Do you want to know how you can invest money so it will grow and multiply in the future?
It doesn’t matter how old you are, how much money you hope to get out of it, or how long you want to invest your money. With the decision to invest your money, you have already taken an important first step. Well done!
You’re probably asking yourself: Where do I start? What are the best tips for investing money safely in Switzerland?
Trying to get an overview of all the different investment options can be overwhelming. And that seems to stop a lot of young people, given the fact that only 10 percent of those between the ages of 18 and 29 are investing in stocks, according to a study by the University of Zurich.
To help you begin, our team has put together our favourite tips on how to invest money in Switzerland. Whether you are thinking you want to invest in funds or real estate, these tips will help you find the strategy (by the way, you can create your own free impact investing strategy right here).
Our 11 tips will also give you advice on how you can invest your money within the level of risk you are comfortable with. And who knows, maybe you’ll discover your passion for investing and become the next Warren Buffet.
Tip 1: Goodbye, savings account: invest money in Switzerland with a good return
Our first tip to invest money in Switzerland is to say goodbye to your bank account – at least, as the place you store your savings!.
This is because as soon as your bank account starts to accumulate more money than you need to pay your bills every month, you lose money through a combination of low interest, fees and inflation.
Nowadays, Swiss banks offer their customers interest rates of around 0.01%. However, prices are rising quicker than that—so the money in your bank account loses value.
Tip 2: Invest money regularly
This suggestion is a great add-on to our first tip. If, at the end of each month, you regularly have money saved in your bank account, why not invest it automatically?
Decide on an amount that gets transferred at the beginning of the month, and set up a standing order where the money moves into an investment each payday. This way, you are not tempted to spend it. You can invest money easily, without needing to actively think about it each month.
Tip 3: Don’t put all your eggs in one basket
We understand that the hardest thing in the beginning is to decide where to invest money. Tip number three will help you with this decision.
In our extensive guide to investing in Switzerland (read more here), we have put together an overview of the different investment forms, so you can easily navigate yourself through the Swiss investment jungle.
Regardless of which option seems right for you, we advise you to diversify your investment. In a nutshell, don’t put all your eggs in one basket! For example, if you choose to invest your money in the stock market, you should buy stocks from companies that operate in different countries and different industries. You could also add bonds to your portfolio.
The reason for diversifying your investment is that you’ll minimise the risk of losing money if a country, industry or type of investment does not perform well.
At Yova, all investment strategies contain around 30-40 different stocks, spread across industries, geographies, currencies, and other factors. Every time you adjust your strategy, the Yova Engine recalculates the portfolio to maintain this level of diversification.
Tip 4: Define your investment horizon
One of the most tried-and-true principles of investing money is also the most simple: the longer you can tie your money to an investment, the better.
It’s important not to treat investing as a way of “getting rich quick”.
To come up with the right investment horizon, you’ll need to understand that each investment depends on three crucial factors: liquidity, return, and security.
While return and security play a major role in the choice of investment, liquidity must be taken into account when it comes to defining the time horizon.
It is important to answer this question honestly. Every investment is affected by fluctuations in the price of the stock or financial instrument, which means that your rate of return varies daily. Remember, having to take out money during a dip in the stock market could lead to a loss.
A long investment horizon goes some way to compensate for these market fluctuations and reduces the risk of losing money. At Yova, we generally recommend investing your money for a minimum time period of five years. This way, you can usually “ride out” any dips in the market and sell your investment once prices have bounced back.
Tip 5: Be aware of hidden fees
Nothing is more annoying than finding out you signed a contract but missed the hidden fees in the fine print.
When investing in funds, people are often surprised by the real cost of their investments. It can turn out to be as much as four times more expensive than you expected.
A further hidden risk can occur when investing in ETFs, as the estimated return often doesn’t include all of the fees. As a consequence, the actual outcome can be lower than expected.
Tip 6: Don’t forget your principles
Nowadays, a lot of investors want to invest money with a clear conscience.
If you care about leading a sustainable lifestyle and taking social responsibility, then your investment should reflect these values, too.
When it comes to sustainable funds, you have to be wary: just because funds say that they are sustainable doesn’t mean that your money will only be invested in responsible companies.
A lot of times the composition of funds is not transparent, so it’s not always clear where exactly you are investing your money and they can sometimes involve certain “unsustainable” companies.
Tip 7: Be careful with investment trends
It is always tempting to follow a recent craze and invest your money in trending companies or cryptocurrencies. But keep in mind that these kinds of investments are very risky and unpredictable as there is a lack of historical experience with them.
At Yova we recommend that you invest your hard-earned money into companies that have already proven themselves instead. If you have enough historical data, it is possible to forecast an approximate return and to calculate the risk for the investment.
Tip 8: Choose the right investment option
Real estate may look like an attractive investment choice. And this might be true for those who put their money into real estate a few years ago and are now enjoying a decent return.
However, the prices for real estate in Switzerland are high, so if you’re looking into it as an investment option, you might end up putting all of your money into one basket, simply because it’s very cash-demanding.
Therefore, we advise that you diversify your investment instead and split it between countries, currencies and other types.
Note: if you are dreaming of owning a house to live in and you have the money to buy, this can still be a prudent investment as you can save money on rent.
Tip 9: Benefit from the rate of return
The magic phrase here is compound interest.
Every investment aims to earn a return after a determined investment period, for example, 5% per year.
At the end of each period, you have two choices: you can either take out the return from your investment or you can reinvest it, adding the return to your initial investment amount.
By reinvesting your money, you’ll benefit from a bigger return after the next investment period and t will begin to grow significantly without you having to invest new money.
That means compound interest works by reinvesting the return from your initial investment into the same portfolio over and over again, growing both the investment amount and the return.
You could look at it like a snowball that is rolling down a hill. It grows with every meter as it collects more snow. The longer you leave the ball rolling, the bigger it will become.
Tip 10: Be patient!
Have you done the first step and invested in your optimal portfolio?!
Congratulations! Now you’ll have to be patient, as it could take some time until you see first results from your investment. Successful investors don’t see investing in the stock market as a 100-meter sprint but rather as a marathon that has to be run slowly but steadily.
Therefore, you shouldn’t expect to make a lot of money on the stock market overnight. It is much more likely that daily fluctuations will make your money grow or shrink by little amounts whereas the expected return will come over a longer period of time.
In the beginning, you’ll find it tempting to check the stock prices every day, but that can be quite stressful. As the course of events can anyway not be altered, we recommend that you relax and invest passively.
Tip 11: Talk about your money
Swiss people have a reputation for being unwilling to talk about money. We think that should change.
You can always write us a message and get advice from our experts if you have questions concerning how to invest money. At Yova, we are happy to give you more tips on investing money in Switzerland and help you find your personal investment strategy.