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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This only for investments domiciled in the USA.
US investments domiciled in IE or Lu are not subject to inheritance tax.
Goodevening, What about this ;
In the event that there would be US securities in the portfolio of a bank investment management, for a value> 60,000 CHF, in the event of death, the heirs would have to pay inheritance taxes to the American tax authorities , while NOT having US citizenship and NOT having US residency.
Subject of taxation could be these titles with the deduction of the deductible of Frs. 60’000.-, at the rate that varies from a minimum of 18% to a maximum of 40%.
Hi Dario,
I have an article about the U.S. Estate Tax for Swiss investors, this should clear it up :)
Thank’s a lot for your precious informations
Thanks for the excellent website!
Do you know if CHSPI has any level 1 withholding? (of distributions in between the companies and the fund) or because both the companies and fund are domiciled in the same place it doesn’t?
I can’t seem to find this information online easily.
Thanks!
Hi,
There should be no level 1 withholding for CHSPI. It’s domiciled in Switzerland and has only Swiss companies. So, there should only be level 2 withholding.
Hi TPS,
The clarity and transparency you provide in your posts based on your personal experience, the very pragmatic advice always backed with data, and your willingness to help others get better at personal finances are the reasons driving me to come back to read more and more of your blog! My investment strategy is slightly different than yours (I am taking a risk on USD FX rate and US market and investing in VOO rather than VT for the moment), but still balancing my portfolio with investments in the Swiss market. And I am facing a dilemma when it comes to which option to go for in this case. I would be interested to get your view on the differences between CHSPI (which you chose for your Swiss market investment) and CHDVD; purely based on historical data, CHDVD seems to be slightly better performing (higher dividend yield, more than offsetting the slightly higher TER).
Best,
Adrian.
Hi Adrian,
Thank you very much for your kind words! I am really glad you feel like about my content :)
Note that you are not taking that much more of a FX risk with VOO than with VT. But it’s true that you are more biased towards the U.S. market. But with globalization, the markets are more correlated, so you are probably not taking much more risk.
There is not much differences between the two. CHSPI is slightly more diversified because in CHDVD, 5 stocks are forming 72% of the portfolio while in CHSPI, the first 5 stocks “only” make up 51% of the fund. But these five stocks are the same in both cases. And CHDVD is twice smaller, but both have good sizes.
In the end, both are a good representation of the Swiss market: a few giants and many smaller companies.
Hello Mr Poor Swiss
Thank you for your helpful information. It’s so exciting to read through all of your blogs.
But I have a question:
You recommend around 20% of the Portfolio in Swiss stocks as the home bias.
But if I’m already invested with 26% in Swiss stocks ETF’s through my 3rd pillar (VIAC) , could I invest without swiss stocks im my own portfolio? for example only world + em ?
I am very happy to receive a feedback
Hi Elino,
Thanks for your kind words :)
Excellent question! It is important to consider your entire assets. You need the percentage compared to your total assets, not each account.
If 26% of your assets are VIAC Swiss stocks, then indeed, you should be fine not investing in Swiss stocks.
If 26% of your third pillar is in Swiss stocks, it may not be enough unless your third pillar is a large part of your entire assets.
Thank you very much for your helpful answer
have a nice day
Hi Hi Mr Poor Swiss,
Thanks a lot for your information and all your help.
If I understand correct, these ETFs are both distributing, correct?
Could you please refer to some accumulating ETFs which are close to the ones you mentioned?
Thanks and many regards,
Christos
Hi Christos,
Yes, these ETFs are distributing. I prefer distributing ETFs over accumulating ETFs (more info here).
There are plenty of world funds that accumulating, just look on justetf, but I do not know any good ETF for Switzerland that would be accumulating.
Why do you want an accumulating fund?
Yes, my problem was for Switzerland where I can’t find something interesting. For world I found the following:
https://www.justetf.com/ch-en/etf-profile.html?assetClass=class-equity&country=CH&groupField=index&from=search&isin=LU0977261329#overview
As an amateur investor, I prefer the accumulating concept, since dividends are being rebalanced correctly (when it comes to time) so gains are optimized.
Hey again,
Have you taken in consideration that with inflation (or hyperinflation) in US, in the next 10-20 years, the dollar could worth nothing?
Hi,
I am talking about this here: https://thepoorswiss.com/4-percent-rule-swiss-stocks/
Let me know if you have further questions :)
Hello,
Thanks so much for all the information! I will start to invest soon but in small quantities so I can adjusted to the markets, etc. I’m looking to create a 1 ETF portfolio and then in the future I can start to diversify. Do you think it makes sense to start with an SP500 ETF and later diversify? Or it makes more sense to start already with an All World etf?
Thanks,
Fransisco
Hi Francisco,
Investing in the S&P500 (VOO for instance) is not bad at all. But you have to know that all your money in the United States. Personally, I would invest everything in VT if I had a single fund portfolio.
Now, it’s true that VOO has had higher returns than VT in the past. And there are many people who only invest in the S&P 500. And with globalization, VOO is a good representation of the entire stock market as well.
Investing in VOO is infinitely better than not investing at all.
Hello there!
I read always your blog, and I remembered this post because I will have soon a good amount of cash in EUR.
What do you think to go with VWRL instead of VT, so I can avoid the conversion EUR to USD and achieve currencies diversification as well (CHF-USD-EUR)?
By the way, on IB, I see 3 VWRL: AEB, LSEETF and EBS…so I need to understand the difference first .
Thank you!
Hi Wavemotion,
It’s not worth it just to save on currency conversion. With VT, you will save 15% of the U.S. dividends. In the long-term, this is more interesting than saving on the current conversion.
Also, there is no currency diversification because VWRL holds USD even though you pay in EUR.
The difference is on which stock exchange you are paying, it makes little difference. You have to consider trading fees, volume and the currency of each listing.
Hi Mr Poor Swiss,
Would you still recommend starting with VT now since there may be a stop in 2022 for Swiss residents? Or do you think it’s better to use the European replacement options (part of another of your articles). And thanks a lot for putting together all these resources, really appreciate the advice and insights on your blog.
Hi Radu,
Yes, I would still recommend it. And I am still doing it myself :)
Thanks for your kind words, I am glad you like it!
Hello Mr Poor Swiss,
if I was to start now and go with VT? What would happen when they stop allowing us to do so from Switzerland? What will you do in that moment?
Is it better to just switch now than having to switch later? Maybe some additional expenses will be had in order to do so?
Thanks
Hi,
Normally, they will prevent you from buying more shares but they will not force you to sell your shares.
If that happens (not sure, seems like probably not), I will keep my VT shares and probably start investing in VWRL instead.
I do not see any advantage in switching now rather than wait and see. If we knew for sure if things will change in 2022, then we should probably use VWRL directly now, but not knowing, I prefer to go with the optimal option for the time being.