Switzerland Permanent Portfolio

[kev_in_tw]

I've got some free time back in Europe and I'm thinking of a trip to Switzerland.

Now I've got some cash in a UK building society which I want to put in a Permanent Portfolio. So I need 

UK/US Stocks
UK/US Long term bonds
UK/US Short term bonds
Gold

I could do some of the gold as physical gold in a safe deposit box. Presumably the bank offers share dealing.

Does anyone know of a Swiss bank that allows foreigners to buy UK or US government bonds?

I've got a small permanent portfolio in the UK as described here

http://gyroscopicinvesting.com/forum/pe ... /#msg55800

However this has some issues in that I hold a bunch of ETFs in via HSBC. Now there's a nominee company which is theoretically safe if HSBC goes down the tubes. I don't entirely trust things like that and potentially all sorts of very bad things could happen like government seizing gold as happened in the Great Depression.

So there's an argument for holding things outside the UK.

However I'm not sure I want to be tied to the CHF.

Is anyone using Switzerland as a base for portfolio? Any advice.

I tried to contact Zurich Cantonal Bank about accounts and safe deposit boxes but they are not at all keen on dealing with people outside Switzerland.

Am I likely to get a better reception if I walk in to an ZKB branch? Also can I hold UK and or US stocks and bonds in a Swiss account?

[frugal]

Hi,

1- Which ETF's would you use in your EUPP?

2- Why not to use a broker in Swiss?

Regards

[kev_in_tw]

I made the trip to Switzerland.

It turns out that so long as you are not a US citizen UBS and Credit Suisse will give you an account, albeit with GBP 50K-100K minimum opening balance. Zurich Cantonal Bank offer accounts to UK citizens so long as they are UK residents. As soon as I mentioned being resident in Taiwan however they balked. Interestingly being outside the EU makes is a plus for UBS and Credit Suisse - for example online share dealing is disabled if you are in the EU.

Now both UBS and Credit Suisse will let you buy stocks, either in the US or UK. Or potentially a lot of other places.

So I'm thinking something along these lines

STOCKS

A UK and a US Index tracker ETF

BONDS

The longest dated UK and US government bonds I can buy

E.g. for the UK I'd go for this

http://www.londonstockexchange.com/down ... BPUKGT.pdf
http://www.fixedincomeinvestor.co.uk/x/ ... &groupid=3

CASH

I need one UK and one US money market ETF. Credit Suisse pointed out that a bond ladder would be a bad idea since I'd lose 1% or so in fees each year I needed to buy new bonds to replace the ones that matured.

GOLD

Both banks have a bunch of options - allocated, non allocated. Or an ETF.

I'm still a bit hazy as to money market products. I think for the UK I'd take my first generation PP i.e.


NameSymbolGain %
ETFS METAL SECURITIES LD ETFS PHYSICAL GOLD £PHGP23.36%
ISHARES II PLC ISHARES FTSE UK ALL STKS GILTIGLT7.81%
DB X-TRACKERS DB X-TRACKERS £ MONEY MKT ETF CAPXGBP1.77%
DB X-TRACKERS DB X-TRACKERS FTSE ALL-SHARE ETFXASX10.05%


I'd replace the IGLT with a TR60, for the reasons mentioned here

http://gyroscopicinvesting.com/forum/pe ... /#msg55884

Probably some of the gold will be physical - allocated if possible, unallocated if not.

For the US part I think I'd do something very similar. I.e. gold will be a mix of an ETF and physical gold. I'd use an ETF for the stocks, a money market fund for the cash and hold the long term bond directly.

I.e. if I take the list of ETF's from here

http://gyroscopicinvesting.com/forum/pe ... d-options/

I get

VTI - Stocks
GLD - Gold
TLT - Bonds
SHY - Cash

I could buy the bonds direct, or stick with TLT. Like with the UK PP I've got the option to replace some or all of the GLD with allocated or unallocated gold in Switzerland.

