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  #21  
Old 14.03.2012, 09:47
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Re: Suggestions on investment - real estate in la cote or...

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Why would their hands be tied? They certainly weren't last time around...
exporters crying about the strength of the CHF.
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  #22  
Old 14.03.2012, 11:27
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Re: Suggestions on investment - real estate in la cote or...

many thanks for all the advices, this is very kind from all of you. yes, we cannot make a loan bigger than 800K CHF because of our salaries, the united nations don't pay as the banks or multinationals, but we cannot complain anyway. do you know of a site where to see prices per sqm in the region? we are still afraid of the bubble, this is really scaring..

many thanks again
Annai
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  #23  
Old 14.03.2012, 11:37
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Re: Suggestions on investment - real estate in la cote or...

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exporters crying about the strength of the CHF.
Swiss franc is going to be nowhere near strong with 7% inflation.
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  #24  
Old 20.03.2012, 22:27
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Re: Suggestions on investment - real estate in la cote or...

For that amount of money I would ask advice from professionals to build a strong portfolio based on index funds, this is a low cost passive strategy. Basically the idea is to follow the market instead of beating it, that's why is very low cost comparing with active strategies where fund managers are constantly trying to outperform the index (and very rarely achieve it....).

In the last 40 years, the returns for this strategy have been around 10% / year (average). The risk is controlled due a a very diversified allocation within different class assets.

If you consider an investment of 700k in a portfolio that gives you for example, 4% dividend yeld / year, this means you will have 28k just in fixed income, then, add the price evaluation of stocks. Important note: This kind of strategy is only recommendable for very long term investment.

I suggest you to google "Harry Browne's Permanent Portfolio"

http://harrybrowne.org/PermanentPortfolioResults.htm
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  #25  
Old 20.03.2012, 23:17
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Re: Suggestions on investment - real estate in la cote or...

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If you consider an investment of 700k in a portfolio that gives you for example, 4% dividend yeld / year, this means you will have 28k just in fixed income, then, add the price evaluation of stocks. Important note: This kind of strategy is only recommendable for very long term investment.
Mega LOL. Humor me - which are the SP500 stocks that pay a 4% dividend? Either net or gross.
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  #26  
Old 20.03.2012, 23:44
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Re: Suggestions on investment - real estate in la cote or...

Can't tell you about individual stocks, but for equities in general:

iShares EURO STOXX Select Dividend 30 (IDVY) gives you 5.59%
iShares DJ Asia/Pacific Select Dividend 30 (IAPD) gives you 5.16%

And for bonds...

iShares JPMorgan $ Emerging Markets Bond Fund (IEMB) has a 5,05 Yield to Maturity (%)


Anyway, 4% was just a number I used to show my point....
This kind of portfolio may include commodities and gold as assets, the average fixed income is expected to decrease in such case.
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  #27  
Old 20.03.2012, 23:49
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Re: Suggestions on investment - real estate in la cote or...

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Swiss franc is going to be nowhere near strong with 7% inflation.
so you think the franc will weaken and inflation will be high.

not such a bad scenario for property bought with fixed rate debt.
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  #28  
Old 21.03.2012, 01:06
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Re: Suggestions on investment - real estate in la cote or...

First, you should only consider taking on an 800k loan if you can comfortably pay off the monthly mortgage with your current income. Generally it should mean that the monthly mortgage payment you will pay should be less than the old rent on an after tax basis. So the first question you need to answer with your bank, is: will the monthly payment be more, less or similar to what you pay now? You should then try and calculate the tax effect of home ownership with a mortgage of 800k, it could affect your tax bill significantly, either in your favour or against it. I suggest you ask around for a good tax advisor in this regard, I am not sure if the bank will assist you in that but do ask. Do not under any circumstances take on debt you cannot afford just to get onto the property ladder. You could quite sensibly take the mindset that you can now comfortably pay your monthly rent for the foreseeable future and keep a certain amount liquid, then invest the rest. If, however, you feel you will be able to afford the additional mortgage and this brings you great quality of life benefits then you should not worry about a housing bubble. Most professionals cannot tell when they are in an asset bubble or how best to take advantage of it [Lehmans / Countrywide Financial being two examples that spring immediately to mind this time round]. Your concern should be to improve your quality of life and that of your children without a financial burden. If the mortgage isnt going to be a large burden I would be inclined to do it. If it means you will struggle to repay it, I would definitely not do it.



