Becoming a rentier and investment strategy

[Investissor]

Good morning,

I have been reading this blog with interest for a few years. And I just finished reading the book. I totally agree with the RatRace analysis, and I loved the beginning of the afterword with the neighbor scraping his car under the snow 🙂

I also aspire to such a goal. And as a small SME boss, with the wealth tax based on a totally disproportionate assessment of the value of my company, I pay 45% of my 2020 income in tax… So clearly, I work like a madman to ensure the salary of my employees and pay taxes. The profitability of the company is good but I reinvest it (yes yes the Ratrace).

Some comments following reading Jerome's book:

– Relying on a real return of 7% seems a bit ambitious to me. Especially since the more securities you have to part with to finance your annuity, the less return you will have. Personally, I calculate with a maximum of 5% per year (real).

– So I'm trying to get to a point where the capital is never touched, with a good diversified equity PF and also real estate. I think I'll have to work hard for another 5 to 8 years.

– In the book, Jérôme rightly says that the most profitable thing would be to be a shareholder in a SME type company and to delegate management to a director. That's a bit what I would like to do. But it is very, very difficult to put into practice. To date, I have not found the person who can do that (be extremely versatile, diplomatic, know economics and accounting, have an entrepreneurial flair, etc.). And I would add that for a sole shareholder like me, I would never really be "worry-free".

– Portfolio: I do not seek to replicate an index with my PF. My strategy is to never sell a security, but only add purchases. Part of the PF is placed in good values, but I allow myself 20 to 30% in small innovative companies. Some are stagnating or collapsing (Canadian cannabis, etc.), but others have largely compensated (Tesla in 2018 🙂 )

– Broker: Historically, my stock PF is with Tradedirect from BCV. I find it a little behind compared to swissquote or others. But given my strategy, that's enough for me. And it's still a cantonal bank behind it... Personally, I avoid brokers abroad (freezing of assets in the event of a serious diplomatic problem, bankruptcy, etc.). Is anyone else with Tradedirect? The tax statement fees seem exaggerated to me (around 500 francs for 40-50 positions)

– French stocks: I have some nice French dividend stocks (total, sanofi, danone, bouygue etc). But after my calculations, the French withholding tax of 30% is purely lost. Right? These positions are worth 5000-8000 EUR each.

Have a good end to the long weekend. Courage to those who will have to get up tomorrow morning (including me)

 

 

 

[Jerome]

Hi,

Thank you for your comment.

Here are my answers:

– Relying on a real return of 7% seems a bit ambitious to me. Especially since the more securities you have to part with to finance your annuity, the less return you will have. Personally, I calculate with a maximum of 5% per year (real).

Be careful not to confuse dividend yield and portfolio profitability. Profitability does not change, even when you sell securities (nor does the dividend yield in percent). The real profitability of 7% is that of the stock market on average over the long term. It is also the one I have had on my investments since 2010. Since the introduction of the determining PF (from 2020), I expect an increase in this annual profitability, to reach 16%. For the moment, it is lower, given the market conditions, but the PF is not performing so badly. I will soon be doing a review of the first half of the year, which is very rich in lessons!

To this day I have not found the person who can do this (be hyper versatile, diplomatic, know economics and accounting, have the entrepreneurial flair etc.). And I will add that for a sole shareholder like me, I would never really be "without worries".

Yes, you are right and it is a real problem. I know several entrepreneurs in the same situation as you.

– Broker: Historically, my stock PF is with Tradedirect from BCV. I find it a little behind compared to swissquote or others. But given my strategy, that's enough for me. And it's still a cantonal bank behind it... Personally, I avoid brokers abroad (freezing of assets in the event of a serious diplomatic problem, bankruptcy, etc.). Is anyone else with Tradedirect? The tax statement fees seem exaggerated to me (around 500 francs for 40-50 positions)

I am an old defector from BCV and e-sider (ancestor of tradedirect). I left in particular because of the fees. For buy & hold it can indeed work. And yes, 500 bucks for a tax statement is theft. Even Postfinance is cheaper (100 bucks).

– French stocks: I have some nice French dividend stocks (total, sanofi, danone, bouygue etc). But after my calculations, the French withholding tax of 30% is purely lost. Right? These positions are worth 5000-8000 EUR each.

Lost, not quite. Either you apply for reimbursement from the French State, but it is a complicated, slow procedure and you only get a small amount, or, much simpler, you ask for a flat-rate deduction on half of the amount, via your annual tax (the other half is already withheld by the Swiss tax authorities). It is much simpler and it prevents you from being taxed twice. The two amounts withheld at source (Swiss and French part) are then deducted from what you owe on your annual tax.

Courage to those who will have to get up tomorrow morning (including me)

I will be united, I also stand up for my kids 😉

[Author]

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