[frugal]

So, you want to make a UK-PP and US-PP in Switzerland?

EU-PP no?

Can you please explain.

[kev_in_tw]

So, you want to make a UK-PP and US-PP in Switzerland?

EU-PP no?

Can you please explain.

Well it's complicated. I'm based in Taiwan with some property in the UK. My intention is to stay in Taiwan and build a business here, but right now I'm living mostly off investments, mostly the rent on the property. I may well end up somewhere else in the long run.

Now Harry Brown said you should invest in your home country. Problem is that is non trivial in Taiwan and I don't really have a home country. After much thought and discussions like this

http://gyroscopicinvesting.com/forum/pe ... /#msg38073

If you're planning on living in multiple countries throughout your life, perhaps a US based PP is the best option as you can always retire in a low cost of living US state with little risk.  Just something to think about.

I think I want a US and a UK PP. UK because I do still have significant business there and I could go back if all else fails, US because it's a big liquid market and the USD seems to be fairly resilient. I could always move to the US - in fact that is far more appealing than going to back to the UK. It is very easy to make a US PP purely out of ETFs, though obviously I'd keep the Gold physical.

As far as the Euro goes I think it is not a very good idea at the moment. The Euro could disappear over the timescales I'm thinking of. Plus I have no significant business in the Eurozone and in fact never really have.

There's an element of guesswork about the choices of currencies of course.

Why Switzerland? The Swiss have been running banks for a long time and they have capital requirements over Basel III. Even if a Swiss bank goes under I could still transfer my shares to another bank and sell them. That would not be possible in the UK and the UK banking system does not inspire confidence. Though I'll keep a small UK PP with HSBC. However HSBC share dealing is through a nominee company. So if UK banking system has a systemic crisis I'd be concerned I could get the money back.

[frugal]

Hi,

Can you explain your ER experience?

At what age you started?

What are your means of income?

Tks

[kev_in_tw]

Hi,

Can you explain your ER experience?

What's ER?

At what age you started?

What are your means of income?

Tks

The income all comes from software consultancy, i.e. contracting. Most of it is from outside the UK. Basically I worked as a contractor in places like Sweden, Netherlands, Germany, Korea and Taiwan on embedded systems. Mostly debugging. I did that for about 17 years. Problem is that is nowhere near as lucrative now as when I stated off - contract rates have dropped off a lot.

[CA PP]

hi kev,
keep it simple.

buy from the swiss stock exchange through a swiss online broker (or two). advantages are safer (my opinion) and no witholding tax on bonds and funds income payments. however a 30% on savings axcounts interest payments.

stocks: csspx ( fee .2%, trade 10usd plus swiss stamp) or zkb mutual fund msci usa

bonds: longest available us gov. secondary market. trading .3% + stamp

cash: a mix of savings acount and us gov treasuries,secondary market. trading .3% + stamp

gold: zgldus (fee .5%) trading 10 usd + stamp

total expense .175% + trades. 

very reasonable in my opinion.  however for a safe deposit you need an account with a bank... it is more expensive but still reasonable accounting for less gold fund fees and the advantage to have your gold there...

[frugal]

Hi,

Can you explain your ER experience?

What's ER?

At what age you started?

What are your means of income?

Tks

The income all comes from software consultancy, i.e. contracting. Most of it is from outside the UK. Basically I worked as a contractor in places like Sweden, Netherlands, Germany, Korea and Taiwan on embedded systems. Mostly debugging. I did that for about 17 years. Problem is that is nowhere near as lucrative now as when I stated off - contract rates have dropped off a lot.

ER = EARLY RETIREMENT

how many annual expenses (years) of saving you have now?

[kev_in_tw]

how many annual expenses (years) of saving you have now?

Rather more than I'm likely to live to be honest, assuming I stay in Taiwan.

[frugal]

how many annual expenses (years) of saving you have now?

