Investments for Retired Mother

[TheSinisterMinister]

Hi all,

I came across this web site when researching investment options for my mother in Switzerland. I've been living in the USA for almost 20 years, so I'm not that familiar with all the options for retired people in Switzerland.



I wanted to ask if you guys had any advice.



Here's her situation:

• She's 78 years old and healthy.
• She owns her apartment outright, it's fully paid off.
• No pension (2. Saeule).
• AHV income: 2'300 CHF per month
• I don't know her expenses, she doesn't really track them. I would guess that she needs 5'000 CHF in addition to the 2'300,- per month.

Her portfolio:

• portfolio size: approx 1.5 mio CHF (home equity not included)
• 15% stocks: (four of five ETFs and one individual stock)
• And here's the problem I need help with: 85% is cash, meaning savings account and Festgeld generating almost no real return (proceeds from home sale).

That's the goal:

• She agrees that her cash needs to be invested and that her stock allocation should be higher.
• I think 25% stock, 75% fixed income is reasonable in her situation.
• When it comes to stocks, I'll just add to one of her ETFs, most likely S&P 500.
• Any suggestions for the fixed income side? I found these two Bond Funds:
  • CH0343694490: Index Bond Fund World (ex CHF) Agg. FAH
  • CH0101754387: CSIF (CH) Bond Switzerland AAA-BBB Blue FB

What do you think ?

 

[Baptiste Wicht]

Hi and welcome to the forum!

A few thoughts:

• 25% is reasonable but still probably low (although much better already than 15%)
• Adding to a S&P500 makes sense, but be careful about USD exchange rate. I would keep some in a home bias ETF.
• For the fixed income, maybe split within a few things:
  • Get a high interest rate account for something like 100K (maybe not higher for deposit insurance). There are some examples here.
  • Get some medium-term notes (maybe 100K as well). Depending on her bank, she may not have to look far
  • Get a good ETF (or mutual fund)
    • I would not use a World Bond Fund because of exchange rate. In this case, the returns will be lower than a world stocks ETF and the risk too high for fixed income.
    • I would rather use CH only bond ETF. The one from CS you are mentioning is good. Or you could use one of the iShares Government CH Bonds ETF

 

[gaijin]

Great discussion, very happy to also jump in here. I have a simliar situation (retired mother and retired aunt) but much smaller portfolios.


For their portfolios:

• As for stocks
  • Due to currency risk, I have a much higher Swiss bias (80% Swiss, 20% world).
• As for fixed income
  • I tend to place fixed income on the high interest account (currently Wir savings account). since fixed income is below 100kCHF, no worries about the deposit insurance.
  • Medium term notes have the disadvantage that they need to be replaced or renewed, so there is some work involved.
  • Still, I'm also looking at bonds. Especially the mentioned iShares Government bonds. My problem: they had a negative return in the past few years. Isn't the idea of bond funds that there is hardly any negative return?
  • https://www.ishares.com/ch/privatku...res-swiss-domestic-government-bond-37-ch-fund
  • https://www.blackrock.com/ch/privat...res-swiss-domestic-government-bond-13-ch-fund

 

[TheSinisterMinister]

Thank Baptiste and gaijin, very helpful information.

I did look into the 3-7 swiss gov bond etf: iShares Swiss Domestic Government Bond 3-7 ETF (CH) and yes I agree, what's the point of a fixed income investment yielding negative returns. Although in 2022 I think almost all bonds took a dive ...

Good point also re international bond funds since my mother already has USD exposure with one of her stock ETFs.

I think we will go with the CH Bond ETF from CS as a first step and take it from there. We are taking baby steps anyways

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