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ETF's or Exchange Trade Funds have been growing in popularity for years, and for good reason!
Low fees and broadly diversified risk are criteria that appeal to many investors. Everything you need to know about ETF's, how you can matching ETF's or create a savings plan, you will learn in this ETF Guide. Frequently heard phrases like "invest in the index" or "I beat the market" will also make sense to you afterwards.
The ETF Definition is that of a stock exchange traded index fund. It is therefore a security that can represent any number of values and is traded on the stock exchange. ETF's are passively managed, i.e. an index (such as the Swiss stock index) is represented. In the example, this would be the SMI, which contains the 20 largest and most liquid listed companies in Switzerland.
You have in the ETF Definition already read that ETF's are securities. Classically, they are therefore also issued by banks. Since ETF's are passive, i.e. not actively managed (by humans), there are only small fees on them.
Banks earn money by issuing ETF's, but usually prefer to sell expensive (actively managed) funds or even hedge funds.
But what bank advisors aren't telling you is what the investor challenge known as the "Buffett Bet" demonstrates Warren Buffett. The star investor offered 1,000,000 $ for the active manager, who beats an S&P500 ETF within 10 years with his fund. The fund manager Ted Seines was so brave, but gave up after only a few years!
His fund returned only about 2.2% per year. The ETF, on the other hand, returned a whopping 7.1%. The explanation can be found mainly in the high fees of the funds, which are mostly between 3%-5% per year. For this ETF Guide, we determined average ETF fees of rather 0.3%-0.7%.
Here you can see an S&P500 ETF from iShares live in action:
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ETF's are good value, scatter the Risk broadly across many companies/markets and ETF savings plans require only little time. So far so good, but how can you find the right ETF or compare ETF's?
First the strategy should be clear. The ETF "Guru" Gerd Kommer recommends for a simple portfolio about:
Your strategy could look like this. But you should think about it yourself. Themes ETFs (e.g. an ETF on cyber security companies) are not successful in the long term, according to studies by Fintool.
When the strategy, we recommend that you use an ETF Finder. to filter out the one that is right for you. The free ETF Finder Switzerland we use is called www.justetf.com . Here you can compare ETF's, compare in fees or performance and also Create ETF strategy ...to leave.
But to really understand and compare ETF's, you should at least know the ETF Basics. We have collected and answered the most frequently asked questions:
"Intelligent people learn from the mistakes of others".
We have compiled our top selection for you from all our tests and experience reports:
Dividend ETF's are more in demand than ever before. Low interest rates and plans like the Generation of a 2nd income or the safeguarding of pensions are becoming more and more in demand.
Special dividend ETF's are designed to do just that and often contain targeted company shares that pay consistent and high dividends.
You can find dividend ETFs at your provider by searching for "Dividend". This should show you all ETFs with a focus on dividends. You can then compare and select the ETFs.
ETFs are cheap, spread the risk widely, are uncomplicated and perform well. But where best to buy them?
Compare the ETF fees yourself. Are you already with a broker or a bank that offers ETFs? Look at the fees and conditions. We recommend not only to look at the price, because there are providers such as DEGIRO from Holland, which offer ETFs free of charge (more on this in their terms and conditions). Besides the price, there are many other points that you should consider. Here you will therefore find a ETF Savings Plan Guide.
We look forward to your feedback in the comments and hope to have helped you with the ETF Guide.
Your Schwiizerfrank team!
The Swiss dividend pearls are here listed. However, as far as we know, there is no Swiss Dividend Pearls ETF yet.
Yeah, few points are not. But after all, you only have to do this work once. Platforms such as www.justetf.com will help you a lot with the ETF selection.
Indices are market barometers that reflect the situation of an entire market segment. For example, there is the SMI index (Swiss stock market) or a Tech index, which can provide information on a number of technology companies from around the world.
The TER (Total Expense Ratio) is the ongoing costs that the ETF will cost you. The TER of an ETF provides information about the costs, but not about all of them. For example, there are still transaction costs or SWAP fees.
Distributing ETFs have the advantage that you always have some money available. Such ETFs could be used to build an annuity or a passive income make sense. Accumulating ETFs make taxation easier and take advantage of the interest effect.
If you are in the accumulation phase of your assets, a distribution of profits is actually not sensible. This is because the taxes and withdrawals burden your portfolio and therefore slow down the compound interest effect.
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12 Responses
Hi Eric
Great article. I am 60 and want to retire to Thailand. I have approx chf 500k to invest and was considering an income ETF to get a steady return to live off. What would you consider in those circumstances? I already have some investments with Swissquote. Many thanks
Hi Mark,
there is not short answer to that. But you will find a good one in the FinanceTimetable.
Hello compliments for the site and good info.
What I haven't found are reviews on REIT and real estate ETF and homeownership as an investment mix?
The core satellite strategy is ok and well explained. I miss a bit the explanation of the risk / investor strategies such as Growth, Whealt, Income, Equity, Balanced etc. and how this is allocated in each case and what to pay attention to. Also a breakdown such as financial flow 50/20/30 etc. But maybe I just haven't found it yet?
The multiple account strategy is made more difficult by the sometimes outrageous fees charged by banks, not only in Switzerland.
As a Raiffeisen customer, you can do this largely free of charge.
I have always pursued the multi-account strategy, also with corresponding foreign currency accounts, but I will reduce them.
(My life partner was never really amused by this, probably wanted to consume more 🙂 )
Most of us often have no idea what assets we really have (AHV/PK) and what is in our PF and pillar 3a, and above all what fees we are being ripped off!
It's frightening when you realise after 20 or 30 years how big the growth really was and how 2-3% hidden fees per year have massively reduced the return. I am slowly solving these problems in retirement and shifting!