Rather more than I'm likely to live to be honest, assuming I stay in Taiwan.

How much you need per person per year in TAIWAN?

tks

[kev_in_tw]

I have to confess I'm still musing over what currencies to set up my PP in. Consider the following



Over the last 11 years the USD has actually been fairly stable against the TWD. The GBP has depreciated and the CHF has appreciated.

Now I think what this is telling me is that I have a couple of options

1) Invest purely in USD. I think I'd go for VTI, TLT, SHY as ETFs and then buy physical gold and keep it at the bank. Whilst the USD has depreciated it is a lot more stable against the TWD than the other two currencies.

2) Invest in a basket of currencies including the USD. E.g. PPs in USD, GBP and CHF wouldn't be a bad idea. The problem is I've got no idea how to pick the basket of currencies other than by pure emotion.

I think I'm inclined to stick to USD to be honest. I've got some other investments back home that generate a steady stream of GBPs. If you talk to Taiwanese people about trying to set up a Permanent Portfolio in TWD they think you're completely mad - they tell you to do it in USD!

[jabba]

http://www.swissquote.ch/sqweb/index.jsp?l=e I used these guys as a broker account is closed now but they seem to be much better value than the banks.

I am in a similar situation to you. Need to start investing but my issue is timing. I feel that I would be a sucker with the S & P 500 at all time highs. That does not bode well, also the constant chatter of bonds about to blow up after "the 30 year bull run". I know we are not supposed to do timing but I can feel it in my bones that we are in for a 10-20% correction sooner rather than later.

Just say that happens, I would start allocating I have similar issues in regards to currency. I hold mainly Eur and live in the EU. I also have GBP, USD and a tiny amount of CHF. My income is earned in GBP and EUR about 50/50.

I am also drawn to investing in USD because of the size and choice of the market but there is the additional currency risk that comes with that. I prefer the USD over the EUR as it is still the world's reserve currency and follow the US market there more than the EU. I know nothing about the STOXX50 etc in europe, it seems a little dull but perhaps dull is good.

So maybe I have hijacked your thread with my thoughts, apologise if I have but I think we are at a similar stage in deciding where to go.

[frugal]

http://www.swissquote.ch/sqweb/index.jsp?l=e I used these guys as a broker account is closed now but they seem to be much better value than the banks.

I am in a similar situation to you. Need to start investing but my issue is timing. I feel that I would be a sucker with the S & P 500 at all time highs. That does not bode well, also the constant chatter of bonds about to blow up after "the 30 year bull run". I know we are not supposed to do timing but I can feel it in my bones that we are in for a 10-20% correction sooner rather than later.

Just say that happens, I would start allocating I have similar issues in regards to currency. I hold mainly Eur and live in the EU. I also have GBP, USD and a tiny amount of CHF. My income is earned in GBP and EUR about 50/50.

I am also drawn to investing in USD because of the size and choice of the market but there is the additional currency risk that comes with that. I prefer the USD over the EUR as it is still the world's reserve currency and follow the US market there more than the EU. I know nothing about the STOXX50 etc in europe, it seems a little dull but perhaps dull is good.

So maybe I have hijacked your thread with my thoughts, apologise if I have but I think we are at a similar stage in deciding where to go.

hi,

a) on that account in SWISS the currency was EUR ?

b) PP is balanced in 4 assets. Timing is not easy.

c) In which currencies will you setup your PP?

[jabba]

Yes they did in EUR, they can do in any currency but it is better to fund the account in the currency you intend to invest in.

AS for PP I am still on the fence. I am not sure it is the opportune time with the Stock market so high and bond yields so low. The only asset class that looks OK now is gold and cash.

As for currency I guess it should really be in EUR as I intends staying in the EU.

[frugal]

Yes they did in EUR, they can do in any currency but it is better to fund the account in the currency you intend to invest in.

