Medium Term investment

[sealjagten]

Hi all,

I inherited a significant amount of money and am not sure how to allocate it. My plan is to buy a house in my future, which will very likely happen between 5-10 years.

I think with this time horizon, it is too risky to put it all in an all world ETF? However, it might be fine to put some of it (e.g. 50%) to an all world ETF and allocate the remaining part to a less volatile investment, what do you think?

For the safer part of my portfolio, I am currently checking options.

• A swiss high interest saving account, for example Radicant with 1.5% interest.
• A world bond ETF hedged to CHF to avoid currency risk, for example GLAC, yielding around 2.5%.
• Money market funds?

I think the best could be to go with GLAC due to the higher yield. However, I have some concerns here: Looking at the past prices of GLAC, there was a significant performance drop in the last 5 years. I do not understand how a bond ETF can drop this much, as at least in theory one can just keep the individual bonds until maturity and not loose any value? If drops like this are likely to happen also in the future (or are they normally corrected in a time frame of 5-10 years?), I guess this might not be the best investment for the next 5-10 years? So what is your overall opinion towards GLAC (or similar)?

I have no idea if there exists a usable money market fund in CHF, but if you know about a good one please let me know.

Thank you all for the help!

 

[LjMan]

if you ask me go all-in in crypto BTC and ETH only, but this is not a financial advice

 

[Max]

I would say, it is important to formulate your goal for this investment.

 

[sealjagten]

I would say, it is important to formulate your goal for this investment.

Well, the goal is to have as much money as possible on my account in 5-10 years without taking too much risk. I am fine with taking a little risk while having a safer part in my portfolio (because if my risk tolerance would be 0 I guess I would just put it on the bank?). As I mentioned, I will use this money to buy a house in 5-10 years and I will be able to afford a small loss worst case but it would be undesirable to end up with like -10%.

 

[LjMan]

Well, the goal is to have as much money as possible on my account in 5-10 years without taking too much risk. I am fine with taking a little risk while having a safer part in my portfolio (because if my risk tolerance would be 0 I guess I would just put it on the bank?). As I mentioned, I will use this money to buy a house in 5-10 years and I will be able to afford a small loss worst case but it would be undesirable to end up with like -10%.

In that case I would transfer all money on Selma so they manage ur portfolio. I have no personal experience with it to be honest, but distribution is ETFs seems pretty good idea and you don't have much hustle managing your portfolio, it is like passive income.

 

[Max]

Well, the goal is to have as much money as possible on my account in 5-10 years without taking too much risk. I am fine with taking a little risk while having a safer part in my portfolio (because if my risk tolerance would be 0 I guess I would just put it on the bank?). As I mentioned, I will use this money to buy a house in 5-10 years and I will be able to afford a small loss worst case but it would be undesirable to end up with like -10%.

I would agree with @LjMan that a robo-advisor is a good solution. You will go through a risk tolerance assessment, so that you will probably be advised to invest in a 50/50-portfolio or the like.

 

[Baptiste Wicht]

First of all, congratulations on putting some serious thought into it and not going crazy with inherited money. It deserves some thought.

First, you need to decide how flexible you are with your 5-10 years. Because if you are very flexible (and end up later in your goal), you can be more aggressive. But if you are not flexible, you should be more conservative.
On top of that, your personal risk capacity is very important.

Allocating everything to stocks over 5-10 years does not make sense unless you are very aggressive and flexible.

Be careful about bond funds. They are much more complicated than people think (I recommend reading this https://thepoorswiss.com/bonds-funds/)

• That's why I would prefer holding bonds directly instead of bond funds, but of course, you may lose on average if bonds go up (although the value of your current bonds will not lose anything if you hold to maturity).

Depending on your risk capacity, I think that having two parts makes sense:

1. An aggressive one could be either an ETF (hedged or not, depends on your risk capacity) directly or using a Robo-advisor
2. A conservative one. And given the current state of bonds (and depending on the amount of money), it currently makes sense to either put it entirely in a bank account or fixed term deposits.

Then, you will need to decide the percentage on each of these two parts.