Better to sell too soon than too late

“Do you have funds 3a? Sell ​​them.” I don’t say it now. I wrote this on May 21, 2017. I really missed the mark. After that, the prices of both stocks and bonds continued to rise uncontrollably.

We are talking here about reserve funds, which can be purchased as part of savings 3a. They are subject to more stringent legal requirements than conventional investment funds. Your share of capital and foreign currency is limited. What is transferred to the post can be deducted from taxable income up to a maximum amount.

And yet, knowing what I learned then, I would repeat this advice. Stocks experienced a prolonged boom and bonds hit record highs due to negative interest rates imposed by the Swiss National Bank.

However, it is not surprising that prices continued to rise after 2017. Markets tend to exaggerate. But it’s just a matter of luck to choose the right moment to exit. It is better to sell too early than too late, it is better to enjoy the rise in prices than to lament the lost profits.

In any case, do not speculate in pension funds. Ultimately, Component 3a is for pensions. That being said, it’s certainly wise to use 3a assets to buy high-equity pension funds when you’re still younger. But do not forget to sell them after a longer boom phase and put money in the 3a account, provided that the retirement age is not far off. Banks from time to time encourage their clients to invest their money in pension funds. But I have never heard them advise a client to sell stock five years before retirement, even though the corresponding prices were breaking record after record.

Anyone who is about to retire and now has to sell a pension fund will be furious that they didn’t sell the 3a funds sooner for a much better price.

The Conference of Investment Fund Managing Directors (KGast) publishes the results of these blended funds quarterly. Almost all of the products reviewed show losses in the double-digit percentage range for the current year. In extreme cases, losses exceed 20 percent.

Stocks tend to fluctuate more than bonds. But in the long run, stocks perform better than fixed incomes. So, let’s take five years as our observation period: virtually all products with an equity component of less than 30 percent are at a loss. Only 3a funds with an equity component of more than 30 percent have achieved a positive return in five years, albeit a very modest one.