The best ETF Portfolio for Switzerland in 2024
| Updated: |(Disclosure: Some of the links below may be affiliate links)
Before investing in the stock market, you must choose a portfolio. In Switzerland, you will likely invest in index funds via Exchange Traded Funds (ETFs). For this, you must decide on a good ETF Portfolio for a Swiss investor.
Choosing a good portfolio is an important decision. You must invest in a portfolio with low fees, high diversification, and good returns. And you should be careful about keeping it simple!
While there are many examples of ETF Portfolios for the United States, there are few examples for Switzerland. So, it is not trivial to choose one.
In this article, we review the details of choosing an ETF Portfolio for Switzerland. And at the end of the article, I give you an example of what I think is the best ETF Portfolio for Switzerland.
Choosing an ETF Portfolio for Switzerland
Choosing an ETF portfolio is an essential step when investing in the stock market. You should keep the same portfolio for a very long time. So, you need to choose carefully.
If you live in the United States, you will have seen tons of examples of ETF portfolios. But if you live in Switzerland, you probably have not seen that many of them.
And if you live in Switzerland or Europe, you cannot blindly follow a portfolio from another country. We cannot compare Switzerland with the United States. Our stock market is 20 times smaller. And in some other countries, it is even smaller than that. So we cannot invest in the same way.
For me, the best ETF Portfolio for Switzerland has two essential parts:
- An ETF representing the entire world stock market. Or it holds two ETFs, one for the Developed World and one for the Emerging Markets, but not more than two.
- An ETF representing the domestic Swiss stock market. This part of your portfolio is called your home bias.
With these two parts, you can have a very diversified yet simple portfolio. This portfolio is what I am investing in and what I recommend people to invest in.
We will see a few things in detail before I review the ETFs that form the best ETF portfolios for Switzerland.
Home Bias
A good ETF Portfolio for Switzerland should have some domestic stocks. This allocation will be your home bias.
The main reason for this is related to currency. Since the Swiss Franc is a stable currency, other currencies tend to depreciate against the Swiss Franc. If your entire portfolio is in USD, you may lose much value. So having an ETF in your local currency will help you.
Of course, you could hold only Swiss stocks in Swiss francs, and you will not have this issue. But having only Swiss stocks is not a great idea. A lot of Swiss companies are exporting to other countries. It means their performance is subject to currency exchanges.
The Swiss stock market is tiny, about 2.5% of the world’s stock market. So do you want to bet your entire portfolio on 2.5% of the world?
Finally, the Swiss stock market had lower performance than the world stock market historically. So if you only invest in Swiss stocks, you will need a larger portfolio to sustain your expenses.
Another way of reducing the currency risk is to use ETFs that are hedged to CHF. But currency hedging is expensive and is generally not the best tool for long-term investing.
So, how much should you allocate to your home bias?
Between 20% and 40% should be allocated to a Swiss Stock ETF. 10% is probably OK, but anything below 10% will not make enough of a difference to bother with it. 50% is also probably okay, but you are making a large bet on the Swiss Stock market with such a large allocation. It is why between 20% and 40% is a reasonable allocation.
In my ETF Portfolio for Switzerland, I have 20% of Swiss Stocks. Currently, I am pretty satisfied with this. I may consider bumping it to 25%, but no further.
I have done simulations of early retirement in Switzerland with Swiss Stocks. If you look at the results, this will also confirm the 20% to 40% bias.
For more information, I have an article about whether you should have a home bias in your portfolio.
What about bonds?
Swiss bonds have been in negative territory for several years in the past. However, as of 2023, Swiss bonds are once again interesting. It remains to be seen for how long, but it now makes to invest in bonds again.
Not everybody needs bonds in their portfolios. Indeed, this depends on your risk capacity. Personally, I do not own bonds. My portfolio is 100% stocks. But this does not mean it is a good portfolio for everybody. It is a good portfolio for me, with my risk capacity.
Using your risk capacity, you can choose your asset allocation. An asset allocation is the percentage of each asset in your portfolio. In our current, this will be the percentage of bonds and stocks.
Bonds are great for reducing volatility in your portfolio. They are especially useful in the early years of retirement when risks are higher for your portfolio.
What about foreign bonds?