AS for PP I am still on the fence. I am not sure it is the opportune time with the Stock market so high and bond yields so low. The only asset class that looks OK now is gold and cash.

As for currency I guess it should really be in EUR as I intends staying in the EU.

hi,

which solid brokers you know in EUROPE ?

PP is in a good point of entry this year

[kev_in_tw]

AS for PP I am still on the fence. I am not sure it is the opportune time with the Stock market so high and bond yields so low. The only asset class that looks OK now is gold and cash.

The point of the PP is that you don't need to market time. At any point in history some of the components are going down and others are going up.

It did OK during the long bear market for gold in the 80's and the stock crash in 2008.

https://web.archive.org/web/20160324133 ... l-returns/

Now I have no problem with accepting that. What concerns me is currency movements. E.g. the USD could drop against the currencies you need to spend money in.

Now the conventional PP response is "Well you need to invest a PP in your own currency". The problem I have with that is that I don't have a home currency in that sense.

So probably I'll invest in USD. I've got some other assets in GBP so I'd end up 50:50 USD and GBP in effect.

Of course the the question is whether there is some sort of theory that tells you how to invest in a basket of currencies such that the portfolio has less volatility with respect to a currency outside the basket than a pure USD portfolio would have.

E.g. suppose I'm a resident of The Republic Of Bananastan. The Bananstani Ringpiece (BRP) is not a good currency to set up a portfolio in for a variety of reasons (e.g. I find it hard to do due diligence in English and impossible in Bananastani, there's the vague possibility of tension with the neighbouring and much larger People's Democratic Republic of Bananastan). So I invest in a USD portfolio. However unlike the US Bananastan actually runs surpluses on both its government budget and its import export balance thanks to both its banana plantations and the ones it runs over the border in the previously desolate and Killing Fields-esque People's Democratic Republic. Thus the BRP appreciates against the USD.

So my portfolio becomes less valuable in BRPs which sucks because I need to use some or all of it to invest in Bananstan.

Now from my somewhat primitive grasp of exchange rates over the last 10 years it seems that

1) The USD/TWD exchange rate varies less the CHF/TWD or GBP/TWD exchange rates. So a USD portfolio seems less risky than a CHF or GBP one.

2) On the other hand it is possible that a cunningly chose basket of currencies might be even better. So if I split by PP up into several chunks and invest each one in a different currency I might be able to do even better than a pure USD portfolio.

The problem is I've got no real idea how to figure out the 'cunningly chosen basket of currencies'. So most likely I stick with the USD for my PP where I control the currencies unless I figure out a better way to do it. For the rest of my assets they're in the UK and so must be in GBP.

[Pointedstick]

AS for PP I am still on the fence. I am not sure it is the opportune time with the Stock market so high and bond yields so low. The only asset class that looks OK now is gold and cash.

I'm pretty sure everyone investigating the PP has thought the exact same thing, but with a different combination of assets. It's a very rare situation where three or more assets are depressed: tight money recession. In normal times, one or two will always look high.

[jabba]

AS for PP I am still on the fence. I am not sure it is the opportune time with the Stock market so high and bond yields so low. The only asset class that looks OK now is gold and cash.

The point of the PP is that you don't need to market time. At any point in history some of the components are going down and others are going up.

It did OK during the long bear market for gold in the 80's and the stock crash in 2008.

https://web.archive.org/web/20160324133 ... l-returns/

Now I have no problem with accepting that. What concerns me is currency movements. E.g. the USD could drop against the currencies you need to spend money in.

Now the conventional PP response is "Well you need to invest a PP in your own currency". The problem I have with that is that I don't have a home currency in that sense.

So probably I'll invest in USD. I've got some other assets in GBP so I'd end up 50:50 USD and GBP in effect.

Of course the the question is whether there is some sort of theory that tells you how to invest in a basket of currencies such that the portfolio has less volatility with respect to a currency outside the basket than a pure USD portfolio would have.