In particular, insurance and bank-owned active funds are very expensive and I don't know of any useful comparison portal. I would be grateful for any tips!
ETFs, on the other hand, are well documented and comparable on Just Etf and other portals.
In terms of custody accounts, Swissquote came closest to being the best option for me in a price/performance comparison. In the end, however, I decided on DEGIRO & FinanzNet Zero and am still looking into others. The most important criterion is "the profit lies in the purchase" or, in other words, the lower the costs, the higher the return. Then clarity and simplicity.
I trust the depositor protection abroad more than that in Switzerland, which is capped at 6 billion. In the USA, depositor protection is capped at $ 250,000.
It should be noted here that most people are not aware that cash deposits in Pillar 3a and FZG accounts are not considered separately and are included in depositor protection. If you have 300,000 in the FZG account, 200,000 are not protected. Therefore, it is essential to invest in securities in the custody accounts as special assets.
For payments to and from abroad, I have been using REVOLUT for years.
- A transfer from Switzerland of CHF 1000 to my CHF account abroad had me paying CS and Intermediaren Bank 3% fees.
cost. Both are EOL for me. With Revolut, it costs me nothing!
What I miss or even find annoying about investing in Switzerland are:
- Missing money market ETF in CHF
- Missing call money / fiduciary money ETF in CHF in small denominations
(Banks have a monopoly here and only offer it as a call cell from 200,000).
- Stock and bond exchange with small denominations (Fractal Trading)
(For example, I would like to buy Lindth & Sprüngli, but only Croesus can afford a share at CHF 108,000).
- that securities units from pillar 3a and FZG accounts often cannot be transferred to private assets at all or only to a very limited extent.
In the worst case scenario, book losses have to be realised at a bad price upon withdrawal/retirement.
It is therefore advisable to ensure that investments are made with ETFs and to make sure that it is possible to transfer them to any custody account.
- More tips for those who have to draw bridging pensions (ÜR), EL or social assistance.
Pillar 3a is taken into account and counted as an ASSET when consuming assets!
2. DO NOT use the PF credit as capital or withdraw it in advance, otherwise it may be immediately subject to the reclaiming of the legitimately withdrawn capital.
Social assistance/EL/UR offset.
3. anyone who is made redundant at 58 should consider the option of remaining in the PF and receiving a pension.
4. if you are unemployed (retired), you can split the capital of the PF FZG, withdraw it in stages and, if necessary, use it for an advance withdrawal or for self-employment.
Be sure to consult a counselling centre before signing any papers!
Hello, I would like to invest in the MSCI World and MSCI EM with the split 70%/30%. Since my savings rate is not that big, I would only invest quarterly 1500.- at Swissquote to not pay too many fees proportionally. I'm at the beginning there, how would you save the two ETF and how would you keep the ratio of both? Also, I saw that the trading currency is actually USD/EUR only. What is the best way to handle ETFs in other currencies that you want to buy (regarding exchange, etc.)?
Hello,
At Swissquote you can buy currencies directly and then invest in them. You will then be shown various positions in which you hold currencies. To avoid further fees, it is advisable to stay in these afterwards. If you receive dividends in USD, for example, you can reinvest them in USD securities or simply use accumulating ETFs.
Kind regards
I'm not quite clear about the impact of currency risk on an ETF. Most ETFs can be bought in EUR or USD, very few in CHF. If I have ETFs in USD and the Swiss franc gets stronger over time, does that depend on it or does it reduce the return?
Hello, Philippe,
It actually depends on what you plan to do with the dividends and ETF's. Diversification across several currencies is not bad, because the Swiss franc can also perform badly. If the franc is strong, you can buy cheaper in foreign currencies. Changing distributions from a USD ETF into francs naturally reduces your purchasing power. But if you can simply reinvest the dividends and wait for times when the switch is again to your advantage. At least that is how we do it. But at Swissquote you will find enough ETF's in Swiss Francs, or where do you have difficulties?
Many greetings!
Hello Eric
I'm looking for a simple all-world ETF (or a world and an emerging market ETF) with a low TER (below 0.2 if possible), but I couldn't find it at Vanguard and iShares, or only the EUR/USD variants of these ETFs. Maybe I haven't searched well enough yet. What I want to protect myself from is a constant, slow increase in the Swiss franc against EUR/USD over the next 10-15 years. Or would the currency risk not be so great anyway, or is it hoped that the SNB will try to keep the exchange rate low in the future?
Many greetings
Hello, Philippe,
if you invest with Swissquote (?) you can have a look at the MSCI World ETF's. I personally invest there in one from UBS and in an Emerging Markets ETF (about 80/20). Which brings me to Gerd Kommer judge.
It is beyond my knowledge where the long-term monetary policy of the SNB is heading. If you think and invest for the long term, you should not forget about inflation and how many currencies have failed in the long term. Not to mention the current monetary policy.
Diversification across currencies and asset classes can therefore certainly make a lot of sense - but this is not intended as an investment recommendation. In the current Wealth Letter ...I've gone into the subject in a little more depth.
If you invest with Swissquote, you are welcome to send me an e-mail and I will be happy to share my ETF's there.
Many greetings!
Hello, Eric,
Thank you very much for the answer. I am not with Swissquote, but I have read up on Gerd Kommer and will leave my ETFs as they are. I was not really aware of the concept of "fund currency", I somehow assumed that a fund that has, for example, the USD as the fund currency, buys all shares with dollars. But of course with an MSCI World or a similar broad index there are many different currencies, against whose exchange rate fluctuations I can only hedge at a very high cost. Therefore, I will continue to invest in ETFs that make sense to me, no matter what the fund currency is. Thanks again for your help!
Many greetings
Philippe
Hello Eric
Which two ETFs do you have?
Check it out here 🙂 https://www.schwiizerfranke.com/etf-strategie-core-satellite