The best ETF Portfolio for Switzerland in 2024
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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?
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Hi Baptiste!
Yet again, thank you so much for your altruism, I’m amazed of what a great gift to society writing a blog can be!
I think I read in some other post of yours that you moved a while ago to a “one ETF” only being that one, VT. I was wondering if you analyzed the difference in return of VT versus VTI+VXUS.
And if you did analyzed both strategies, whether you made the decision giving a high importance to simplification over saving a few points on the ETF TER.
Thanks a lot,
With VTI+VXUS you have to decide how heavily you want to weight the United States (VTI) and whether you want to rebalance annually. This question does not arise with VT because it regulates itself globally based on market capitalization. Will there be a new world order? The VT will align accordingly (simply put). I see this simplification as the key element.
Hi Emilia
Thanks for your kind words :)
I only use VT for the world and CHSPI for my home bias, so still two ETFs.
The difference in absence is almost negligible, so it’s really not worth the extra complexity of having two ETFs and having to rebalance them. If you are going to have two ETFs, you will need to choose the allocation of each and if you base this on market cap, this can vary year after year. VT does this for you and I think that the cost is fair enough.
Thank you for your fast response. If I may share one more query, if I now choose to sell the positions I have with VTI and VXUS, other than trying to sell them at a better price than when I buy them (that’s the case right now since I only buy them in may 2023). Should I have any other factors into consideration to plan the closure strategy? I was thinking if I should factor in anything else to try to minimize taxes?
Maybe this question is too obvious but I’m new to investing.
Thank you!
You should avoid trying to sell them too fast, but in your case it’s fine since you have waited more than 6 months, this should not trigger any tax office professional investor status.
So, if you plan to sell any ETF and buy any other new, you can do it in one go and quickly.
Hello Baptiste,
Question regarding accumulating vs distributing for Swiss ETF. You mention that “In Switzerland, you will pay the same taxes for both, mostly a matter of preference”.
The distribution received is subject to withholding tax of 35%, some of which can be claimed on the tax form. So you effectively pay your tax rate on the income.
How exactly does it work for accumulated distributions? Is the same withholding tax applied to the accumulated distribution at the fund level before the reinvestment? Wouldn’t the fund pay the rate at the fund’s tax rate? Or is only 65% of the distributions effectively reinvested?
Thanks!
Hi Yvan,
There is no withholding for accumulating funds. At the end, you declare the full virtual dividends in your tax declaration and you are taxed on 100% of the dividends.
On a distributing ETF, you will get withholding and then pay the tax on 100% of the dividends, but you can reclaim the withholding.
So, in the end, you are paying the exact same amount of taxes for both cases.
Thanks for the prompt and concise reply!
Actually I live abroad and am looking to invest in swiss ETF. My country has a double tax treaty so I can recoup the 20 of the 35% withholding tax on dividends. Additionally, my country does not tax dividends. So effectively I am paying 15% tax to switzerland on the dividends
With that in mind, if I invest in an accumulating fund there is no withholding or any other swiss tax paid per your explaination. So I would effectively pay 0% tax. Am I correct?
(I am not asking for tax advice, this is hypothetically :-)
Hypothetically, it seems like if you are abroad, an accumulating ETF would be more efficient with a tax treaty. But if you are not living in Switzerland and have a tax treaty, couldn’t you reclaim this 15% withholding?
Hi Baptiste,
When you say Home Bias, do you mean the country you currently recide in or the one perhaps you intend to reture in?
Best regards,
Edmund
Hi Edmund
I would say it should be the one you plan to retire in and use your money. For me, that’s the same place, but for many people, that can be different indeed.
Hey there,
Amazing blog, thank you so much for your insights !
I was wondering if you hedge yourself with a stop loss for both your ETPs (even with long term investing in mind). I am asking in case of a financial crisis, global recession, etc, do you convert your portfolio to cash and re-buy at the dip, or do you keep yourself invested? Also, if you use the stop loss mechanism on IBKR, I would be interested in a blog post explaining that, and at which draw-down rate (10%? 20%?) you cash out.