Some people try to invest in foreign bonds instead. But doing so is not a good idea. I made this mistake myself. The problem with international bonds is that they will incur an additional currency risk to your portfolio.
When you invest in bonds, you want the bonds to lower the volatility of your portfolio. You want your bonds to help you when the stock market is not doing well. But if you add currency risk on top of that, you will not achieve this goal.
So, investing in foreign bonds is a lousy alternative to Swiss bonds for an ETF portfolio for Switzerland.
Alternatives to Swiss Bonds
If you do not want bonds but want to reduce volatility, there are several solutions to emulate bonds:
- Allocate some of your Swiss Portfolio to cash. Currently, cash is better than bonds. Of course, it is not great since it is still losing value due to inflation. But it still beats losing money with Swiss bonds.
- Invest in your second pillar. Most second pillar accounts offer around a 1% interest rate. And you will have some tax advantages as well. For me, this is the best alternative to Swiss bonds.
- Invest in gold. Gold has better returns than the second pillar and the Swiss bond market. And there are some excellent Gold ETFs. So you can directly invest in gold in your ETF Portfolio. But gold is not risk-free and can be quite volatile at times.
Of these three options, I prefer investing in my second pillar. But the second pillar has three limitations. First, it is limited because you cannot invest a limitless amount. Secondly, you will not be able to get the money before you retire. Therefore, it is not ideal for early retirement. Also, you can only get tax advantages if you have not withdrawn from the second pillar. And without tax advantages, the second pillar is not great.
So, I would recommend starting with your second pillar. And then, you can allocate some part of your ETF portfolio for Switzerland into gold. Or you can bump a little your cash allocation until you feel at ease.
How to choose ETFs
For each position in your portfolio, there will be several choices for you. There are many ETFs for each stock market index. So, how can you choose between these ETFs?
There are several things you need to look at:
- The Total Expense Ratio (TER) of the fund is how much fees you will pay each year.
- The domicile of the fund is the country from which the ETF comes from.
- The size of the fund. You generally want large funds for smaller spreads and higher liquidity. But do not pay too much attention to the detail. A fund managing two billion dollars is not better than a fund managing a single billion. On the other hand, a fund managing 10 million is less attractive than one managing 200 million.
- The way the ETF is replicating the index. You only want to invest in funds with Physical Replication.
- The way the ETF is handling dividends. A fund can either distribute or accumulate dividends. In Switzerland, you will pay the same taxes for both, mostly a matter of preference. I prefer distributing funds to get the cash once I need it in retirement. And this cash will also help me with rebalancing.
One excellent resource to find and compare ETFs is justetf.com. They have an extensive list of ETFs, and you can compare the information on different ETFs in a very convenient way.
For more detail about this process, I have an article about choosing and comparing ETFs.
The best ETF Portfolio for Switzerland
Now, we have covered the most important aspects of designing an ETF portfolio. Thus, we can finally go over the details of the ETFs.
Now, remember that this is only an example, which only reflects my way of investing. Therefore, this portfolio may not be the best ETF Portfolio for Switzerland for everybody. And remember that I am not a personal advisor and that you should still do your research and not merely copy what I am doing.
Here is what I consider to be the best ETF Portfolio for Switzerland:
- 80% World ETF
- 20% Swiss Stocks ETF
This portfolio is extremely simple and highly diversified. As I said, the percentages can vary. Between 20% and 40% allocated to Swiss stocks is a good range. So you could go 25/75 or 60/40, for instance. Anything between 20% and 40% would be fine. Adding more Swiss stocks will reduce your currency risk but reduce your returns.
Now, we can look into the ETFs. Which one you use will depend on whether you can access U.S. ETF. Then, we will see how to add bonds to the mix.
ETF Portfolio with U.S. ETFs
If you have access to U.S. ETFs, for instance, with Interactive Brokers, I recommend the following ETFs:
- Vanguard Total World (VT) for the World ETF with a TER of 0.07%
- iShares Core SPI (CHSPI) for the Swiss Stocks ETF with a TER of 0.10%
With this portfolio, you will have very low fees and high diversification. You also have the advantage of saving 15% of the U.S. dividends on VT. Saving on dividends will make a significant difference compared to the other portfolio. It is some extra optimization that you can do to your portfolio. But in the grand scheme of things, it will not change everything.
