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2020年1月14日 火曜日

A comprehensive guide to investing in Switzerland

This article provides comprehensive insight into investing successfully in Switzerland, and the various options that a potential investor has. The information in this article is provided by Maierna Trustee, our partner in Switzerland, and will cover where to invest money in Switzerland and how to get the best return for foreign and domestic capital. This is a professional take on the current status quo of foreign investment opportunities in Switzerland, as well as an analysis of the pros and cons of the most popular investment methods.

The below summarises the variety of investment options available in Switzerland along with their potential returns and risks:

1. Swiss bonds
Returns: -0.8% to 0.7% (2018) for different bond types; real estate bonds yield up to 3%.
Risks: Bonds are widely considered the safest investment option.

2. Swiss stocks
Returns: Vary widely; Swiss index funds (close to "average" market returns) show between 0.37% and 1.32% annual returns.
Risks: It is advised that nonprofessional Traders do not pick individual stocks.

3. Hedge funds
Returns: Vary widely, not predictable.
Risks: Inadvisable, as the long-term performance of most funds is worse than the average market performance.

4. Direct real estate investments in Switzerland
Returns: 2% to 4% p.a. for mid-market; 10% and higher for luxury properties
Risks: The demand is dependent on nearby factories and offices of large corporations

5. Real estate crowd-financing
Returns: 6% to 17% p.a.; best luxury properties can yield up to 20% when structured right.
Risks: The demand can be dependent on nearby factories and offices of large corporations.

6. Bank deposits in Switzerland
Returns: -0.5% to 0.5% p.a.
Risks: The bank provides no collateral for investors.

7. Robo advisors
Returns: Vary widely, not predictable.
Risks: Specific to the platform and approach.

8. Wealth Management: top family & multifamily offices in Switzerland
Returns: N/A, as usually wealth management companies create custom portfolios for investors that consist of other instruments, covered or not covered in this article.
Risks: Bad management and/or wrong incentives of the manager.

9. Investing in Gold in Switzerland
Returns: N/A, as the only returns that can be made come from the changes in gold's price, which is unpredictable.
Risks: The price is unpredictable.

Most recommended investments in Switzerland
There currently exists a range of investment options. The key to a successful portfolio lies in the careful and thoughtful decision making process that best fits your investment goals, keeping in mind capital, timeframe and potential risks.
Below is an explanation of the major types of investments.

1. Investing in bonds
A bond is a fixed-income security, whereby an entity borrows funds from an investor for a specific time period and promises to return capital at maturity with a fixed or variable interest rate.

Returns: Vary from -0.8% to 0.7% for different bond types; real estate bonds yield up to 3%.
Risks: Bonds are widely considered the safest investment option.

Characteristics of a Bond
● Bonds are usually traded by a corporate entity or a government for a project or a specific purpose.
● Bonds may be traded on exchanges or over-the-counter.
● The parties partaking in the bond investment cycle are referred to as the "Issuer" on one end, and the "Bondholder" or "Creditor" on the other.
● The main body of the bond is referred to as "Bond principal", which is returned upon maturity date at a contractually specified "interest rate" (AKA "coupon rate" and "payment").
● Bonds are issued at face value (e.g., $100 or 1000 CHF) that is termed "par" and the payment is calculated as per fixed interest based on par.
● Coupon Dates are the fixed dates in time whereby payment of interest is made to the Investor by the Issuer until maturity date is reached, up to 30 years. Coupon dates are usually fixed at annual or semi-annual periods.
● The Creditor has no ownership rights arising from the owning of bonds, unlike in the case of stock investments.

Advantages of bond investments
● Low risk - bonds are one of the safest and statistically low-risk investment methods.
● Bondholders' rights are preferred over stockholders' rights - those who own bonds get paid first.
● Readily available information for due diligence on most of the municipality and government bonds in the form of economic forecasts and ratings.

Disadvantages of Bond Investment
• Low returns that accompany the high security of bond investment.
• Brokerage and custody fees can eat out your profit, so they need to be accounted for at an early stage of decision making to provide a feasible comparison between the brokers.

Swiss Bond Investment
Many of the major banks will offer bond investments as part of their services portfolio. This is the time to compare the fees based on your initial investment criteria.