Thank you !
I can’t answer for Baptiste, but this question has been on my mind for a long time. When you step out of the risk, you have to decide when to go back in. And that makes it really difficult. For me, I decided never to sell, but to buy in times of a big correction or a crash. But for this I must have an investment reserve on the sidelines. I keep 20% in cash, which is easy because there is interest again. If the market falls by 20%, I will buy more with half of my cash. If the market falls by 40%, I am 100% invested. This also helps me to endure the crash better. I then see the crash as an opportunity. But this is a very individual and psychological topic.
That’s an interesting strategy as well. However, be careful that in the long term, your 20% cash position may well cost you more (opportunity cost) than what it would make you “win” in case of a crash.
Hi Mohammed,
Thanks for your kind words :)
No, I do not have stop loss or any mechanism to hedge. I think there is no way to predict at which point the stop loss should be put to avoid local minima and be out of the market. I simply plan to go through any crash with stocks.
Hello Baptiste,
Thanks for the blog – I’ve spent a lot of time reading in the past weeks and I believe your recommendation of US ETFs had a big positive impact on my investment choices.
As for the home bias – CHSPI part. I plan to use 20-25% as well. Since the fees for CHSPI are higher on IB for SIX ETFs I plan to only invest every 4-5 months, I think I read somewhere you do the same.
Question: My monthly investment is not very big yet (1000 CHF) – so I cannot buy whole ETF shares close to my investment sum (%-wise, I will often only reach 930-950 CHF). Do you buy fractional ETF shares on IB? I have done so for VT without any problems, but for whatever reason with CHSPI the tiered commission fees get astronomically high (50-100CHF) if you compare buying 7 shares vs. 7.1 e.g. (at least it shows me so in the preview window).
Hi Ramon,
Yes, I do the same indeed.
1000 CHF monthly is already great!
I never buy fractional shares, only full shares because it makes more sense for me.
I actually thought CHPSI was not possible for fractional shares at IB. The fees should in theory not be bigger, but if they are, we should definitely avoid this.
I really would not worry too much about having some CHF left in IB (you even get interest rate).
Remark: There will be no interest paid on the first USD 10,000 or CHF 10,000 of cash.
Excellent point, I forgot about that!
Hello, and thank you for the incredibly high-quality content! :-)
I was wondering why you suggested VT instead of VOO.
I was comparing the two, and it seems that VOO is cheaper in terms of fees, with higher returns over the years and a very strong correlation with VT.
On the other hand, I see that VT is more diversified in terms of geography and company size and has a lower bias on the tech sector, which is the one in which you work. Do you see VT as a simpler version of VOO complemented by emerging markets and smaller-size company stocks?
Have I missed any important comparison points?
Thanks a lot,
Matteo
Hi matteo,
As you said, VT is massively more diversified, while VOO is only in the US. For me, this is enough. I’d rather have a single fund than have many.
It’s really the main difference.
Hi, thank you for this article. I have a question relating to US ETFs.
Some brokers allow Swiss individuals to buy US ETFs, others don’t.
It seems that SQ allows the purchase of US ETFs (eg VOO, VT), however there is a disclaimer when you want to make a trade regarding NACH funds not authorized in Switzerland. I am not clear if US ETFs are allowed or not. Can you provide more insights? What are the risks of buying US ETFs when they are not technically allowed unless you are extra rich or a professional trader?
Hi Julie,
US ETFs are allowed in Switzerland since we are not part of the European Union.
At this point, there is no risk in purchasing US ETFs, I am still doing it almost every month.
Hi Baptiste,
I am planning to replicate this very strategy. I am young, just moved in Switzerland and I am going long (30+).
As I will buy a US ETF, it is still not clear to me (I have read the article about taxes and how to use ICTax) how much tax I should expect to pay. If I understood correctly, there are no taxes on capital gain but only on dividends. Scenario:
On January 1st I buy 5000 CHF of VT, priced 100 CHF. Meaning I get 50. At the end of the year, the value of VT is 110 (10% capital gain) and they distribute a 2% dividend (100 CHF).
