Hi everyone, I have a doubt about how to increase my exposure to fixed income instruments.
The boundary conditions:
As I am not 20yo anymore, I would like to increase my exposition to bonds to ca. 20% of the invested amount, also in order to reduce the volatility of the portfolio in case I will want to buy a house in less than 10 years.
Which instrument would suit me the best?
Some possibilities are:
I don't like the bond ETFs because they are basically tools to bet against the rise of interest rates, especially when the coupons are small. When the time span of the investment is known, one should use real bonds.
For the moment I tend to just keep the course, by splitting the bonds allocation between an HYSA and the stock ETF.
Is my analysis flawed? Do you have better ideas than mine? Cheers everyone!
The boundary conditions:
- Current allocation: emergency fund in a HYSA, while my investments are fully in cheap stocks ETFs (80% world and 20% swiss for some local bias)
- Life situation: 35, employed, married, kids may arrive soon, renting a flat and maybe buying one in 5-10 years (difficult to predict)
- swiss taxation: dividends and fixed income are taxed as income with the marginal income rate, while capital gains are tax free
As I am not 20yo anymore, I would like to increase my exposition to bonds to ca. 20% of the invested amount, also in order to reduce the volatility of the portfolio in case I will want to buy a house in less than 10 years.
Which instrument would suit me the best?
Some possibilities are:
- HYSA, current yield 1.5%
- Swiss Bonds with duration of max 7 years, current yield ca. 1.8%. Since buying bonds in Switzerland is an expensive thing, ca. 0.4% of fees should be considered, leaving a net yield of ca. 1.4%
- Swiss govt bond ETF (CSBGC3 and -7): yield 1.1%
- HY Corp Bond ETF: yield 8.2%. I don't like neither the hedged version (hidden hedging costs up to 2%) nor the currency risk.
I don't like the bond ETFs because they are basically tools to bet against the rise of interest rates, especially when the coupons are small. When the time span of the investment is known, one should use real bonds.
For the moment I tend to just keep the course, by splitting the bonds allocation between an HYSA and the stock ETF.
Is my analysis flawed? Do you have better ideas than mine? Cheers everyone!