Active or passive investments
Today, even small investments in passive funds can be widely diversified on a global scale and invested in line with ESG (environmental, social, governance) criteria. Choose a low-cost passive core, and then only add active satellites if they add value and the board of trustees has sufficient financial expertise to evaluate them. Avoid active funds that deviate only slightly from the index. A fund with a mere 20 percent deviation would need to produce an annual surplus value of 5 percent on its active portion to compensate for fees on the entire fund volume being 1 percent higher.
Bonds: a risk with no chance of returns at present
In the wake of diminishing interest rates, government bonds in Swiss francs generated average returns of 1.2 percent annually over the last decade, thanks to capital gains and initially high coupons. With interest rates currently sitting at ‑0.6 percent, 10-year Swiss government bonds are worth six percent more than they will ever pay back. Zero-risk returns have turned into a risk of zero returns.
Shares: avoid cluster risks
A lot of Swiss companies generate the lion’s share of their turnover abroad. You can use their shares to ensure your investments are globally diversified. As a Swiss charity, you can also reclaim Swiss withholding tax in full (tax withheld on overseas shares quickly eats up 0.5 percent of your returns every year). The heavyweights of Nestlé, Roche and Novartis are to be found in many funds.Avoid cluster risks.
Swiss real estate is highly rated and the rental income is correspondingly low. If possible, only use equity to finance your real estate: the difference between rental income and mortgage interest is at an all-time low.
Gold and silver have been able to maintain their purchasing power for decades, but they have not increased it in real terms. They add a valuable dose of diversity in times of crisis, but mining them has a negative impact on the environment.
In the financial sector, this term does not just refer to environmental investments. It also includes unconventional ones such as private equity, hedge funds and structured products. Avoid them: they often come with high hidden costs and risks.