Switzerland is a great place to invest, thanks to its strong economy and business culture. It is considered one of the main financial hubs and is now the home of many people who have become billionaires by investing there. In this guide, you will find out that you have a lot of choices to invest your money successfully in this country, so read on to learn more about it.
Investment in Switzerland
Switzerland has become one of the safest destinations for investors for a time now since it has a stable economy, low national debt, and great business culture. There are several options for you to invest in Switzerland, but there are also some policies that you should pay attention to, especially if you are a foreigner. Different kinds of investments are shown to you below.
Savings account investments in Switzerland
Savings accounts are available in banks of Switzerland, but you can’t gain interest from them anymore. So, putting your money in a savings account isn’t really considered an investment anymore. However, there are some benefits for people who keep their savings in a bank account. Here are some of the main advantages and disadvantages you might want to know.
Advantages:
- If your bank goes bankrupt, you are guaranteed you are covered for up to CHF 100,000.
- It is a great idea to keep your money in a bank account since it is a safe place, and you can have access to it whenever you want.
Disadvantages:
- You might have to pay the bank 0.01% interest, meaning you end up losing money.
- Bank accounts might have some hidden fees, so make sure you know what you are paying for.
Pensions investments in Switzerland
The 2020 Allianz Global Pension Report ranks the Swiss pension system the 23rd in terms of sustainability and adequacy among 70 countries. But why is the Swiss pension system one of the most reliable in the world? Well, their pension system has proven its merits over many decades and is now a key factor in the social and financial security of people who live in Switzerland.
There are three main pillars of the pension system in Switzerland:
- The state pension: People who reached the retirement age, which is 65 for men, and 64 for women, can withdraw their state pension. The pension you will get depends on how many years you have contributed to the country.
- Company pensions or occupational pensions: Employees, even self-employed workers over 20 years old, who earn CHF 21,330 from a Swiss company, must contribute to the occupational pension. They will then receive 6.8% of their pension each year.
- Private pensions: Private pensions are not mandatory. This type of pension allows you to access it before retirement, so you can use it in case you want to invest or buy a property. Another positive thing about private pensions is that they are tax-free.
Property investments in Switzerland
Investing in a property can be complicated since Switzerland has strict rules for foreigners buying property. You will need such qualifications:
- EU or EFTA national with a Swiss residence permit
- Permanent resident with a Swiss C permit
- Temporary resident holding a work visa
You are not allowed to invest in a property if you only are on a temporary visa or a resident with a B permit.
When looking to invest in a property, you might face a lot of competition since the house prices are increasing by 7% each year. Cities with the largest competition and prices are big cities like Zurich, Geneva, and Lausanne.
Although house prices are high, Switzerland has one of the lowest transaction costs in Europe. According to Global Property Guide, the costs that the buyer pays are between 0.25%-3.55 %, that includes:
- Real estate transfer tax (0.2%-3.3%)
- Registration fee (0.15%)
- Notary fee (0.1%)
Business investments in Switzerland
Switzerland is one of the best countries to start a business in. But you need to be a resident in order to start a business there. Business investments in Switzerland can be a bit complicated, depending on the type of company. For instance, sole proprietorships and partnerships are usually not as complex as setting up a corporation, in which case you’ll need to provide evidence of having a minimum amount of shareholder equity to invest into the business.
Different Investment Options in Switzerland
Switzerland offers various investment choices. So, if you’re wondering about your investment options and their risks, keep reading. This article will provide you with everything you need to know about different investment options as well as their pros and cons.
Invest in investment funds
Investing in investment funds is like buying shares from a company but with one difference. A fund is a collective investment where your money is joined with other investors’ money and managed on your behalf. An investment manager and other intermediates involved in your investing choose which companies to include in the fund and make buy/sell decisions for you. However, investment funds have their advantages and disadvantages.
Advantages:
- Billionaire Warren Buffet showed that passively managed funds could outperform actively managed funds.
- Investment risk is spread throughout investors, which minimizes the risk of losing your money.
- You can always sell your shares and have the money back in your account within seven business days.
Disadvantages:
- Because of the complexity and layered structures, funds are known for hidden fees which can cost up to four times higher than you are told.
- When investing in funds, you can’t control what you are investing in. Instead, your investment manager decides for you.
- Funds are often not sustainable.
Invest in stocks
The stock market has become easier and more effective, especially for small investors, because of the online services (investment platforms) that allow you to buy and sell stocks in different companies.
Investing in stocks enables you to participate in the future of a company’s success. When you buy stocks, you immediately turn into a co-owner of the company. Stock investment comes with its risks and rewards too. You can see the pros and cons of investing in stocks below.
Advantages:
- The average return is 6% per year.
- You can sell your stocks and have the money back in your account within a few days.
- Unlike investing in funds, there are no complexity and layered structures between you and your investment. So when you invest in stocks, you become an owner of the company.
- You can invest in a company and have complete control over your money and the companies you want to support.
Disadvantages:
- The stock value moves up and down daily, and you can lose your money. So try to invest in different stocks to minimize your investment risk.
- There are no guarantees of profits or even that you will get your original investment.
Invest in bonds
Investing in bonds means giving a loan to government bonds which they agree to pay back with a small interest. This type of investment has its advantages and disadvantages too.
Advantages:
- Bonds are steady and have less up and down value movement than the other investments.
