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  #21  
Old 13.07.2017, 14:32
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Re: Long-term investment for infant

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Can the wise minds of the forum give an idea?
I can understand your point. I also created a bank account for my son, making a clear division of wealth, being actually quite conscious of my choice and all it entangles.

Grandparents and great-grandparents want to be able to gift money directly to the child, even though they will most likely not be among the living by the time he learns how to use money. I also had a bank account as a child, and it was a fantastic way for me to deal with finances, learning about the joys of sparing for a bigger goal, and the joys of earning money through my own work to fatten up my own account. It's not just about "parents controlling their own finances".

The thing you will have to take into consideration - there is no 100% safe investment. Any investment might eventually come up with less than you had at start - be it in stocks or gold. Yes, you can always "wait till it gets better before selling", but if the idea is to spare for your child to use it for studying/marriage/whatever he wishes, investing will possibly cut away some flexibility.

We have decided to just go with a bank account in his name, and if he wishes to invest later on, he can do it himself with his own money. But the gifts his family offered, no matter how small, will be there for him to use (ok, minus inflation, I guess). If I want to increase wealth, I do it with my own money, at my own risk, because if the money has been gifted to my kid, I personally feel it's a violation of trust to put it in jeopardy for my own glorified gambling.

I think this is not only a topic about finances, it has some ethical and very personal family concepts entangled with it, and you will probably have to choose what matches your family best.
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  #22  
Old 13.07.2017, 14:37
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Re: Long-term investment for infant

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Hello,

I was thinking about a similar thing when my son was born. You know, living in CH, let's make hay while the sun shines and set him up with a nest egg.

I went to www.baloise.ch in the end. A finance guy visited and went through some investment options. A fairly conservative option was selected, a direct debit set up and that was it.

Not so traditional that it can't be touched until he's 18. It's my investment, and in my name, so it's flexible.

Difficult to say whether I'd recommend it, that's only something I could say after a decade or so, but right now I feel pleased with it.
A conservative option is likely to be a poor choice of long term investment, time considerably reduces risk.
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Old 13.07.2017, 14:40
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Re: Long-term investment for infant

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A conservative option is likely to be a poor choice of long term investment, time considerably reduces risk.
There's more to it than that, but I'm sparing the details.
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Old 13.07.2017, 14:56
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Re: Long-term investment for infant

This is a topic that interests us also.

Til now we simply have junior bank savings accounts in the kid's names (under our control) with a teeny tiny miniscule fractional % more interest that an adult savings account. We put the familienzulagen we receive each month straight in to their accounts.

It may be an artificial separation of wealth, but it keeps everything conceptually separate from our point of view, though of course is still our wealth as far as the tax authorities are concerned.

It's something my parents did for me as I grew up in the UK, however then there were children's investment bonds with tax free, good returns over 10 years (or something along those lines...) just for that purpose, so the separation made sense for the preferential rate and tax-free nature.

I haven't found something like that in Switzerland though.

Clearly, putting something aside for one's offspring is not such an alien concept though:
https://www.beobachter.ch/geld/gelda...kunft-aufbauen
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Old 13.07.2017, 16:07
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Re: Long-term investment for infant

Sorry for being so up front but: Sounds like a major rip-off. What are the charges (entry, exit, annual, performance), what is the historical performance and what is the risk profile?

Is there an insurance aspect to it?

Why not take say 10K and put it in a low cost s&p500 index fund, add the 500CHF a month to it until your child turns 18, and by that time he/she would have roughly a half a million pot. Instead of 100K.

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Hello,

I was thinking about a similar thing when my son was born. You know, living in CH, let's make hay while the sun shines and set him up with a nest egg.

I went to www.baloise.ch in the end. A finance guy visited and went through some investment options. A fairly conservative option was selected, a direct debit set up and that was it.

Not so traditional that it can't be touched until he's 18. It's my investment, and in my name, so it's flexible.

Difficult to say whether I'd recommend it, that's only something I could say after a decade or so, but right now I feel pleased with it.
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Old 13.07.2017, 16:07
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Re: Long-term investment for infant

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I was just about to open new thread on a similar topic but I guess this one can be good as well to increase the scope of discussion.

So we are expecting our first child and I would start an investment strategy for our new born. We plan to put aside appr. 500chf per month till the kid reaches 18 years of age(hopefully in good health).

My question is which investment tool should I consider?
  1. physical gold
  2. blue chip stock shares(google, coca cola,etc)
  3. savings account
  4. any other

Can the wise minds of the forum give an idea?
By the level of your question (no offence), I think you need first to understand the basics of long term investment, plenty of material online. I don't like personal financial gurus but there is a book called "Money: Master the game" by Tony Robbins that is worth reading.