Second, if you do go to an investment advisor, for example if you decide against the mortgage and you want to invest the cash, then they should prepare an Investment Policy Statement [IPS] for you. The IPS is a client specific summation of the circumstances, objectives, constraints and policies that govern the relationship between the advisor and investor. A well constructed IPS presents the investors* financial objectives, the degree of risk they are willing to take and any relevant investor constraints to be taken into consideration. It sets operational guidelines for constructing a portfolio that can be expected to best meet these objectives while remaining in compliance with any constraints. Finally the IPS establishes a mutually agreed upon basis for portfolio monitoring and review.


A typical IPS will cover 1. Objectives and 2. Constraints

1. Objectives: Return, Risk

Return: In the end the IPS must present a return objective that is attainable given the portfolios risk constraints. A return requirement is generally driven by annual spending and relatively long term saving goals. A total return approach is useful for setting return requirements which first look at the individual investors goals and then identifies the annual after tax portfolio return necessary to meet those goals

Risk: This covers the investors ability to take risk and willingness to take risk


2. Constraints: Liquidity, Time Horizon, Taxes, Legal and Regulatory Environment, Unique Circumstances

Liquidity: Generally refers to the investment portfolios ability to efficiently meet an investors anticipated and unanticipated demands for cash distributions. These fall into the following classifications: Ongoing Expenses, Emergency Reserves e.g. sudden unemployment, Negative Liquidity Events e.g. anticipated home repairs

Time Horizon: Can incorporate stage of life analysis and multigenerational planning if necessary

Taxes: Tax codes are country specific but these general categories are widely recognised: Income Tax, Gains Tax, Wealth Transfer Tax, Property Tax. Most tax strategies share some basic principles: Tax Deferral, Tax Avoidance and Tax Reduction.

Legal and Regulatory Environment: There could be scope for a Personal Trust or a Family Foundation depending on jurisdiction and the advantages they confer

Unique: Covers anything for example you may wish to allocate to socially responsible investing


Once the IPS has been constructed and mutually agreed upon, the advisors challenge is to find a set of asset class weights that produce a portfolio consistent with the individual investors return objective, risk tolerance and constraints. This task must be completed from a taxable perspective.


I provide this brief information on the IPS only for you as a basis of discussion should you meet with an investment advisor. I took almost all of it from a book that has a section on the principles of private wealth management that I once studied [Managing Individual Investor Portfolios for the CFA level 3 exam] as yours is a classic case of wealth inheritance [I recall there was even an example covering a case very much like yours, but it is a bit late for me to hunt for it right now]. By the way, I am not an investment advisor for private clients, though I once met one to see if they do it like this and to my pleasant surprise, they more or less do [was a large multinational bank that could be an anagram of BSCH who I had my main bank account with at the time…]. So you should be able to get at least sensible advice off a reputable wealth management firm, albeit for a fee. The conversation I had with my adviser was free and did not oblige me to invest, so it could be a good starting point to gather information for you. Perhaps you can talk to an adviser at your current bank about your specific situation. Then I would suggest you shop around for a second opinion. Go to other banks or ask people for their recommendations. Typically, if you are calling the adviser rather than the adviser is calling you, they are more likely to be reputable [Knowing this is a popular subject for discussion on these forums].


Looking at what you have said about your circumstances, you have clearly stated that you do not have a willingness to bear risk. This is key for me. I would envisage that an investment advisor would recommend that to have a high allocation in high quality fixed income [also known as bonds] investments. Here you get paid a rate of interest and your principal returned at the end of a period. A 10 year bond would give you 10 years worth of interest payments plus the original lump sum at the end of it. A diversified portfolio of well selected high quality bonds should cause your neither much gain nor much loss, but certainly safety of principle, your stated objective. Other investments are likely to be considered based on a portfolio approach for their ability to reduce risks.


*Apologies for the poor punctuation, my son knocked a glass of water over my laptop and I cannot type certain numbers, apostrophes and hyphens.
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  #29  
Old 21.03.2012, 11:38
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Re: Suggestions on investment - real estate in la cote or...