- Government bonds are considered a low-risk investment because Switzerland is known for always paying its debts.
Disadvantages:
- You have to invest a significant amount of money in bonds, and they usually take a long time to get back at you.
- Bonds returns are currently very low.
Invest in ETFs (Exchange Traded Funds)
ETFs are a simple way to begin investing. An ETF allows you to buy many stocks or bonds at once. ETFs are similar to investment funds, but they differ in that they are traded on the stock market, so you can sell whenever you want. It is a lower-risk and reward investment than some other investment types. Investing in ETFs also comes with its advantages and disadvantages.
Advantages:
- ETFs are built to have a high level of diversification.
- You own a share in a financial structure.
- ETFs are a lot cheaper than traditional funds.
Disadvantages:
- When investing in ETFs, you cannot control the companies you are going to support with your money.
- At times ETFs turn into complex structures with risks that are difficult to access because fund managers sometimes buy “warrants” and “equity swaps” instead of stocks.
Invest in real estate
As the rent prices in Switzerland are rising every day, many people are considering investing in real estate. Investing in real estate in Switzerland is a very safe investment. Although prices don’t increase dramatically, they don’t crash either. Here are some of the advantages and disadvantages of investing in real estate in Switzerland.
Advantages:
- Although house prices have dropped in the last few years, they are stable for now.
- You can sell your investment within a few months if you find a buyer.
- If you own and live in that real estate, you can save money on rent.
- You can rent it and keep money flowing into your account every month.
Disadvantages:
- Properties in Switzerland are expensive, and a large deposit is required, including real estate transfer tax, marketing costs, and agent’s commission.
- Buying real estate will require a large amount of money, so you won’t be able to make other investments that could help in a real estate crisis.
- The returns may be low and may take a long time to get back to you.
Invest in Cryptocurrency
Many people choose to invest in cryptocurrency, and while many have been successful and earned a lot of money, others have lost their savings. Some of the most popular cryptocurrencies you could invest in are Bitcoin, Ether, XPR, and many others. Here’s more about the pros and cons of investing in cryptocurrency.
Advantages:
- There are few regulatory constraints, so transactions are easy and fast.
- Social, economic, and political instability cannot harm cryptocurrencies.
Disadvantages:
- The cryptocurrency has high volatility.
- Cryptocurrencies don’t have a real return like metals such as gold and silver.
Invest in precious metals
Precious metals such as gold, silver, platinum, and palladium have always been good options to invest in with a low risk of losing money. Gold is a long-standing favorite; it is surprisingly easy to purchase it in Switzerland. For instance, Degussa Goldhandel, a market leader based in Zurich, offers a storefront for walk-in purchases and an online shop. Just like with others, this investment has its advantages and disadvantages too.
If you are looking to buy gold and other precious metals without worrying about home storage, vaulted storage companies like BullionVault are a great option.
Advantages:
- These materials have longevity.
- They have held value throughout history.
Disadvantages:
- You will need to pay to have it insured and stored in a safety deposit box.
When Is the Right Time to Invest in Switzerland?
Before investing, consider what time is right to get started. Sometimes, it is a good idea to wait for the economic situation to change. You can also read about different experts’ opinions that look closely at the market and predict its changes. However, their prognosis can be wrong. Remember the early 2000s when everyone believed Google and Amazon were ‘insecure investments’? Well, anyone who did invest in these companies turned out to be a millionaire 15 years later. So, you can never be sure about the right time to invest; that is why it is advisable to look at the market and analyze it rather than blindly follow the crowd. Also, try to diversify your investments across various companies, and of course, be patient.
Tax on Investments in Switzerland
Before investing in Switzerland, you have to be aware of the tax that comes along with the investment. When investing in property, you expect to pay property taxes which are around 0.1%-0.15% of the property’s value. However, remember that taxes can vary depending on the canton.
Can Foreigners Invest in Switzerland?
Currently, there aren’t any foreign investment controls in Switzerland. Foreigners can invest in certain industries and sectors such as securities, particular banking, and real estate, where approval from the government is required. Other fields of business activities require a license from authorities such as aviation, telecommunications, radio, and television.
How Much Money Do I Need to Invest in Switzerland?
You don’t need to be rich to start investing in Switzerland. When it comes to buying in the stock market, the minimum amount you need starts from CHF 2,000 for stocks. It is a good idea for you not to put all your money in one place though. You should consider investing in different companies, so you have a backup in case of a crisis.
How to Invest Wisely in Switzerland?
If you are new to investing in Switzerland, you might want to consider low-risk investments. You can often lose money by buying and selling stocks, so you must be committed and attentive since different investments come with high risks. Remember: think carefully about the best investment strategies and proceed with caution.
Tips for Investing in Switzerland
If you want to invest in Switzerland, it can be helpful to consult an expert first. You can find an advisor through associations such as the Swiss Association of Independent Financial Advisors (SAIFA) or the Swiss Registered Investment Advisor Association (SRIAA). Websites such as Globaleye, Lazard, and Swiss Life, can also be useful in offering financial advice.
Conclusion
Deciding where to invest your money can be a challenging and even overwhelming task. There are various types of investments that come with their own risks and rewards. So, think carefully about your choices, research the market, and consider taking an expert’s opinion before investing your money in Switzerland. And remember: if you are committed to it, you might just become a millionaire one day.
