Passive investing via long-term ETFs

[Yeah yeah]

Good morning,

I am very interested in ETFs to invest part of my savings. I would like to invest in the long term with low risk. I have read a lot of things, a good part of which is on French blogs and sites. There is a lot of talk about PEAs… There is a lot of information but I don't really know where to start, so I come to ask my questions here to see more clearly and know if there are subtleties in Switzerland compared to France.
What is the best account type for what I would like to do?
How can I possibly get more information?
Or even train me on the subject?

[Jerome]

Hi,

If you want to invest in the long term, I advise you to open a trading account with Postfinance.

Check out this link:

Brokerage fees

Here we talk a little about ETFs, even if stocks are our favorite subject.

To inform and train you, it depends... what do you want to know?

[Yeah yeah]

Ok thanks for the advice regarding postfinance
Yes, I had read the very interesting topic on brokerage fees.

For information and training precisely in order to learn more about ETFs and how to best invest through them. For example, how to choose ETFs, distribution, etc.

 

[Jerome]

I am currently writing a book that will be published this spring and which will discuss ETFs in particular.

In the meantime, you can already read this series of articles:

How to diversify your portfolio to protect yourself from market risks? (1/20)

and get inspired by my asset allocation:

Determinant portfolio

 

[PloutosNX]

Hi,

I hope I'm not too late, but here is my little contribution regarding your request.

For me, there is already a contradiction between wanting to use ETFs and investing with low risk.
In any case, you will indirectly buy shares and company shares. There will therefore be declines and volatility.
There are several types of ETFs, general, sectoral, index replications, etc. and ETFs with physical products, others using synthetic products. You must first understand all these differences.
I am by no means an expert, I am also learning and trying to understand how to better protect myself by buying stocks individually.

Otherwise, as I understood, you are also in Switzerland. A simple way is to use your 3rd pillar to build it up and invest it. There is the FinTech VIAC (viac.ch) which allows you to use ETFs to make investments and if you make a payment every month you make what is called a programmed investment (DCA).

Also find out about taxation, what is taxable or not in order to best choose your investment products.

I hope I was also able to give you some additional information.
Xavier

[Yeah yeah]

Hello Xavier

Thank you for your reply

What I meant was low risk in the area of stocks (indeed stocks are relatively "risky" compared to other things)

For VIAC yes I discovered that in the meantime but as I have already done a 3rd pillar this year I will be interested in it next year.

For ETFs I am also always researching and looking for information to have all the parameters before getting started.

 

[PloutosNX]

Hi,

I made the same "mistake last year"... too bad it's almost 20% of lost earnings.
You can always transfer a 3rd pillar to another bank (or VIAC in this case). That's what I did for one of them.

OK low risk you mean as "being the market" using index replication I guess.

I think a lot of the research and analysis for ETFs is already available in asset allocation, if Jerome can confirm that the ETFs he gives as references are the ones he uses.

Good evening.
Xavier

[Jerome]

I use ETFs where I don't have direct stocks, i.e. gold, bonds, real estate and emerging markets.

ETFs are not complicated. You just have to stay focused on a few that are fairly liquid and not too expensive in terms of management fees.

The only real challenge is less their choice than the way to arrange them between them. In short, asset allocation.

[PloutosNX]

Hello Jerome,

I think I misrepresented the question that dismays ETFs.
Are the ETFs that you give as references in your asset allocation the ones you use or have you selected others?

I may have also misunderstood... You don't use these ETFs (CHSPI, CSSX5E, ISE, CSSPX/XSVM, CSCA, SJPA, SAUS) to invest, it's just to follow the trend?

Regarding emerging country stocks, do you only take small CAPs (EEM) or do you mix them with other ETFs (IEMS)?

Xavier

[Jerome]

I actually use these ETFs to follow the trend and make my top down decisions to buy stocks directly. This is the best way to go because ETFs are a blend of good and bad vintages. However, for beginners and/or those with little means, it is better to start with ETFs. So in this case we will base ourselves on the ETFs mentioned rather than on the stocks themselves.

ETFs are also useful for taking minority positions in other assets such as gold, bonds, real estate and specific markets such as emerging markets.

For the latter I replaced IEMS with EEM for liquidity reasons.

[PloutosNX]

Hello Jerome,

Thanks for the clarification.

[Soon]

Xavier,

Many thanks for the mention of Viac. I spent a few hours looking for an "efficient" supplier for the 3rd pillar, my insurance broker not knowing of any solutions of this type.

ETFs still deserve a minimum of analysis because they can be built in very different ways. Some use swaps to have the economic exposure of the underlying assets (i.e. a contract with a third party, which implies a counterparty risk, (remember 2008). In contrast, others have the underlying positions, which is less risky (which are nevertheless sometimes lent). Is it a "US" isin? .. then a tax risk (for survivors) in the event of death. If all the ETFs that give you exposure to gold had to buy the underlying asset by certain that there is enough yellow metal in circulation... finally, they are great instruments but worth a little research.

[Jerome]

Hi Soon. All your thoughts are perfectly correct. ETFs, contrary to popular belief, can be riskier than stocks. I have already mentioned this many times on this blog and in my e-book. Their construction (swaps, securities lending), their exposure (mostly US big caps), and the style of the indices followed (capitalization - favoring growth stocks to the detriment of value) create systemic risks. As you say, this can recall 2008 with subprimes. As you also mention, if they are domiciled in the USA, there is a tax risk that is added in the event of death, but this is not specific to ETFs.

This does not mean that we should do without them completely, because in some cases they are very useful. I am thinking in particular of:

– for beginners: allows diversification despite low capital

– for the more experienced: allows you to quickly take a position on an asset class representing a minority position in the portfolio and therefore to diversify

– for all: allows you to buy asset classes that are more difficult to trade or for which you have less affinity or skills (gold, real estate, bonds, emerging country stocks, etc.)

The important thing, again and again, is to DIVERSIFY. Not just ETFs, but also (and above all) all approaches. As soon as you have passed the beginner stage and have capital of several tens of thousands of francs or euros, the portfolio must therefore include shares, in addition to a few ETFs.

These ETFs should be considered as an asset class in their own right. They are not completely equivalent to the assets that make up the indices tracked. They have their own risks.

[Mystic]

There are several types of ETFs, general, sectoral, index replications, etc. and ETFs with physical products, others using synthetic products. You must first understand all these differences.
I am by no means an expert, I am also learning and trying to understand how to better protect myself by buying stocks individually.

If you want an ETF as close as possible to the desired index (e.g. the SMI), you have to buy all the shares of the SMI in the same proportions then leave it in buy and hold 🙂

We just have to hope that an action from the SMI does not go into the SPI 🙂

PS: my idea is limited because if you want to replicate the S&P 500, good luck :)

[Author]

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