The best ETF Portfolio for Switzerland in 2021

By Baptiste Wicht | Updated: | Investing

(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?

Baptiste Wicht 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.

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

  1. Hello,
    Since US ETF will probably not be available for Swiss investors in 2022/23, what is the best strategy on that:

    1. Still buy and hold US ETF until 2022. Then we will be able to just hold and sell anytime (long term).

    2. Or we will have to sell all US ETF in 2022/23, because the law will apply, and then a big taxable event (capital gains) will take place as we sell and make profit, just to buy the same EU ETF version (with bad TER).

    Which is the best strategy?
    Thanks for your answer!

    PS: I love your blog!

    1. Hi Greg,

      Currently, it’s more likely that we keep them in 2022. So, until we know for sure, I recommend keeping buying them. That’s what I am doing.
      So, option 1 is the way to go. We should not be forced to sell these assets with the law, only not being able to buy more.

      Thanks, I am glad you like it :)

  2. Hi,
    Thank you for all the information, your blog is super useful when trying to start investing!
    I’m having trouble finding Vanguard Total World (VT) on IB.
    In fact, I can find several versions of it (VT.IV, VT.NV), which all seem to say Vanguard Tot World, but I’m not sure if they’re all similar or it’s a different thing.
    In my search bar in IB, just VT stands for S&P 500 Three Month Variance, which I guess is not what I’m aiming for.
    Do you see the same things and which one is the “right one”? :)
    Thanks!

    1. Hi,

      I believe that .IV is the intraday indicative value and .NV is the NAV value of the fund. These are just indicative values.
      The one you should find should be called VT simply.
      Indeed VT is not S&P 500 Three Month Variance, it should be different.

      It should be on NYSE and the price should be around 100 USD these days.
      Do you have permission to trade on US stock markets?

      1. I think I should have, I’ve already bought SPY, then replaced it with VOO and also bought QQQ. Is there a better way of searching for a stock or something than writing « VT » in the search bar at the top and hoping for the best?

  3. Hi,
    I subscribed to your blog. It’s really helpful. I also opened account with Interactive Broker so that I can invest in US ETFs.
    However these 2 mentioned below doesn’t appear in IB search list.
    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%
    Could you kindly let us know if it’s not possible to invest in US ETFs any more from Switzerland?

    1. Hi Sayan,

      It’s still possible to buy U.S. ETFs from Switzerland with IB.
      CHSPI is a Swiss ETF, so you should definitely be able to buy that one. How did you search for it? Did you just search for CHSPI? You should be able to find it.
      Have you requested stocks permissions for Switzerland and United States in your account settings?

  4. Hi TPS
    Thanks for the great article. I was wondering about some thoughts to accumulation or distribution. Isn’t an accumulating ETF better to build up wealth? (I haven’t found an accumulating alternative to VT but I guess that’s because I don’t know enough yet or there is a reason for that)

  5. Hi PoorSwiss!

    Would you mind sharing how do you mange your currency risks (i.e. having a heavy USD based portfolio 80% and only 20% in CHF)?

    1. Hi JV,

      Currently, it’s not really a problem since I have my second pillar in CHF and my house in CHF.
      But in the future, I do not plan to take any action. I personally think that currency exchange can be mostly ignored in the long term.

  6. Hello !
    Thanks for the great post. I am on my way to start investing, I was checking at some ETFs from UBS, just to start getting used to reading the fact sheets they provide.
    I found the one in the link below, for example, and they mention “Management fee p. a. = 0.28%”.
    Do you know if that fee is on top of the TER? Or what does that mean?

    https://www.ubs.com/2/e/files/RET/FS_RET_IE00BMP3HN93_PT_EN.pdf

    Thanks again and have a great day

    1. Hi Hernan,

      In the case of the ETF you cited in the PDF, the management are inside the TER, so the TER is 0.28% and it’s all-inclusive. UBS has some cheap passive ETFs that are quite good.

  7. Hi The poor Swiss,
    Can you still buy VT as a Swiss investor with an Ib account. I find this confusing because you cannot find VT in justetfs?
    Cheers
    Ian

    1. HI Ian,

      Currently, you can still buy VT as a swiss investor with IB.
      Unfortunately, justetf does not have U.S. ETFs. You have to look on one of the American websites like etfdb or morningstar.

  8. Your home bias currency advantage is gone as soon as you compare the prices for a trade. Some Swiss Brokers charge you the same amount for a share as for an ETF trade. This is ridiculous. I use Flatex for my ETF saving plan. It‘s free and when I buy an individual ETF I pay 5.90 Euro for each trade.

  9. Hi TPS,
    I recently started investment and your blogs are really helpful. I opened an account in Degiro and I am planning to buy the All-World ETF. But I am confused on which one to buy since my base currency is Swiss. I am planning to buy the same ETF (once decided) every month with a small amount for another 10-15 years at least. For me I treat both accumulating and distributing the same – no personal preference, just looking for the economical one. I found that Degiro has free and paid ETFs.
    The only free Vanguard ETF is VWCE and VWRL but both are in Euro. hence, I will be paying the exchange rate.
    The paid ones (which I have short listed are)
    1. VWRL in CHF, where there is no exchange rate. But I need to pay the fee every month, which will hurt me. OR
    2. VWRD in USD (if it makes sense). Here I need to pay the exchange as well as the fee every month. You mentioned in the post that I will get more Dividend if I held the USD ETF. :)
    So I am bit confused on which one to buy. Or if you have another opinion. Thanks.

    1. Hi,

      Congratulations on wanting to get started investing for the long-term.

      You will get more dividends if you own U.S. ETFs, not USD ETFs. VWRD is still a European ETF, but in USD, there is no advantage over the other two.

      I would think it depends on how much you are going to be investing. If you invest a lot of money, the exchange fees may be significantly higher than the transaction fees. For very small amounts, it may be the contrary, but we have to look at minimums as well.
      Overall, I do not think it matters much. What matters is the underlying ETF and it’s the same for the three choices. The fund is the same, just a different way of buying it.

      I would personally buy VWRD so that I see USD in my account since the fund itself holds USD. But going with VWRL in EUR or CHF both makes sense to cut on the costs.

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