I have in the account, as I don't intend to use more than I can afford to lose as always.
=> with a cash account, you don't have this risk. You won't be able to buy a security if you don't have cash in the currency of the security concerned. On the other hand, with a margin account, if you buy a position in a currency where you don't have cash, your cash balance in that currency will turn red and interest will be charged. In this case, all you have to do is buy the corresponding forex pair to turn the balance back into green.
In short, IB is very simple indeed. Especially the smartphone application. You just have to try it out and you'll soon understand how it works.
Thank you and welcome Xavier.
You've already taken some interesting steps with real estate. It's a good first step. I'm surprised in a good way that the bitcoin \ blockchain universe is interested in value investing. Back to basics is back to basics!
ETFs are a good second step after real estate. They're a good way to start out and diversify a portfolio. But beware: contrary to appearances, they are no less risky than equities - quite the contrary. Especially as they cost more. After that, you'll still need to get to the heart of the matter: equities.
All the best to you.
Ah ah, frouzback, what a nice nickname 😉
thank you for your diligence. You seem to be well on your way to financial independence and I congratulate you.
It's always good to hear the opinions of French readers, who also live in Switzerland. I've often heard French people say that in their country, financial culture is not very well developed, and that financial skills are therefore lacking. This is apparently not the case with you. Nor do you seem to me to be a follower of the welfare state, as there are many in your beautiful country. You've taken matters into your own hands and you've already been able to significantly improve your condition as a forced worker-consumer (improvement meaning, of course, liberation).
Some aspects of your speech remind us, and this is something I've already pointed out a few times, that it's one thing to achieve a certain financial affluence, but quite another to be able to translate it into a real improvement in quality of life, notably, and perhaps above all, by saving time. It's as if Western life has to remind us every day, every hour and every minute that we have responsibilities and tasks to perform. Employers' resistance to part-time work is a blatant example of this, even though Switzerland is paradoxically one of the world's best performers in this area. Personally, I've had to fight very hard to reduce my working hours again and again. Today, I'm still constantly on the lookout for new strategies to further reduce it. Almost everything pushes our employers in exactly the opposite direction. The only argument is almost always the financial gain they can make by paying less.
Like you, I'm math-oriented, not accounting-oriented. I'm intuitive, not factual. I think this is paradoxically an advantage in the stock market. You have to keep an eye on the big picture, step back and look at the big trends.
Like you, I too have a pessimistic side, which isn't part of my personality, but rather my experience of the stock market, since I started in 2000. This has taught me to be extremely cautious.
All the best to you and looking forward to reading you again.
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Ah yes, now it's clearer 😉
If the euro disappears for political reasons, it will be replaced by a national currency, so assets will obviously not be lost. On the other hand, it is possible that it will lose value before being replaced by the new currency. More generally, even if the euro does or doesn't disappear, it's a good idea to vary your investments, in terms of currencies, allocation types and the securities making up each allocation. As you said, you can't put all your eggs in one basket.
To protect yourself against the euro, if it's your domestic currency, simply buy foreign currencies or securities quoted in foreign currencies. If you're just buying currencies, I'd advise you to aim for strong currencies such as the Swiss franc (CHF) or the yen (JPY). It would be foolish to invest in a currency just to protect yourself against the euro and lose even more money. The dollar is currently holding up well because of the Fed's policy tightening, but historically speaking it's a weak currency.
The choice of currencies is less important if you're buying foreign equities, as these tend to react inversely to their domestic currency, especially if they are exporting or commodity-oriented companies. In a pinch, you could even stay focused on European companies, which could benefit from a fall in the euro, boosting their exports.
One last option when the going gets tough: gold. The yellow metal loves it when currencies panic 🙂
If the market were cheap and not in a negative trend I'd tell you that you could without too much risk buy 2 arsitocrats at 4k. But as it's now, I'd rather tell you to buy SRFCHA today for around 2k, and buy an aristo in 6 months' time for 1k, and so on. Save your money, reinvest the dividends, and aim for at least twenty positions.
Hello Jean,
Thank you for your loyalty.
I wouldn't say it's a good time to get started. If you read the articles and comments on this site, you'll see that many members are rather cash-oriented at the moment. On the other hand, I started out in 2000 and I'm still alive. I even think that taking starter broths was a great help to me later on, but at the time I could have done without it.
So go for it, but take it easy. You don't have much cash and you still need to diversify. So it's important that transaction costs are low, even for small positions. Interactive Brokers is a very good choice. I don't know De Giro, but some members here seem to like it too.
I'd start with a real estate ETF like SRFCHA. Then do dollar cost averaging, i.e. invest slowly and regularly, e.g. in your case every 6 months. Aim for around twenty positions, starting with blue chips. But beware, they're pretty expensive at the moment, except perhaps in Europe. But the trend there is not optimal...
Follow my asset allocation tool
and the blog's various analyses.