As an example, my allocation of 20% to Swiss Stocks would give this ETF Portfolio for Switzerland:
- 80% Vanguard Total World (VT)
- 20% iShares Core SPI (CHSPI)
This portfolio is the current portfolio I am investing in.
If you wonder why I talk about U.S. ETFs, here is why U.S. ETFs are great.
ETF Portfolio without U.S. ETFs
If you do not have access to U.S. ETFs, I recommend the following ETFs:
- Vanguard FTSE All-World UCITS ETF Distributing (VWRL) with a TER of 0.22%
- iShares Core SPI (CHSPI) for the Swiss Stocks ETF with a TER of 0.10%
With my allocation of 20% Swiss Stocks, this would give:
- 80% VWRL
- 20% CHSPI
This portfolio would be the one I would be using if I were not investing in U.S. ETF. If you want to be cheaper, you can choose one ETF for the developed world and one ETF for the emerging markets. That way, you can save a little on TER. But I prefer to have only two ETFs, even if the fees are slightly more expensive.
This portfolio has two disadvantages over the one with U.S. ETFs:
- The TER is about twice more expensive.
- You will lose 15% of the U.S. dividends because you will not profit from the double-taxation tax treaty since the funds are not in the United States. This difference is more significant than the first one. But this difference is often ignored by many investors.
If you can, you should probably invest in U.S. ETFs. But I want to emphasize something that many elitists will not tell you: Investing in a good portfolio is much more important than investing in the perfect portfolio!
If your broker does not give you access to U.S. ETFs and you do not want to change, then invest with European ETFs!
ETF Portfolio with bonds
Now, what is the best ETF portfolio with bonds for a Swiss investor?
We can take an example with a reasonable 20% bond allocation. This is a common bond allocation that does not decrease too much your portfolio returns and still reduces volatility.
There are two ways to integrate your bonds in your portfolio regarding your home bias (if you have any).
First, you could replace your home bias with the bonds part. Indeed, a Swiss bonds ETF would play a similar role to your home bias. In this case, you can opt for a portfolio with:
- 80% World ETF
- 20% Swiss Bonds ETF
If you want to combine Home Bias in stocks and Swiss bonds, you have to be careful about not having too much in Swiss stocks and bonds. So, you can either go 20% Swiss Stocks, 20% Swiss Bonds, and 60% World Stocks. If 40% allocated to Switzerland is too much for you, you could also opt for 10% Swiss Stocks, 20% Swiss Bonds, or 70% World Stocks.
Finally, I recommend iShares Swiss Domestic Government Bond 7-15 (CSBGC0) ETF. It has a 0.15% TER, manages about 250M CHF, and has been around for 20 years.
So, with US ETFs, this would give us this portfolio:
- 80% Vanguard Total World (VT)
- 20% iShares Swiss Domestic Government Bond 7-15 (CSBGC0)
And if you want to integrate a home bias ETF, you can bring back CHSPI into the mix to craft your perfect portfolio.
Conclusion
You should now have a good idea of what ETFs you need as a Swiss investor. You can now decide on your ETF Portfolio for Switzerland.
The ETF portfolios from this article are just examples of what I recommend. Of course, this portfolio may not be the best ETF Portfolio for everybody. But you should now know enough so that you can do your research and decide for yourself in which ETF Portfolio you want to invest.
And remember: investing in a good portfolio is more important than investing in the best portfolio. If you take years to decide on the best portfolio and delay investing, you lose out on some opportunities. It is better to get started with a good portfolio, and you can refine it over the years.
Of course, you must have a broker account to invest in your ETF Portfolio. If you do not yet have a broker, here is a guide on choosing the best broker account for Switzerland.
If you want more control over your portfolio, I have a guide on creating an ETF portfolio from scratch.
What do you think of this ETF Portfolio for Switzerland? What does your portfolio look like?
Download this e-book and optimize your finances and save money by using the best financial services available in Switzerland!
Download The FREE e-bookRecommended reading
- More articles about Investing Fundamentals
- More articles about Investing
- What is Currency Inflation? How to Fight it?
