HdLR’s Investor Policy Statement (IPS)

[This Investor Policy Statement was originally posted in Spanish in August 2018, a new version of the IPS is coming…]

[Drums sound]… tttrrrrrr….trrr…Ladies and gentlemen… 2019 is just around the corner and… it is the year we have established as our retirement target date! 

 so… are we ready to pull the trigger and make the big step? … well… Every time that the deadline gets closer and closer new things come to my mind

But, first things first… WTF happened with the Swiss Citicenzinch paperwork you guys are doing?

Swiss Citizenship (update)

Well… for those of you new to the blog, some time ago we had analyzed the possibility of moving to Canada or to the US for some time. 

Our conclusion after some months of thoughts (and spreadsheets of course) was that it didn’t make sense to move to either the US nor Canada and start over. Thus, we have decided to stay in Switzerland until we get the Swiss Citizenship.

We have been here for more than 12 years and we could get a nice red passport, which by the way ranks #3 in the global passport Index together with Italy and other European countries. 

So the question is: At which point are we?

We finally have all the documentation ready to be submitted and start the process by August 2018. 

How long will it take until you get citizenship?. It depends on who you ask. You will receive answers like “1 year” or “5 years“… (we don’t have 5 years to wait for the fuc#$%ng passport)  but, I found that the maximum time it takes for the canton to send the documents to evaluate at the federal level is 12 months. That would be August 2019, 

still on time to be on target and relocate to our ranch?.

Well not really, once the canton has sent the documents to the federal level, the confederation is required to provide an answer maximum within 8 months from receiving the request, that would mean May 2020.

May is close to the summer which is our favorite season in Switzerland so forget about leaving by then.

This Citizen stuff would delay our departure but would also give us more than 2.5 years in accumulation phase ( ½ a year of 2018, all 2019 and 2020)

Cool… it’s good to read about this stuff but…

WTF it has to do with your Investor Policy Statement?

Well, in fact, it is closely related because we’ll have 2.5 more years in accumulation phase so we need to set up the rules we’ll follow to invest and allocate our investments.

The IPS is the document we use to outline a clear way to go. From objectives to actions and future actions. 

Having this into account, I did a quick research on how to put together a personal guideline so that we can clarify priorities, strategy, asset allocation, etc… Thus, after some hours on the web, I found an interesting article in the Bogleheads Wiki explaining what is this IPS, I found that PhysicianOnFire had already done one so I decided it was a good idea to complete ours and make it available for others.

UPDATE (2020): while re-writing this post I found that some Swiss bloggers like RIP, The Poor Swiss, and Julianek (from the Swiss mustachian forums) have already written an Investor Policy Statement have a look.

So, this is our IPS, enjoy it.  

Current Situation

We’re a family of 4, living in Switzerland and planning to move to the beautiful mountains of Colombia/Mexico by 2021

Financial Objectives

  • To reach between 28 to 30x our yearly expenses so that we can retire with an SWR of 3.5% to 3.33%
  • Push the numbers as much as possible while being willing to take risks 

General Strategy and actions

2018 – 2020 (included)

  • Continue the accumulation phase, aiming for a monthly savings rate between 50 and 60% 
  • Primarily to invest in stocks through the use of low-cost index funds
  • Reorganize my current portfolio to the one described in this IPS
  • Keep at least 2 months of expenses in cash

2021 – ….

  • Already in Financial Independence, start a transition of assets. 

Ideally from stocks to real state (that demand more time and less liquid) but this will allow us to create a passive income stream and will give us some “work” while taking care of the investments.

Portfolio objective

  • Growth! 
  • Geographically Diversified Portfolio following (more or less) the MSCI All Country World Investable Markets + Frontier distribution
  • Overweight small caps 
  • Overweight “Greater China” (China, Taiwan, Hong Kong).

Risks, Expectation and Time Horizon (RETH)

To achieve market growth and keep the portfolio running for the next 10 years.

Asset allocation

Low cost Indexed ETFs 65%

I came to build this portfolio after a great discussion and feedback received in the forum, so read this if you want to see the whole process.

Total TER of 0.0965%

Investor-policy-statement-portfolio-allocation
Portfolio by geographical allocation

Retirement accounts 20%

  • This includes the 2nd and 3rd pillar
  • 2nd pillar is with employer ‘s company (can’t do much about this)
  • 3rd pillar move to VIAC

Crypto 5%

Yeah.. we hold some crypto, I don’t care what you think 🙂

  • Bitcoin (BTC) 3%
  • Ethereum (ETH) 1%
  • LiteCoin (LTC) 1%

Real Estate 5%

  • To keep the current property in the portfolio (we have a fully paid rental) 

Personal Lending 5%

  • This is like P2P but not on the web. I rarely lend money but sometimes you have close trusted friends and family that need quick cash to make a business where there’s a profit involved so we can lend some of the cash and make a quick return. 

Investment Plan and frequency 

  • At the moment of writing this article I’m with CornerBank so, change the broker to Interactive Brokers? DeGiro?
  • To analyze what’s the investment frequency that makes more sense 2, 3, 6 months?
  • Use the new investments to rebalance the portfolio.

Extra considerations and actions To Be Done

  • Research about different withdrawal strategies (Where is the money coming from during retirement?) 
  • What taxes are paid for leaving the money in Switzerland while living abroad?
  • What other cost or contributions must be done being a Swiss citizen and living abroad? 
  • What’s the cheapest way to transfer money from Switzerland to Colombia for monthly withdrawals?

What about you? do you have an Investor Policy Statement?


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1 Response

  1. February 20, 2020

    […] also wrote our Investor Policy Statement (IPS) to fix the rules to be followed in different circumstances and that helped us as a guide to […]

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