Investing in Swiss Francs
There are clients who keep the money in Swiss francs because the “safe haven” is like gold and other fleeing currencies.
However, they quickly run into the problem of not being able to invest money, which has only been in the account for years, causing a lot of losses. (In euros and dollars, even with a low to moderate risk, their money would be 2-3% a year. There is an amount where this has been a sensitive loss for years.)
I would like to help them with this article
It is worth considering first why the Swiss franc has the money. Probably a word is the answer: fear. Fear of market changes, the euro, the dollar.
In this case, we expressly believe that the Swiss franc has a granite strength, so we should not be surprised.
However, many investors like us chose the Swiss franc for the same reason, pushing up the franc exchange rate. They face the same problem as us: their money does not bring anything.
When the dread and panic subsides, many people will consider whether it would be more worthwhile to switch money to the euro or the dollar, where something can be achieved. At that time, the Swiss franc could suffer a severe fall and, moreover, it would be as self-generating as it was. (The Swiss franc is a safe haven, so everyone buys it, so it’s expensive. Because it’s expensive, so it’s worth it for me to invest in the Swiss franc too.
Therefore, it is advisable to handle the Swiss franc with caution, and it is not advisable to just keep the full savings there. (Especially since the Swiss central bank still wants to weaken the Swiss franc at any cost.)
What are our investment options?
If you buy the US stock index for the Swiss franc for an example, you immediately converted your money to the US dollar because it doesn’t matter if you bought the US stock index for the euro, the Swiss franc or the dollar, your money will be in US dollars. (This is forgotten by many, which is why it was cool to have euro unit linked life insurance at the same time, as if you were investing in euros in Russian stocks or forints.)
So if we don’t want to convert our money to another currency, we are forced to look for investment in the tiny Swiss market like so many others.
The Swiss franc bank deposit does not pay anything, so we can rule it out
Swiss government paper also has a minus yield, so this is not the business of the century. If you still want to buy government paper, you can easily buy it in an ETF. Here you will find Swiss government securities with maturity of less than 3 years.
As you can see, the annual yield ranges from minus (!) To 0.1-0.7%, meaning you pay to buy Swiss government securities. Since 2009, your net yield has been at a low of 0.03% per annum, but before the account management fee and the selling and selling costs.
Even holding cash is a better deal for light years.
If you are looking for a Swiss bond with a maturity of 7-15 years, you can find it here. At first, the annual yield of 3.5% seems attractive, but one thing to keep in mind is that this fund has a duration of almost 10 years. This means that if at any time the current zero interest rate increases by one percentage point, your existing investment will be reduced by 10%. If interest rates on government securities increase by 3 percentage points, the value of your existing bonds will be almost 30% lower.