- Swiss Stock Market Indexes – SMI, SPI and SLI
- How do stock options work?
Hi Baptiste,
Thank you for the very interesting and useful articles.
I want to start investing in ETFs and trying to figure out which US ETF to choose.
1) I understand you would recommend VT?
2) Why do you prefer VT over VOO? What is the criteria you have used?
I have read this article and from what I understand VOO had a better performance than VT over the last 10yrs and has lower TER:
https://portfolioslab.com/tools/stock-comparison/VT/VOO
Thank you in advance,
Vanessa
Hi Vanessa
Have you read the description of the two ETFs? VOO is only for US stocks while VT represents the international world. I want international diversification in my portfolio, hence I choose VT. Chasing past returns is not what I recommend.
If you want to invest in US stocks, VOO is great.
If you want to invest diversified, VT is great.
Thanks a lot for the clarification:)
Dear Babtiste,
Thank you for your very informative blog. I already learned a lot :-)
I opened an IBKR account and transferred CHF, but am not able to convert them into USD to buy the ETF I desire. How to I do so? Could you guide me please?
Thanks, DS
Hi DS,
I have an article explaining how to use IB: How to Buy an ETF on Interactive Brokers the Easy Way
This should help you convert to USD and then buy US ETFs.
High Baptiste,
nice review, thank you.
However, having in mind an “early retirement portfolio with Swiss stocks”, I think that you focus too much on the TER. Dividends, stock distribution and past ETF-evolution without dividend are more important. Considering these aspects, I would consider the combination of CHDVD and SPMCHA in equal parts; you would have had – in the past – more dividends and a better performance, at the cost of a slightly higher TER (wich is already detracted from the performance, though).
Ciao Andreas
Hi Andreas
I don’t agree. First, we should not consider dividends indepedently, because they are part of total returns.
And total returns are interesting, but past performance is not a great indicator of future performance. Sure, it’s easy to pick the funds that did the best in the past, but it’s impossible to pick the funds that will perform best in the future. It’s an easier pick to select cheaper funds to at least have predictable fees and good diversification.
Do you consider either of your Pillar 2 and 3a part of the 20% of your swiss home bias? For pillar 3a, even when you select world for brokers such as finpension or viac, they seem to have a Swiss bias.
Yes, I do consider that in my total allocation. I want my total allocation to be about 25% Swiss and my portfolio to be about 20%. Depending on the balance between my broker account and my swiss acount, I will vary the portfolio allocation.
With finpension, you can entirely remove the Swiss bias with a custom strategy.
Hey Baptiste
Thanks for the updated post, very helpful!
You wrote ‘I want my total allocation to be about 25% Swiss and my portfolio to be about 20%‘. What do you mean with my portfolio to be 20%?
In my case I hold in USD: 1 US ETF; and in CHF: 1 Swiss ETF, Pillar 2 with my employer, and 3a with VIAC (world). Means all above in CHF account to my Swiss home bias, correct?
My portfolio is what I have in my broker account. There, I want to keep 80/20. But on my overall net worth (accross all my assets), I want to have 75/25. Does that make more sense?
Everything in CHF in your net worth is indeed part of your home bias.
Hi Baptiste, All,
I started to use Interactive Brokers, and chose permission to trade stock / ETFs in Europe incl. Switzerland and the US. Much to my surprise, many of the ETFs which I looked up were only available on the the LSE and on no other stock exchange. On the other hand all the ETFs in question were well contained in the SWX Exchange ETF list published by IB on the internet. Has anybody come across the same issue, what is the solution?
HPRD and HMWO are two examples.
Kind regards,
Herbert
Hi Herbert,
Sometimes, it’s difficult to find all the stock exchanges available for an ETF because the names differ. Have you tried searching by name or by ISIN rather than by Ticker?
Hi Baptiste,
I tried to enter the different tickers for the markets I was interested in first and met with difficulties. I also entered the ISIN number. Some ETFs did come back with a choice of exchange markets (Xetra and Six being often among them), but when I selected these entries they were systematically changed to LSN ETF in the trading mask. A call to IBKR did not solve the issue so that I had to open two tickets to provide all details. I will drop a line if ever I can find out where the problem lies. Thank’s again
That’s weird. Let us know what you find out!