Am I correct thinking that I will need to pay 30% out of that 100 CHF dividend (15% to US and 15% here)? And then if declared correctly I should be able to get the 15% tax paid here in CH.
Thank you in advance and thank you for the time you put into writing these articles – without you and Mr. RIP I’d be lost.
Hi Ste,
If you fill out the W-8BEN form (on IBKR for instance), you will only pay 15%.
So, for your example, you will have 500 CHF of capital gains that will not be taxed (unless you are doing very active trading, using leverage or such, but if you are a long-term passive investor, you shoudl be good).
Then, you will have 100 USD in dividends. Of that, 15 USD will be witheld by IBKR. You will declare 100 USD as income in your tax declaration. On that, you will be taxed as your marginal tax rate. And then, you can deduct the 15 USD from your taxes. In most cantons, there is a minimum of 100 USD for this deduction, so, in your example, it may not work exactly like that.
Great Baptiste,
It is now much clearer! I do use IBKR indeed.
Another short question: on CHSPI, how do you accumulate? I see the fee is CHF per order, which means it would cost 60 CHF year to buy monthly. Not sure whether this is convenient.
Since CHSPI is 20% of my portfolio, I buy CHSPI about once every 5 months (1/5=20%). I try to buy only one ETF per month.
Hi Baptiste,
thanks for your advice! Can you please give more details on where/how to fill out W-8BEN form on IBKR for tax purpose as you described?
thanks!
Normally, it should have been filled up during onboarding. If not, you can go to your accounts settings, press the (i) button next to your name and then go to update tax forms and you should be able to make sure it is fully setup.
Haha, okay, very interesting. Thanks again, Baptiste. Have a great day!!
Hi Baptiste
First of all – and once again – thank you for the amazing site. You’ve taught me so much.
So there’s something I don’t understand with regards to the 80/20 split between US and CH (total beginner investor)…
Is the idea that if by the time we retire USD.CHF has turned against us, we can dip into our CH ETF instead of the US ETF while we wait for the exchange rate to improve?
If I already have 3rd pillars that I will be cashing in, I would have thought this would be enough and I could throw 100% into VT and forget about CHSPI entirely.
Thank you in advance for helping me see the light!
All the best
Simon
Hi Simon,
Thanks for your kind words!
For your first point: a home bias provide some security against two things. First, it protects a little against other currency devaluations. Then, it protects yourself about global events that do not impact your country (Switzerland being relatively safe, this could be important).
For your second point. You should totally take the big picture into account. If your 3a is invested 100% in CHF stocks or cash and represents 20% of your total wealth, you can indeed use it as a home bias. But if you use something like VIAC or finpension, it won’t be 100% invested in CHF (by default), so you must account for that. And if your 3a is not a significant portion of your wealth, then it will not be enough to be your home bias.
Does that make sense?
Dear Baptiste
Thank you so much! You have educated me once again. Not having a bias could land us financially in very sticky situations if we protect ourselves against the world changing. And we know it will change! Home bias sounds like a type of hedging to my layman ears.
Considering I am already 55 years old and only now starting to invest for the very first time, I wonder if my home bias should be less because the world is unlikely to change that much in the next 10-15 years? Then again, we never know, do we!
By the way, the quality of your English is superb.
Thanks again. Extremely helpful! What amazes me the most – generally about the advice on your site – is how simple you have made the concept of investing. Passive invest and just leave it be. I never realised I could do it. What a shame I am so late to the party!
MfG
Simon
You are welcome!
I would actually say the contrary. If you have few years in front of you, you want to protect yourself better and likely want a bigger home bias. As you said, we never know. But you know that you have fewer years to recover if something happens in the next few yeras.
Dont’ worry about being late, most people are. The best time to start investing is always yesterday and the next best time is today!