The best ETF Portfolio for Switzerland in 2021

Mr. The Poor Swiss | Updated: | Investing
The best ETF Portfolio for Switzerland in 2020

(Disclosure: Some of the links below may be affiliate links)

Before investing in the stock market, you will need to choose a portfolio. If you are in Switzerland, you will likely invest in index funds via Exchange Traded Funds (ETFs). For, this you will need to decide on a good ETF Portfolio for a Swiss investor.

Choosing a good portfolio is an important decision. You need to 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 will go over the details of choosing an ETF Portfolio for Switzerland. And at the end of the article, I will 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:

  1. 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.
  2. 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 very 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 go over 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 a lot of 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?

I think that between 20% and 40% should be allocated to a Swiss Stocks ETF. 10% is also 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% in the future, 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?

Unfortunately, Swiss bonds have been in negative territory for a long time now. And given the current situation, I do not believe they will become positive any time soon.

Therefore, I think it is not a good idea to invest in Swiss bonds at this time. You should not add Swiss Bonds to your ETF portfolio for Switzerland.

If the situation improves and bonds are back to yielding 1% or more, they may become interesting again.

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

There are several solutions to emulate bonds:

  1. 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.
  2. Invest in your second pillar. Most second pillar accounts offer around a 1% interest rate. It is not great, but it is much better than cash. And you will have some tax advantages as well. For me, this is the best alternative to Swiss bonds.
  3. 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 in that you cannot invest a limitless amount into it. 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 yet 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, so it is mostly a matter of preference. I prefer distributing funds so that I will get the cash once I need it in retirement. And this cash will also help me towards 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, keep in mind 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 have access to U.S. ETF or not.

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 0.08%
  • 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, with my allocation of 20% to Swiss Stocks, this 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. ETF and you do not want to change, then go ahead and invest with European ETFs!

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 will need to 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? How does your portfolio look like?

Mr. The Poor Swiss is the author behind thepoorswiss.com. In 2017, he realized that he was falling into the trap of lifestyle inflation. He decided to cut on his expenses and increase his income. This blog is relating his story and findings. In 2019, he is saving more than 50% of his income. He made it a goal to reach Financial Independence. You can send Mr. The Poor Swiss a message here.

109 thoughts on “The best ETF Portfolio for Switzerland in 2021”

  1. Hi there !
    great and super clear explainations! was looking for the Vanguard ETF that you mentioned on JustETF but dont seem to find it there, neither on my tradking platform (Swissquote) – is there a reason?
    talking about Vanguard Total World Stock ETF (VT)
    thanks a lot in advance!
    tatiana

    1. Hi Tatiana,

      VT is a US-domiciled fund, it cannot be found on justETF since it is focused on European ETFs.
      As for Swissquote, some Swiss brokers have stopped offering them even to Swiss investors. You may want to ask Swissquote if they still offer US-ETFs or not.

  2. Hi ThePoorSwiss,

    Thanks for your clear reply!
    Another quick question, Vanguard Total World (VT) is distributing, and for a slight optimization I would rather be in accumulating. Because reinvesting the dividends with SQ costs money, so accumulating should be better for reinvesting, right ? Do you have an alternative to VT that is accumulating ? I tried to find one, but did not find an alternative with the same expense ratio (0.08)

    Thanks,
    -nestor

    1. Hi Nestor,

      There are no accumulating ETFs in the USA. So, if you want a distributing ETF, you will have to switch to a European UCITS ETF and you will lose on all the advantages of the US-domiciled ETFs.
      Can you still buy VT at Swissquote?

      1. Yes it is possible to buy VT at swissquote. The only problem is that, as you have mentioned, buying US securities in SQ is expensive, compared to other brokers. That’s why I thought having an accumulating instead of distributing would have allowed me to save on the fees of re-investing the dividends.

        1. Hi Nestor,

          Thanks for confirming this! I was thinking it was not possible anymore!
          It’s expensive indeed, no doubt about that. It will save you the fees of reinvesting for European and Swiss dividends.

          Thanks for stopping by!

  3. Hello,

    Thanks for your most informative blog, I’m currently trying to adjust my portfolio.

    Would you be so kind of helping me understand the issue with the tax on dividends ?
    You wrote in an answer to a comment above:

    ” It’s indeed because of the domicile, not the content of the ETF. The U.S. tax office removes 15% (30% by default, but we have a tax treaty that gets it down to 15%) of the U.S. dividends on the funds. And you can reclaim this on your tax declaration.
    Acc or Dist has no effect on taxes indeed.”

    Do you mean that dividends are not taxed at all in switzerland ? So that the 15% taken by the US authorities can be recovered once make your taxes ?

    Also what about using swissquote to hold your funds ? Will it make a big difference on the long term ? Maybe this is just a wrong perception but I feel more comfortable having to deal with a swiss entity than with a foreign one…

    Thanks !!

    1. Hi Nestor,

      Dividends are taxed as income in Switzerland. What I meant by “Acc or Dist has no effect on taxes indeed” is that you pay the same amount of taxes regardless of whether it’s distributed or accumulated.

      The 15% taken by the US authorities can be taken if we use US-domiciled ETFs only. If we use European ETFs, this is not possible.

      Using SQ will make a difference, but not a life-changing one. This will be about 0.3% lost per year. You can definitely invest very successfully with SQ or CornerTrader.

  4. Hi Mr. Thepoorswiss :)

    First of, Thank you for a great blog that has helped me a lot when it comes to personal finance, really appreciate it!