In short, you have to have a diversified portfolio of investments that will grow well in the long term without a high fluctuation. It is achieved by putting some money in bonds, some in stock indexes, and a bit in commodities. It's extremely important that these investments have LOW FEES.
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Old 13.07.2017, 16:10
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Re: Long-term investment for infant

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Hello,

I was thinking about a similar thing when my son was born. You know, living in CH, let's make hay while the sun shines and set him up with a nest egg.

I went to www.baloise.ch in the end. A finance guy visited and went through some investment options. A fairly conservative option was selected, a direct debit set up and that was it.

Not so traditional that it can't be touched until he's 18. It's my investment, and in my name, so it's flexible.

Difficult to say whether I'd recommend it, that's only something I could say after a decade or so, but right now I feel pleased with it.
Interesting. How much do they charge?
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  #28  
Old 13.07.2017, 16:42
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Re: Long-term investment for infant

No charge - the reward for them comes from the groups they use. Of course, there might be a risk of bias, but these are pretty common schemes I understood.

As to the other point about a rip-off - well, I didn't do no research about this at all. There is a higher interest in this model, at the cost of a slightly higher risk.

This is normal. I'm not saying this is better or worse than another approach, and I'm surprised that this is considered unusual, or even possibly a rip-off without your having done this specific research.

The question was about options. This is an option. Some details have been provided so you can look into it yourself.
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  #29  
Old 13.07.2017, 17:19
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Re: Long-term investment for infant

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No charge - the reward for them comes from the groups they use. Of course, there might be a risk of bias, but these are pretty common schemes I understood.

As to the other point about a rip-off - well, I didn't do no research about this at all. There is a higher interest in this model, at the cost of a slightly higher risk.

This is normal. I'm not saying this is better or worse than another approach, and I'm surprised that this is considered unusual, or even possibly a rip-off without your having done this specific research.

The question was about options. This is an option. Some details have been provided so you can look into it yourself.
The thing is that active management and/or complex investment products are typically needed to hedge risk on the short term. When the investment horizon is longer, most of these (otherwise useful) mechanisms are less important. In a way, investing becomes also easier, and you can often do it yourself.

I am not into investing, and surely not into advising, but if you want to see this fact just by yourself, look at what I prepared here. It's just educational material for my students, don't take it too seriously
But it shows how investing becomes simpler, even if you want to pick the highest "risk-free" option, if you have 20 years in front of you.

That is probably the reason why a few users made some assumptions on the option you proposed without seeing all the details. It can well be that they just select a reasonable mix of some low-fee ETFs/funds, and therefore provide you with a convenient off-the-shelf solution (see all the robo-investing trend, especially in the US).
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  #30  
Old 13.07.2017, 17:38
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Re: Long-term investment for infant

The traditional approach in switzerland is to open a cost-free savings account on the child's name at the local branch, where children can go deposit change they earned with small jobs (like removing leaves at the neighbour's garden) on their own and learn about saving money for the future, where parents put the monthly allowance so they can learn to use bancomats, where the godparents put gifts for first communion/confirmation, etc.
Interest is very low nowadays though, but from my experience almost no one ended up with more than 20-30k on these accounts or start spending something when they are 16 or so, so it's probably never been that important.
Grandparents often open their own savings account on the child's name, separate from the one of the parents, much better in some families with excessively controlling or money-grabbing parents.
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  #31  
Old 14.07.2017, 07:28
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Re: Long-term investment for infant

I recommend investing in an index-tracking ETF (Exchange Traded Fund). They are not actively managed and thus have low fees. They are designed to track a market index such as the FTSE or SMI. Another lesson I learned the hard way: make sure the ETF is priced in Swiss Francs else you may end up taking an exchange rate hit, losing money even if the ETF went up in value (in a foreign currency). The more chaos there is in the world, the stronger the CHF gets against other currencies, and it looks like we are in for a long period of that.
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Old 14.07.2017, 07:44
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Re: Long-term investment for infant

ETF's quoted currency is irrelevant - you're ultimately investing in stocks, not currency. Unless you're talking about CHF hedged ETF, but they're hardly low cost - you're probably paying like 1-2% a year in hedging costs, in addition to already not so low TER
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Old 14.07.2017, 09:25
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Re: Long-term investment for infant

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ETF's quoted currency is irrelevant - you're ultimately investing in stocks, not currency. Unless you're talking about CHF hedged ETF, but they're hardly low cost - you're probably paying like 1-2% a year in hedging costs, in addition to already not so low TER
Hedging will cost you the movement in the wrong direction without any limit, 10-20% likely rather than the 1-2% you quote,
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Old 14.07.2017, 10:22
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Re: Long-term investment for infant

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The thing is that active management and/or complex investment products are typically needed to hedge risk on the short term. When the investment horizon is longer, most of these (otherwise useful) mechanisms are less important. In a way, investing becomes also easier, and you can often do it yourself.

