My investment policy or better, my personal wealth management policy.
This is my first time doing this, I tried to inclued everything wealth-related.
Please give me your feedback :)
(note that I am from switzerland).
1. Emergency Fund
Emergency fund is what allows me to invest and live safely, knowing I have something to fall back to without needing to resort to debt (debt is EVIL).
Emergency fund is established at 8 months of full living expense (e.g. not reduced), when job is secure.
When job is not secure (term contract, difficult company situation, ecc.) emergency fund is established at 10 full months.
In the case the EF runs under the established amount, it shall be replanished as first priority and all saved money will be put in to the EF, postponing other investments.
Full living expenses will be re-assessed when important life-events occur (getting married, children, moving city, ecc.)
2. Location of financial assets
Financial assets are located (I am swiss investor):
- In 2 pillar (fixed retirement asset)
- In 3a pillar (variable retirement asset)
- As cash (EF) (mixed asset)
- ETF or mutual funds with low fees and low costs of investing (mixed asset)
3. Risk tolerance and risk strategy.
My risk tolerance is at this moment unknow (first investment), but expected to be average. As I fear investing in a lump-sum and get immediate bad returns, I will always apply a DCA strategy to all my investment. My investment veichle will also take into account this, as the higher fees it might incur I might pay to be able to apply DCA over small investment will in the end repay themself by preventing me from acting stupid out of fear. By investing with DCA I am protecting myself (although not fully) from the physcological fear of seeing my investment going down straight.
My risk tolerance is around 40-60% stocks, rest bonds.
My risk tolerance will be re-evaluated each year, and in case of important life events.
4. Investment objectives
The main objective is to accumulate wealth, for retirement and for down-payment in a house.
Time horizons are 2053 for retirement and 2031 for the house.
5. Assets allocation
Money will be invested according to the % allocated (according to my possibilities) for investment of my income-after taxes. The allocation takes into account: fixed expenses; retirement; holidays; saving for big expenses (car); free cash flow (various) and investments.
Invest money monthly with DCA.
Variable retirement assets
Overall stock allocation for variable retirement assets will be:
30-40 years old: 45
40-50 years old: 25
50-65 years old: 10
65+ years old: 5
Allocation balance will be reached by investing more or less in different third pillar accounts:
pillar 3a bank account (fixed income) vs pillar 3a fond (stock/fixed income mix)
Pillar 3a fond: keep fees as low as possible, more than 0.7% p.a. is not acceptable.
Priozation of Pillar 3a bank vs pillar 3a fond: untill 35 yo always prioritize 3a fond.
Cash
In addition to EF, some cash will be held in the bank account to accomodate for “life”:
30-35 years old: 7% of target EF
30-40 years old: 13% target EF
40-50: 24% of target EF
50-65: 35% of target EF
65+: 39% of target EF
Wedding: as wedding is planned in a short-term period, remember to keep money for it as cash, in savings account.
ETF or mutual funds:
Bonds: 35-45% (Total bond market: 0-35% / Swiss bonds: 65-100% )
Equities: 65%-55% (Total US stock market: 40-55% / Swiss equities: 4-7% / International market: 40-55%
Real estate: 0%
Natural resources: 0%
Keep fees as low as possible. target is 0.5% p.a. maximum; more than 0.65% p.a. is not acceptable.
priorization of assets
EF> 30% pillar 3a fond > 50% ETF > 30% pillar 3a bank > 50% ETF > 50% pillar 3a fond > 30% pillar 3a bank > remaining pillar 3a fond > remaining pillar 3a bank >
foreign currencies
A single foreign currency should never be more than 45% (total only counts in ETFs; pillar 3a fonds aren't calulated in; also, a pillar 3a fond in foreign currency - if it even exists- should be avoided at all cost)
If it need be, to balance this out, bonds in foreign countries can be exchanged with bonds in CHF, trying to avoid buying more of a bond I already have, but including a new one.
6. Other
Aim at maximum diversification and wide-market coverage.
For stocks, aim at world coverage, do not give too much importance to home (=swiss) assets.
Avoid overlapping of same-nature investment veichles (i.e. avoid overlapping of ETFs); if possible avoid overlapping over different-nature investment veichles (ETFs overlapping with 3a pilar funds).
In 3a pillar funds aim at world-coverage (and avoid swiss-only).
Nothing justifies a single company being worth more than 10% in an asset (so avoid ETFs or index funds doing this).
Missing anything important?