    I do however have one question; Why do you choose VTI over VTSAX? The performance is exactly the same and with VTSAX you get the benefit of doing automatic investings (since its a fund and not an ETF).
    Are ETFs in general more preferable than mutual funds?

    Cheers!

    1. Hi Doug,

      VTSAX is an excellent fund. But it’s not available in Switzerland since Vanguard does not provide their funds to customers :) So, here we have to use VT. If you have access to VTSAX in your country, it will be perfectly fine!

  5. Hi, first thanks a lot for your blog, it has been very helpful!
    1) I have been a bit confused by this sentence :
    “You also have the advantage of saving 15% of the U.S. dividends on VT” I am not sure to understand why buying VT would save you 15% on U.S. dividends. I suppose VT does contain US Shares, and the fact that an ETF is Acc. or Dist. should not really an impact on the end taxation (from what I understood in another on your post).
    So in that case… Why would we save this here compared to other ETFs? Is it related to the ETF domicile? or the Base currency? or?

    2) For a local ETF, Degiro seem to have CHSPI, perfect.
    However, Degiro does not seem to have VT (nor VXUS, VTI… ) (or maybe I am too stupid to do a simple search.. :D ) I searched for something similar… (world ETF, low TER, big fund size) Would LU1781541179 be an “ok” choice? or any better suggestion that exists at degiro?

    PS : and sorry if this last question is a bit stupid: “No Access to US ETF” Did you mean no access to US domiciled ETF (or USD based currency ETF?), no access due to the fact that it is missing on the Platform (IB / Degiro…)? or due to People’s Nationality or something like this? I Just wonder if this is related to why I cannot find VT…

    1. Hi Pabs,

      It’s indeed because of the domicile, not the content of the ETF. The U.S. tax office removes 15% (30% by default, but we have a tax treaty that gets it down to 15%) of the U.S. dividends on the funds. And you can reclaim this on your tax declaration.
      Acc or Dist has no effect on taxes indeed.

      Indeed, DEGIRO has no access to US-domiciled ETFs, hence no VT on DEGIRO.

      And IB offers access to U.S. ETFs, but to Swiss investors, not investors part of the European Union.

      Does that make sense?

    1. Hi,

      These two ETFs are investing in the United States stock market. This is also covered in VT, with about 50% of U.S. Stocks.
      Some people prefer to overweight on U.S. stocks, in these cases, using QQQ, VOO or VUSA is a good idea. But you should know that you are reducing your international diversification and increasing your volatility, for potentially more returns.

      Thanks for stopping by!

  6. Hi Poor Swiss,
    First of all, thank you so much for your blog, I am learning a lot from all the articles on your blog.
    I have a question with regards to the portfolio.
    As I am starting to invest, I have some money saved for investment. Since I am living in Switzerland, I thought about replicating your portfolio, but before starting, I have the following question:
    What is the best option (or what do you recommend):
    1. Invest all the money I have saved in the portfolio (it is all intended to build the portfolio)
    2. Apply dollar-cost averaging and buy the ETFs of the portfolio on a monthly basis: Start with a small quantity and then buy the same quantity every month.

    I am not sure if there are some tax-related problems if applying dollar-cost averaging. I am new to ETFs and the Swiss fiscal system.

    Thank you very much in advance,

  7. Hi Mr. PoorSwiss,

    I was wondering how did you choose CHSPI instead of other swiss ETFs (e.g., https://www.ubs.com/ch/en/asset-management/etf-institutional/etf-products/etf-product-detail.ch.en.ch0111762537.basedata.html) given that you had VT (which is also my case). I’ve seen that TER is pretty low, but it should not be the only factor. Also, CHSPI focuses on large-cap (like VT) and is held by BlackRock.

    I’m wondering what would make sense for the home bias. For now, I have no stock in Switzerland. I have my 3rd pillard (Finpension) as 78% World, 11% EM, and 10% world small cap. (of course also my 2nd pillard which I considered as bonds).

    Thanks in advance if you share your thoughts.

    I also would like to thank you for the more “scientific” aspect of your blog! I’m a 4th PhD so I appreciate very much your “PhD” way of analyzing ;-)

    1. Hi Matteo,

      CHSPI does not focus on large-cap. The SPI index is focusing on the overall Swiss stock market. The problem with this stock market is that we have three giant companies that are skewing the market.
      SMIM is a good alternative, but then, you have worse diversification and you have a bias towards smaller companies. It could be fine, but you need to be aware of that.

      You may have slightly more returns with SMIM but you will have higher volatility as well.

      Thanks for stopping by!

      1. Hi,

        Thank you for your answer, I see the problem you mention about these few companies driving the market. I will follow your advice and Bogle’s ones with the diversification and thus, favoring CHSPI.

  8. Dear Mr. The Poor Swiss
    Thank you very much for your work, your blog and community are truly a wonderful resource in this jungle!

    My question is related to chosing ETF on Degiro and I apologize if you’ve answered this before already:

    When searching for HSBC MSCI World there is a total of 6 listings showing up in the Degiro app, all with the same ISIN code, but each one is traded at a different stock market (SIX, XETRA, LSE etc.). As far as I understand one should go with the largest liquidity, smalles ask/bid spread correct? That would be XETRA, as of now? Or are there regulatory/fiscal implications in Switzerland that would benefit going with SIX? Or does it all not matter and should one just go with the one that’s free on Degiro (Paris stock exchange)?

    I’m based in Switzerland and my currency is CHF.

    Thanks for your help, cheers! Ed

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