Looking for advice on asset allocation for a beginner

L

Luma

New member
Hello,

I’m trying to put together a long-term investment portfolio (10-15yrs) and would appreciate some input on asset allocation.

I’m considering using a global stock ETF like VT as the core of my portfolio, but I’m unsure how to structure the rest. In particular, I’m wondering whether it makes sense to include:
  • Bonds to reduce volatility and add some stability.
  • Home bias by allocating part of the portfolio to Swiss stocks, rather than relying entirely on a global ETF.
  • Gold as a diversifier.
For those of you who invest for the long term:
  • Do you stick to a global equity ETF, or do you add other asset classes?
  • If you hold bonds, Swiss stocks, or gold, roughly what percentage do you allocate to each?
  • What made you decide on your allocation?

Thank you
 
Hi and welcome to the forum!

None of your questions have a definite answer, they will vary on each investor.

We have a global stocks ETF and a Swiss stocks ETF as our home bias.

For us, a home bias is important to have more CHF exposure.

We have a tiny bit of physical gold, but not part of our portfolio, only to have something physical on the side.
* I do not think gold is that interesting as a part of a portfolio even though it did really well in recent years.

We have no bonds because we are in a good financial situation and can afford to take risks on the stock market.
* These days, I would rather have cash than Swiss bonds actually
 
Hi and welcome,
I have a very different approach from those who commented before me.

I diversify across uncorrelated asset classes to get the best possible risk-return tradeoff. In practice, when one goes up, another goes down, but if you look at the portfolio as a whole, it always grows in a much smoother way. You'll notice, though, that the expected return often drops too, depending on which asset classes you pick and how many. So it's about calibrating well between asset classes.

My portfolio takes it a step further: I look for the best risk-return ratio (Sharpe ratio), and then I add leverage based on the risk I'm willing to take. This way you can even build portfolios that deliver equity-like returns with far less volatility, for example. It's an approach many portfolio managers use.

If you feel like it, try running some backtests — Testfol.io is great. You can create different portfolios, add the ETFs you want with whatever weightings and rebalancing frequency you choose, and see everything in CHF if you set the currency at the top. Don't just look at how much it returns, but also how much it draws down and how much it can hurt you psychologically. Also try checking how some well-known portfolios have performed — portfoliocharts.com/portfolios/ has a nice list with plenty of information.

Obviously, only if you feel like digging deeper. Investing solely in VT is not a wrong choice.
 
Baptiste Wicht said:
Hi and welcome to the forum!

None of your questions have a definite answer, they will vary on each investor.

We have a global stocks ETF and a Swiss stocks ETF as our home bias.

For us, a home bias is important to have more CHF exposure.

We have a tiny bit of physical gold, but not part of our portfolio, only to have something physical on the side.
* I do not think gold is that interesting as a part of a portfolio even though it did really well in recent years.

We have no bonds because we are in a good financial situation and can afford to take risks on the stock market.
* These days, I would rather have cash than Swiss bonds actually
Click to expand...
Hi Baptiste,

Thank you very much for the reply and for all the valuable information you are sharing on you blog :)

Is there a "defensive" component you would recommend? I am starting investing a bit late (42yrs).

Thank you
 
gaijin said:
I stick to a global ETF. I consider my 2nd pillar to be my bond allocation. In my 3rd pillar I have a small amount of home bias (ca. 10%).


Expectation of long term return based on historical data plus simplicity.
Click to expand...
Thank you for the shared information!
 
Rttm said:
Hi and welcome,
I have a very different approach from those who commented before me.

I diversify across uncorrelated asset classes to get the best possible risk-return tradeoff. In practice, when one goes up, another goes down, but if you look at the portfolio as a whole, it always grows in a much smoother way. You'll notice, though, that the expected return often drops too, depending on which asset classes you pick and how many. So it's about calibrating well between asset classes.

My portfolio takes it a step further: I look for the best risk-return ratio (Sharpe ratio), and then I add leverage based on the risk I'm willing to take. This way you can even build portfolios that deliver equity-like returns with far less volatility, for example. It's an approach many portfolio managers use.

If you feel like it, try running some backtests — Testfol.io is great. You can create different portfolios, add the ETFs you want with whatever weightings and rebalancing frequency you choose, and see everything in CHF if you set the currency at the top. Don't just look at how much it returns, but also how much it draws down and how much it can hurt you psychologically. Also try checking how some well-known portfolios have performed — portfoliocharts.com/portfolios/ has a nice list with plenty of information.

Obviously, only if you feel like digging deeper. Investing solely in VT is not a wrong choice.
Click to expand...
Hi, thank you for sharing, it's great to learn about different approaches and I am very curious to try testfol.io
 
Luma said:
Is there a "defensive" component you would recommend? I am starting investing a bit late (42yrs).
Click to expand...
Cash :)

Swiss bonds used to be great, but they currently have very low interest rate. Once they get back to some yield, we can go back to using them instead of cash.
 
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