I am not into investing, and surely not into advising, but if you want to see this fact just by yourself, look at what I prepared here. It's just educational material for my students, don't take it too seriously
But it shows how investing becomes simpler, even if you want to pick the highest "risk-free" option, if you have 20 years in front of you.

That is probably the reason why a few users made some assumptions on the option you proposed without seeing all the details. It can well be that they just select a reasonable mix of some low-fee ETFs/funds, and therefore provide you with a convenient off-the-shelf solution (see all the robo-investing trend, especially in the US).
That's quite an interesting game/model
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Old 14.07.2017, 12:00
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Re: Long-term investment for infant

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Hedging will cost you the movement in the wrong direction without any limit, 10-20% likely rather than the 1-2% you quote,
Hedging will just give you your target index performance in your native currency, taking currency rate fluctuations out of the question - replacing them with a fixed loss equal to difference in short term interest rates (covered interest rate parity). If you believe USD will keep losing values and CHF will appreciate, it's a reasonable thing, expensive though; but there's of course a risk that you bet the wrong way on CHF too - SNB often seems to think it's overvalued and strong Frank hurts swiss export-heavy economy
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Old 14.07.2017, 12:39
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Re: Long-term investment for infant

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I was just about to open new thread on a similar topic but I guess this one can be good as well to increase the scope of discussion.

So we are expecting our first child and I would start an investment strategy for our new born. We plan to put aside appr. 500chf per month till the kid reaches 18 years of age(hopefully in good health).
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My question is which investment tool should I consider?
1. physical gold
2. blue chip stock shares(google, coca cola,etc)
3. savings account
4. any other

Can the wise minds of the forum give an idea?


I respect the different opinions parent have and quite large number of parents save money into an investment product. So you are not alone with your plans

Equity investments has shown to bring by far the highest returns when the investment term is as long as it is for a child to become 18. I would invest into a cost efficient equity fund, eventually into an EFT.
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Old 14.07.2017, 12:48
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Re: Long-term investment for infant

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I think this is not only a topic about finances, it has some ethical and very personal family concepts entangled with it, and you will probably have to choose what matches your family best.

I could not agree more!
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  #38  
Old 14.07.2017, 12:52
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Re: Long-term investment for infant

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I recommend investing in an index-tracking ETF (Exchange Traded Fund). They are not actively managed and thus have low fees. They are designed to track a market index such as the FTSE or SMI. Another lesson I learned the hard way: make sure the ETF is priced in Swiss Francs else you may end up taking an exchange rate hit, losing money even if the ETF went up in value (in a foreign currency). The more chaos there is in the world, the stronger the CHF gets against other currencies, and it looks like we are in for a long period of that.
Can you explain how can you loose if the ETF went up in value?

Maybe if only its valuation in a certain currency went up, but not its value? Otherwise it can not happen. Or maybe it looks like it lost value because you get less franks back than you invested, but it could be that you get back stronger francs than you invested. In this case you might think you lost because keeping the franks in cash would have at least keep the amount of franks constant. This thinking is however wrong: all that actually happened - if you had kept the cash vs investing and getting less but stronger franks back - is that your investment in swiss francs performed better than your equity investment. Just dont forget that keeping cash is also a huge risk (just ask the British who lost half the value of their savings over CHF in the last 10 years)

But as said before, the ETF currency is completely irrelevant.

Last edited by EPMike; 14.07.2017 at 13:06.
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Old 14.07.2017, 13:07
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Re: Long-term investment for infant

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Can you explain how can you loose if the ETF went up in value?

Maybe if only its valuation in a certain currency went up, but not its value? Otherwise it can not happen. Or maybe it looks like it lost value because you get less franks back than you invested, but it could be that you get back stronger francs than you invested.

But as said before, the ETF currency is completely irrelevant.

In any fund in other than your “home currency” is always beside the value risk also a currency risk. If you were invested into an ETF in Euro and the currency exchange rate dropped more than the ETF performed then you lose money.

Have a look to Morningstar.ch. there all performances are in CHF. You see quickly that even a well performing ETF could not equalize the currency turbulences we had few years ago. If you want to eliminate the currency risk then invest into a fund with basis currency of your “home currency” which for most of us is CHF.
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Old 14.07.2017, 13:18
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Re: Long-term investment for infant

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But as said before, the ETF currency is completely irrelevant.


With simple figures: if the ETF performs 7% but the exchange rate drops 10% you have a negative performance of -3%.

How should I understand that the fund currency is irrelevant? Please explain me the morningstar.ch negative performances for funds that show on their fact sheet good looking positive performances.


I assume that we all agree that Morninstar is reliable fund Research Company? Their logic is to show on their local websites, such as .ch for Switzerland, .de for Germany and so on, the private investor point of view which includes the currency risk and which is the reason all performances on Morningstar.ch are in CHF.
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