2D·

Maximum Security—The Result

Dear Qiners,

After I recently asked about the safest possible investment option for my parents, I received many interesting suggestions from you all. Thank you to everyone!

Based on the discussion, I’ve drawn the following conclusions for myself:

1. The options presented are already among the safest available on the market (if you don’t count deposit insurance per account).

2. There is no such thing as absolute safety. The ETFs presented are primarily subject to inflation risk. Security varies over time; what’s safe in the short term isn’t necessarily safe in the long term. A relatively safe way to hold or invest money must diversify risk across different time horizons. However, a lot depends on an individual’s risk tolerance—and their life expectancy.

3. Ultimately, I recommended the following allocation to my parents, which is now being implemented step by step:

100k each in a money market account

400k $CSH (-0%)

400k $XG01 (+0,05%)

spread across 4 accounts (IngDiba, Zero, DKB, SNeo). At the moment, there are a total of 8 accounts, some of which are with rather risky local banks.

4. This allocation is intended to keep the money as safe, simple, and interest-bearing as possible for the time being, until they are psychologically ready to climb up the short-term risk ladder (and thus move down the long-term one). If you’re not ready, just stick with the (ultra-)short-term bonds. When you are ready, there will likely be higher-yielding bond ETFs and low-volatility dividend stock ETFs available.

Incidentally, this is also the kind of advice I’d give to anyone who’s supposed to provide financial guidance to their parents or other relatives. Tailor the portfolio’s risk to your psychological comfort level and level of knowledge! Anything else will just get you into deep trouble!

Yours, Epi

Epi

@Epi

1Semana·

Maximum security?

Dear Qiners,

I need to tap into your collective wisdom. My parents recently sold their business and now have about €1 million sitting in their accounts (in addition to the €100,000 each covered by deposit insurance). They know nothing about investing (they’ve been scammed a few times by bank advisors and insurance agents). Now they’re asking me for advice on investment options for the coming decades.

Their very first requirement is: Maximum security! (no capital market fluctuations, no currency risk, no loss due to inflation, no risk of theft, no risk of bank insolvency) Second requirement: Maximum liquidity! (Liquidation and transfer to a checking account possible at any time) Third condition: Minimal costs! (no custody fees, no transaction costs, max. 0.1% TER) Nothing else matters. As you can imagine, this aspect of investing isn’t my specialty. That’s why I’m asking you: How would you invest the money?

My initial idea is to allocate 25% each to the following ETFs, spread across three brokers (IngDiba, Zero Finanzen, SNeo):

1. Amundi Smart Overnight Return UCITS ETF C-EUR (money market ETF; the riskiest due to unfunded swaps, but offers the highest yield, approx. 2.48% per annum) $CSH2 (-0%)

2. Shares € Ultrashort Bond UCITS ETF (Acc) (short-term EU corporate bonds, physically replicated, second-highest yield, approx. 2.23% per annum) $ERNX (+0,02%)

3. Xtrackers II Germany Government Bond 0-1 UCITS ETF (Acc) (short-term German government bonds, physically replicated, likely the gold standard for safety in Germany, 1.96% per annum) $XG01 (+0,05%)

4. Amundi Prime Euro Government Bond 0-1Y UCITS ETF Acc (short-term EU government bonds, physically replicated; in terms of interest rates, these are currently even safer than German short-term bonds, 1.95% per annum) $PRAB (+0,02%)

The total return on this portfolio would be approximately 2.16%. That’s more than enough for my parents—they don’t need the money, but they don’t want to spend it either. It’s simply meant to sit there safely, protected from inflation, until the end of their lives, so they can sleep soundly.

Mind you, we’re in a realm here where a money market ETF is pure gambling. But what else is even safer for the next 10–30 years—that is, protected against currency crises, sovereign crises, bank failures, money market collapses, pandemics, nuclear strikes, and the Four Horsemen of the Apocalypse?

And no: cash won’t work—it loses value to inflation and can be stolen. Gold isn’t the answer either—its value fluctuates too much and it can also be stolen. Real estate isn’t either—its value fluctuates and it can be expropriated. The well-known “3xGTAA” safety net is somehow out of the question too—though I can’t quite recall the reasons right now.

Of course, I could tell them: “Dear parents, the only certainties in life are death and taxes.” ” But they’re not up for that kind of joke. Besides, that saying doesn’t solve their problem.

So: Do you have any ideas for maximum security? Then please share them! I’m feeling a bit incompetent in this area right now.

Yours, Epi

12 Comentários

Wealth-Accelerator@Wealth-Accelerator

Thanks for the feedback. I think it's great when a question is followed by something that makes the result clear.
Others could take a cue from this 👍🏼

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ehrlichergauner@ehrlichergauner

@Wealth-Accelerator, I couldn't agree more. I also think it's great that you're posting the results. 👍 I wish you the best of luck (and safety) with this allocation.

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Felix@Shareholder

Wow. Kudos for posting the results of your thoughts and discussion! There’s nothing more to add to that last sentence. You should always adjust your portfolio’s risk level to match your mindset and knowledge.... 👍

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Christoph@ChrisBizz

Very interesting 👍🏻

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Joshi@Joshi15

Great diagram. Generally speaking, I’d personally tell my parents what I think, but leave the follow-through to someone else.

As you so aptly put it: you’ll get yourself into hot water… and my mom has way too many wooden spoons and pans for that 😅

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Epi@Epi

@Joshi15 I've already told my parents this: To get their finances on a solid footing for the long term, they should hire a fee-based financial advisor. That person knows more about tax and legal issues than I do anyway.
I'll probably have to find the advisor myself just to get this over with. 🙄

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SarkasmusSchlumpf@SchlaubiSchlumpf

16H

From my personal perspective, money market ETFs and ultra-short-term bond ETFs aren’t so bad. Hyperinflation ruins everything. And with high inflation, the overnight interest rate will likely go up too. The downside, of course, is that it’s taxed.

I think the lowest-risk approach would probably be to diversify your money sensibly across many asset classes: real estate/rental income, bonds, Cat bonds, gold, stocks, managed futures… that way, if one goes south, you’ve got others.
The problem is: that’s usually not for people who just want to have money. As far as I understood from your first post, what matters most to your parents is the amount, not investing the money wisely over 10–20 years to keep pace with inflation.

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Epi@Epi

@SchlaubiSchlumpf We both agree on this. 👍

The rest is just parent psychology. I need to figure out how much money they need to have readily available—without any risk—so they can sleep soundly. The rest can then be allocated wisely. 😏

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SarkasmusSchlumpf@SchlaubiSchlumpf

@Epi That's the best strategy 😁

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Musikerie@Musikerie

It makes my stomach hurt a little when I read that, and I have a lot of respect for you!

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Epi@Epi

@Musikerie Why Bachweh?

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Musikerie@Musikerie

@Epi that it's only empathy that makes me wonder whether I could act with the same composure if I were in your situation. That's why I have respect for you.

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