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Can't tell you about individual stocks, but for equities in general:

iShares EURO STOXX Select Dividend 30 (IDVY) gives you 5.59%
iShares DJ Asia/Pacific Select Dividend 30 (IAPD) gives you 5.16%
Excellent. Did you factor the FX risk in your yield calculation? 5.16% yield in IDR won't go far if the IDR tanks by 15%. Further to that, dividends are not paid out on collective investment vehicles, thus
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this means you will have 28k just in fixed income, then
is not exactly true.

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Anyway, 4% was just a number I used to show my point....
Yeah, that much i figured...

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And for bonds...

iShares JPMorgan $ Emerging Markets Bond Fund (IEMB) has a 5,05 Yield to Maturity (%)
You do know there's no maturity on a bond fund, right :-)
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  #30  
Old 21.03.2012, 11:40
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Re: Suggestions on investment - real estate in la cote or...

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so you think the franc will weaken and inflation will be high.

not such a bad scenario for property bought with fixed rate debt.
Not bad until the point where rates will reset ^^
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  #31  
Old 21.03.2012, 11:56
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Re: Suggestions on investment - real estate in la cote or...

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I suggest you to google "Harry Browne's Permanent Portfolio"

http://harrybrowne.org/PermanentPortfolioResults.htm
Why does his graph & figures end in 2003? what happened then?
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  #32  
Old 21.03.2012, 23:19
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Re: Suggestions on investment - real estate in la cote or...

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Why does his graph & figures end in 2003? what happened then?
[2004, 6.39],[2005, 7.69],[2006, 10.83],[2007, 12.70],[2008, -0.91],[2009, 11.12],[2010, 11.18]

(see graph)




Quote:
dividends are not paid out on collective investment vehicles, thus
With collective investment vehicles, do you mean ETFs? If so, distribution of dividends is quarterly in both cases.
About bonds, yield to maturity matters for long term investors. Flat dividend for the bond I referred is 6.15%.
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  #33  
Old 22.03.2012, 00:12
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Re: Suggestions on investment - real estate in la cote or...

Rather than look at where you should start, why dont you look at what you want to achieve. Are you looking for growth on the windfall, if so Swiss property may not be the best opportunity you have. If you are looking for long term stability then yes buy a property, pay as much as you can towards it and don't over borrow.

If you looking for the growth, then invest wisely on rental properties in a growing or redeveloping area, property can only fall so far in terms of value so as long as you are careful you should always make a profit.

One thing I think should be said or asked here, is how many of the people giving advice have actually been in your situation. It is very easy to risk other peoples money without having a personal consequnce to worry about. 700k sounds like a lot of money, but in reality even 100 or 200k of that being lost significantly erodes the total sum proportionally. The question you need to ask yourself is would you be upset if you lost it all, could you live with that, would it eventually replaced with another windfall. Only risk the money if you can truely afford to lose it.

Last edited by kb92830; 22.03.2012 at 00:25.
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  #34  
Old 22.03.2012, 00:16
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Re: Suggestions on investment - real estate in la cote or...

ZKB recommended something called "ZKB Bond Vision Fonds CHF" to me (though I don't have 700k and I'm not going to inherit).
On hearing this, my (Swiss) boss told me to just sit on the money for now.
We're in the IT business, but I suspect that my boss has some spare cash, too, and that's probably what his banker-friends told him to do.

You could put it into a Postfinance eDeposito-Account for the time being.

Be aware that the people you talk to at banks just want to sell you something that in the end is good for them and not necessarily good for you.
They have sales-targets to meet...

You do not say if you are Swiss or not. If your employer can send you around the world on short notice, I would advice against buying property, as most banks don't like to have mortgages from foreigners not living in Switzerland. You might be forced to sell quickly, which means at a discount.

I would really advice not to let the money burn a hole in your pockets.
Your 700k won't be worthless overnight - and if they should in fact get worthless over night, you can bet that almost anything you buy with it now or invest in is also going to be almost worthless, too.

Let the advisors talk, take their sales brochures home and try to understand them. There are enough forums etc. where people only talk about money ;-)
After a while, you will understand much more about the subject.

Personally, I would think of buying and renovating a cheap chalet as a summer/weekend project (if both you and your wife are into that).
If both of you work most of the time, what's the point of buying a house that you only see at night?
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