- Over 25 years, the share of equities matters far more for the result than the choice of securities.
- Caution has a price: in our example, about 200'000 francs between a cautious and a balanced profile.
- Your pension fund already acts like a bond: your wealth is more cautious than your portfolio.
The result by profile
The bigger the share of equities, the higher the final wealth on average, and the bumpier the ride. Example: 100'000 francs to start with, then 1'000 francs a month for 25 years. Here is the median wealth over 1'500 simulations.
Median of 1'500 ViaVest Monte Carlo simulations. Historical assumptions: equities 6.8%, bonds 2.5%, cash 0.9% a year. Half of the paths end lower: these are not guarantees.
A reference study (Brinson, Hood and Beebower, 1986) showed that allocation explains most of the variation in a portfolio's returns over time, far ahead of security selection or market timing.
The real cost of caution
Choosing a cautious rather than a balanced profile costs about 200'000 francs over 25 years in our example: that is the price of peace of mind. So the right question is not "what am I comfortable with?", but: could you watch your portfolio drop by a quarter in one year without selling? If so, a more dynamic profile makes sense over 20 years or more.
What allocation does not do
No allocation rises all the time: between late 2007 and early 2009, a 100% equity portfolio lost more than half its value at the worst point. A balanced profile lost about a quarter, a cautious one much less. And in 2022, unusually, equities and bonds fell at the same time.
Losses in the worst year, by profile
| Crisis | 20 / 60 / 20 | 60 / 40 | 100% equities |
|---|---|---|---|
| 2008-2009 | -10 to -15% | -25 to -30% | up to -57% |
| 2022 (rate rises) | -10 to -12% | -15 to -18% | about -18% |
Indicative losses, global equities and bonds, in local currency. For 100% equities: MSCI World index, maximum loss between October 2007 and March 2009, and the year 2022.
Selling at the bottom in 2009 turned a temporary fall into a permanent loss. Staying the course during falls often matters more than the allocation itself. The right reflexes: when the stock market falls.
Your pension fund changes your real allocation
Your BVG capital behaves like a bond: it grows at a guaranteed minimum rate and becomes a pension. It often makes up a large part of an employee's wealth. Example: you have 100'000 francs in a portfolio, 60% of it in equities, and twice as much in your pension fund. Your real wealth is then only about 40% equities. You can often afford a more dynamic portfolio than you think.
To size your needs at retirement, see how much you need to retire in Switzerland.
Four questions to choose
- Your horizon: do you need the money in 5 years, or in 25?
- Your reaction to a sharp fall: in theory, everyone holds. In practice, many sell at the worst moment.
- Your other assets: property, 2nd and 3rd pillars are part of the equation.
- The stability of your income: a regular salary allows more equities than a variable income.
Going further
Rebalance once a year. After a strong rise in equities, your portfolio becomes riskier than planned. Going back to your target split every year, or as soon as an asset drifts more than 5 points, makes you sell what has risen and buy what has fallen, without thinking about it.
Reduce equities as retirement approaches. A crash just when you start living on your capital does far more damage than at 35. A common benchmark: about 80% equities at 35, then a gradual decrease to around half at retirement.
Rebalance with your contributions. Rather than selling, direct your new contributions to the part that has fallen behind. You avoid selling fees.
Simulate your own allocation1'500 paths with your capital, contributions and horizon.
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Frequently asked questions
What is asset allocation?
The split of your capital between equities, bonds and cash. It sets the expected return and the size of your portfolio's falls over the long term.
Are equities riskier than bonds over 25 years?
In the short term, yes: they fluctuate more. Over 15 to 20 years and more, the historical probability of a positive return on diversified global equities exceeds 95%. The risk then becomes not reaching your goal with a portfolio that is too cautious.
Should I rebalance my portfolio every year?
An annual review is enough for most investors: you bring each asset class back to its target share. Some rebalance only when an asset drifts more than 5 points from its target.
What is a Monte Carlo simulation?
Thousands of paths calculated with random returns consistent with each asset class's history. You get the median, but also the unfavourable and favourable scenarios. The ViaVest calculator runs 1'500.
How do I take my pension fund into account?
Your BVG capital behaves like a bond: it grows at a minimum rate (1.25% in 2026) and becomes a pension or a lump sum at retirement. With CHF 200'000 in your pension fund and CHF 100'000 in a 60/40 portfolio, your real allocation is about 40% equities.
Should my allocation change with age?
Usually, the share of equities falls as retirement approaches, to limit the risk of a crash just when you start drawing on your capital. A common benchmark: 80% equities at 35, 60% at 50, 50% at 65.
Sources: Brinson, Hood and Beebower, “Determinants of Portfolio Performance”, Financial Analysts Journal, 1986 ; MSCI World Total Return Index ; Vanguard Research, 2017 ; FSO, occupational pensions ; ViaVest simulation assumptions: equities 6.8% (volatility 16%), bonds 2.5% (5.5%), cash 0.9% (0.6%).