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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Thank you so much for the feedback!
hi Poor swiss, Jay here again would you say considering company share value as an okay portfolio balance to the VT world? i.e keep just the VT world and continue investing in that monthly and consider my previously bought company shares before i knew alot about diverse investing as my swiss bias? (I currently have 37% of the total amount in company shares and the rest in VT world ETF) and in addition 3rdpillar to contribute to the swiss bias cushion. thank you so much for your thoughts on this.
warm regards,
judith
Hi Jay again,
I would be very careful about single shares. If you are really confident in this company, why not, but know it’s a large risk to have such a large position in your portfolio. You could reduce it a little and invest in a CH ETF instead. But of course, that’s up to you.
hi Poor swiss,
Thank you for sharing on this timely topic. Busy scratching my head on how to somewhat spread out my portfolio. I have currently been investing 100% into the VT world ETF for a year now but want to add one extra instrument for some kind of diversity. the trick is now how do i spread the 80% 20% split? i have aprox 50K invested in VT. would you recommend a lumpsum investing in the swiss ETF to catch up on the %. (was considering using my bonus but dont know if it is a great idea to put it all to the Swiss ETF and not put anything towards VT this timeround) my other thought was keeping just the VT and keeping investing in that and consider my 3rd pillar to be my ‘home bias’ would that be a reasonable balance. Thank you for sharing your thought on this.
Jay
Hi Jay,
A few thoughts:
* Your third pillar should definitely be considered (and your second pillar) in your total asset allocation
* I would personally build up the CH position little by little. Instead of investing 80/20 in the next few months, you could invest 60/40 until the CH ETF is at 20% and then switch back to 80/20. But I do not think it matters much depending on how long you are investing for.
Thank you Baptiste for sharing.
Don’t you think 2023 could an historical moment opportunity to come back on bonds for a long term investment?
Kind Regards
Gilles
Hi Gilles,
2023 could be a great year for bonds or a terrible year for bonds, I don’t know :) Therefore, I won’t make any predictions and keep investing according to my portfolio and asset allocation.
Hi Baptiste,
Thanks for the very valuable insight.
As for the overseas part of the portfolio, I’ve seen that Vanguard’s S&P500 ETF (VOO) has an even lower TER, at 0.03% and historically has had higher yields than the Total World (VT). How come do you still prefer VT? More diverse?
Thanks in advance
Hi Tamas,
VOO only covers the US companies, while VT covers the entire world, that’s more than enough for me :)
Hi there,
I would like to use your suggested portfolio for my kids money, 80% World ETF and 20% Swiss Stocks ETF.
My problem is that atm I already use IB for my investments and I would like to separate from my kids account (and preferable 2 different accounts)
I thought about opening a degiro account for this even tho they are not as good as IB.. Do you have any recommendation for this?
Thank you
Hi Francisco,
This article will help you: How to invest for your children in 2023?
Hi Baptiste,
Thank you for the great content you constantly release.
I hope you can help me do clarity on the choice of the market to buty the ETF from.
I am using Degiro, hence I am planning to go with the VWRL.
I can choose to buy it on the EAM commission free or on the SWX with CHF and have no commission change fee.
What do you suggest?
Is there a big difference in the spread on the 2 markets? How can I verify this myself?
Thank you a lot
Hi Michael,
With a broker with cheap conversion fee, I would recommend buying on EAM in source currency.
But DEGIRO is relatively expensive for conversions, so either makes sense from my point of view.
The spread will be significantly higher on SWX, but unless you are trading a ton of money, I don’t think this should matter.
I don’t remember if DEGIRO displays spread, but many other brokers do. Outside of IB, I don’t know how to find this information.
Just keep in mind that buying on SWX does not protect you from currency risk, it’s just a different trading currency for the same fund and the price in CHF will be adjusted based on the base price.
Thank you Baptiste for your prompt answer.
Instead when it comes to the all world ETF comparison between IBKR and Degiro. You mentioned first the difference in the TER and secondly the 15% in taxation.
If I invest 1000 CHF/month in this fund, would it be better to move to IBKR and buy the US-based ETF?
Not financial request, I will research what you tell me ;)
Thank you again, really!
Mathematically if you are in Switzerland, it makes indeed more sense to have it at IB. I would say that with 1000 CHF per month, the difference starts to be considerable.
Hi Baptiste
Thanks a lot for this article and the comprehensive guidance on your blog!
I want to invest into VT (Vanguard Total World) as well. However, I can’t find the ETF on justetf.com. Does the website only show non-US domiciled ETFs, and where do I find full information on these?
On IB, I found the following ETF: VT
VANGUARD TOT WORLD STK ETF
ARCA. Is this the right one (VT Total World)? I’m a little confused on where to find this information.
Thanks a lot and cheers
Alessandro
Hi Alessandro,
Yes, this is the right one. ARCA is NYSE ARCA the New York Stock Exchange.
Thanks!
Why can I not find the ETF on justetf.com? What other ETF are there to look up ETFs on, to get infos such as TER, fund size or replication method?
Cheers
Alessandro
justetf does not have any US ETFs in its database, unfortunately. It’s only interesting if you are looking for European ETFs.
hi,
I’d like not to be exposed to currency risks and do investments in CHF hedged, what do you recommend in this case for the World ETF?
I don’t recommend currency hedging, so I do^n’t have a currency-hedged recommendation.
Hi Baptiste,
I have 2 questions:
1. You said “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. ”
Can you explain this a bit better please? so for accumulate dividends we also have to pay the gains? (I live and work in CH)
2. which platform you use to buy the iShares Core SPI (CHSPI)?
Thank you
Hi Francisco,
1) Yes, you have to pay the dividend gains as income for accumulating funds, even though these gains are “virtual” (not distributed). You can read my article about distributing vs accumulating funds.
2) I buy everything on IB
I searched on IB for the VT and this is the one you buy right? VWRL VANG FTSE AW USDD LSEETF
and regarding 2. point, if I buy CHSPI ISHARES CORE SPI CH from IB then I can buy directly in CHF right?
I tried to simulate to see if I byu 1000chf of this ETF how much the fees would be but we cannot see this right?
Thank you!
No, this not right, this is VWRL, while I am talking about VT.
Yes, you should buy CHSPI in CHF. If you enter the trade window, you can use the preview button to see the fees.
ah sorry I saw the wrong one, so the right is probably this right?: VT VANGUARD TOT WORLD STK ETF ARCA
regarding CHSPI have you thought in another alternative like yuh? for 1000CHF it costs 5.75chf in fees
Yes, that one seems correct!
5.75 CHF in fees is standard fees for the Swiss stock market. It would cost you 5 CHF with Yuh, definitely not a significant difference.