Hi Baptiste,
Thank you for your valuable article – this is useful.
I am researching for a Swiss friend that is very new to investing, my thoughts would be for her to invest in VWRL (CHF). Would that be correct?
And also is there a tax wrapper that she should invest that into (i.e. similar to a UK ISA)
thanks in advance Baptiste.
Hi Abruzzo,
Ideally, she should invest in a US ETF: What makes U.S. ETFs so great?
We don’t really have tax wrapper. We don’t pay taxes on the amount inside our 3a, but we also can’t choose freely our ETFs for the 3a, so it does not matter.
Hi there, thank you for the guide! With your advice, I want to follow a similar split to you (80% World/ 20% Swiss) ETFs on IB.
I was wondering which currency you have set your account to? Since 80% of your investments are in USD and 20% are in CHF, did you set it to USD or CHF?
Thank you in advance!
Hi John,
The currency of my account is CHF, because that’s what I spend since I live in Switzerland.
The currency of your account only changes what is displayed, nothing else, so it makes little difference.
Thank you for the reply. That makes sense. So I understand your base currency is CHF on IB.
So when you deposit money, you have to convert from CHF to either USD, EUR or GBP, right? When I deposit money, for me there is no CHF option. The CHF that I deposit has to straight away be converted to those currencies.
Do you convert always to USD since the majority of your investment is in USD?
Also, when you buy Swiss ETFs on IB, are you losing some money again because you have to convert whatever currency you have on IB to CHF again?
Sorry for the long question, I hope it makes sense.
Hi john,
If you are in Switzerland, you should be able to deposit CHF directly. I am depositing either CHF or USD depending on what I have (I mostly have CHF, but some USD from shares from my employer).
I do convert most of the CHF to USD to buy.
When I buy Swiss ETFs, I use CHF, I don’t convert. I keept the CHF I have deposited.
You can hold CHF in your account. If you can’t, it’s a bug.
Hey Baptiste,
thanks for your blog, I am learning so much!
You wrote:
Most second pillar accounts offer around a 1% interest rate. It is not great, but it is much better than cash.
Why is 2nd pillar better than cash – given that cash gives now easily > 1% interest rate in a saving account?
Thanks for the clarification.
Hi Marie,
This was written when interest on cash was 0% :) I will update this.
Currently, we can indeed have higher interest rate on cash than on second pillar. However, we get large tax savings, so this could still justify using the second pillar with contributions.
Thanks for clarifying 🙌
Hi Baptiste,
Why don’t you have euro exposure in your portfolio? If we assume that your 3 pillars have a good weight in your overall portfolio, then the home bias should be covered. Right? You could then replace the 20% Swiss ETF with an 20-30% MSCI Euro ETF. I just think that today no one knows where they will live in their retirement and considering we live in the middle of Europe it would be good option to have some level of Euro exposure as well. What is your opinion?
Hi marc,
I don’t see the point honestly. I am about 90% sure I will retire in Switzerland, so I much rather have my home bias in Switzerland. And having EUR means more currency risk (I already have enough of that). I also don’t trust most of the European economies, so a bias towards them makes no sense for my case.
Hi Baptiste,
thank you for the great blog.
In this article you suggest the iShares Swiss Domestic Government Bond 7-15 (CH) ETF bond to reduce volatility. Looking at its past performance (5 years) it gives approx. 1.5% dividend yield.
https://www.justetf.com/en/etf-profile.html?query=iShares++Swiss++Domestic++Government++Bond++7-15++%28CH%29&groupField=index&from=search&isin=CH0016999861#holdings
At the moment you can find fixed deposits with 2% or more interest rate. Wouldn’t they reduce portfolio volatility more and provide better interests?
Thanks
Felix
Hi Felix,
If you look at any past period, you should lean about the specifics of that period. In the last 5 years, bonds have been extremely low interest. They have only started getting back to positive territory last year. So this past performance makes sense.
That being said, there are many complex things with bond funds. So, sotimes a COD at a bank makes more sense, but you may be locking at 2% while it increases up to 4 in the next year (who knows).
If I were to buy a bond ETF, I would still buy this ETF. But I would probably prefer a bond at a bank anyway these days.