E.g. suppose I'm a resident of The Republic Of Bananastan. The Bananstani Ringpiece (BRP) is not a good currency to set up a portfolio in for a variety of reasons (e.g. I find it hard to do due diligence in English and impossible in Bananastani, there's the vague possibility of tension with the neighbouring and much larger People's Democratic Republic of Bananastan). So I invest in a USD portfolio. However unlike the US Bananastan actually runs surpluses on both its government budget and its import export balance thanks to both its banana plantations and the ones it runs over the border in the previously desolate and Killing Fields-esque People's Democratic Republic. Thus the BRP appreciates against the USD.

So my portfolio becomes less valuable in BRPs which sucks because I need to use some or all of it to invest in Bananstan.

Now from my somewhat primitive grasp of exchange rates over the last 10 years it seems that

1) The USD/TWD exchange rate varies less the CHF/TWD or GBP/TWD exchange rates. So a USD portfolio seems less risky than a CHF or GBP one.

2) On the other hand it is possible that a cunningly chose basket of currencies might be even better. So if I split by PP up into several chunks and invest each one in a different currency I might be able to do even better than a pure USD portfolio.

The problem is I've got no real idea how to figure out the 'cunningly chosen basket of currencies'. So most likely I stick with the USD for my PP where I control the currencies unless I figure out a better way to do it. For the rest of my assets they're in the UK and so must be in GBP.

Talking of the Bannastani ringpiece I was going to stick 100k into Indian Rupees because you get 9.5% interest. Not sure if anyone has seen what has happened to the inr in the last 2 months? I would be down 10k already on that one.

Are you ethnically Chinese Kevin? Any idea where you want to retire? Seems like you are answering your own question. I also think you should just invest in USD, you have GBP as a hedge, maybe chose chf or eur but not both, that just will make it complicated. There is a 1.20 eur/chf line set by the snb anyway that they have spent billions defending.

My existing gbp I am keeping in a UK broker, well just because it is already denominated in Gbp. I invest through a company for tax purposes in all cases. With US equity dividends you have 15% withholding taxes as along as there is a double taxation agreement. Switzerland must have this, if not then it is 30%. Something to consider also. With the dollar being reasonably weak currently to the eur I am thinking about buying some usd in the following week so I can just get on with the currency allocation. Once I have done that then I am married to it.

Asia is meant to be a good place to keep gold according to my brother, Singapore in particular I have heard for physical. He a doomer and is 100% in gold to his detriment over the last year. I will have to send him this website

[kev_in_tw]

Are you ethnically Chinese Kevin? Any idea where you want to retire? Seems like you are answering your own question. I also think you should just invest in USD, you have GBP as a hedge, maybe chose chf or eur but not both, that just will make it complicated. There is a 1.20 eur/chf line set by the snb anyway that they have spent billions defending.

No, unfortunately I'm not at all ethnically Chinese - if I were then it would probably be easier to learn to speak non bastardised Mandarin.

You're probably right - USD is the way to go. As far as retirement goes, I just don't know. I do think things will need to get very bad indeed before I move back to the UK.

My existing gbp I am keeping in a UK broker, well just because it is already denominated in Gbp. I invest through a company for tax purposes in all cases. With US equity dividends you have 15% withholding taxes as along as there is a double taxation agreement. Switzerland must have this, if not then it is 30%. Something to consider also. With the dollar being reasonably weak currently to the eur I am thinking about buying some usd in the following week so I can just get on with the currency allocation. Once I have done that then I am married to it.

Asia is meant to be a good place to keep gold according to my brother, Singapore in particular I have heard for physical. He a doomer and is 100% in gold to his detriment over the last year. I will have to send him this website

I fancy Singapore too - you could make a good case for it being the Switzerland of Asia. It's certainly no democracy but it does have the rule of law. Also unlike Hong Kong it is politically independent from China.

I like the phrase 'doomer' for gold bugs.