All major banks will trade in bonds.
Here are some of the most innovative and reliable institutions for your consideration:

• Swissquote bank AG
• UBS AG
• Swiss National Bank

Swiss real estate bonds
Some companies offer real estate bonds that pay up to 3% p.a. while keeping your risk at a minimum, as your cash flow is backed by a piece of real estate.

Extra resources for Bond Investments:
● Swiss Government Bond overview by Investing.com
● Major Swiss Stock Exchange SIX Group
● Berne eXchange (BX) the second largest Swiss stock exchange


Investing in Swiss Government Bonds: Interest Rates



2. Investing in stocks

Stocks are a form of investment, whereby an investor gets to own a proportionate share of a company, i.e. its assets and earnings, when buying its shares (AKA stock or equity). 

Returns: Vary widely; Swiss index funds (close to "average" market returns) show between 0.37% and 1.32% annual returns.
Risks: Picking individual stocks is highly not recommended for nonprofessional traders.

Characteristics of a Stock
● An investor in corporate stocks is referred to as a "shareholder".
● Common stock allows its owner to have voting rights and dividends on the company's earnings, and provides ownership rights to a share of the company.
● Preferred stock suggests that a stakeholder will not vote but will have higher dividends as well as ownership rights to a portion of a company.
● Stockbrokers are usually the licensed professionals who are eligible to buy and sell stocks on stock exchange markets. Stocks may be sold OTC (Over-The-Counter) as well as openly on the stock exchange with the latter being easily subjectable todue diligence and the former almost impossible to gauge from this perspective, as private companies have no obligation to disclose their financial information.
● Just as with bonds, there is a primary and secondary market for stocks, primary being the shares issued to the stock exchange in the process of the IPO, when a privately-held company becomes a public one.

Pros of passive stock investment in index funds
If you invest in index funds, you will almost always do better than you would if holding cash. If you consider the stock market in the US, there were only 4 short periods, huge crises, where you would have made more money in the long run if you had stayed in cash.

Cons of passive stock investment in index funds
As the economy moves in cycles, after a bull market always comes a bear market, so even your investments in index funds (i.e. investments in the market overall) can temporarily lose their value. Potential of no returns or even losing it all if a company goes bankrupt.

Investing in Swiss stocks
If using one of Switzerland's EFTs to multiply your capital (investing into ADRs or opting for the most complex way of using one of the 2 stock exchanges direct), Swiss stock is still one of the most trusted options on the investment horizon. Switzerland welcomes domestic and foreign capital alike with foreign direct investment stock in the country amounting to 1 059 777 million USD in 2019.

Useful resources on Stock Investment in Switzerland:
• Investing in Switzerland - brief overview by the balance
• SIX Group: Swiss Indices List


Equity Funds Outperformed by Benchmarks, source: AEI


Switzerland Stock Market Index

3. Hedge Fund investments in Switzerland
Returns: Vary widely, not predictable.
Risks: Highly inadvisable, as most funds perform worse than the average market performance in the long run.

Investing in hedge funds may not be advisable, as it requires larger amounts and has a high threshold to enter in every meaning.
For those completely uninitiated, statistics suggest that most hedge funds cannot beat the market in the long run.

Before investing into a hedge fund, consider the following:

Invest your Money in Gold and Silver
People have been investing in precious metals since ancient times, and this remains popular amongst wealthy individuals looking for protection from inflation, deflation, and hyperinflation.
Gold and silver are widely known as a good option for a safe investment with a relatively low risk of losing money.

Pros:
Longevity:
   Gold and silver have held an underlying value throughout history.
Safety:
   Physical bullion is considered safer than the 'paper market' of gold and silver.

Cons:
Cost:
   Safe storage and insurance costs need to be considered.
No real return:
   Precious metals don't have a real return. They don't create anything new or better. Their return hinges simply on hopes for a price increase.
Impact on people and the planet:
   Mining gold and silver often takes place under conditions that are harmful.

There are therefore a variety of aspects to consider before making an investment in the Swiss market, and we hope that this article helps to make a well informed decision before investing. If you would like assistance on moving forward with and protecting investments, we would be happy to assist you. With our specialist partner, Maierna Trustee in Switzerland, and through our membership of the eurolegal group, we have extensive experience in dealing with complex cross border transactions and are able to provide an exceptional quality of service to our clients dealing with overseas matters.


Kuribayashi Sogo Law Office                 
BUREX Kojimachi Bldg., 501 3-5-2         
Kojimachi, Chiyoda-ku Tokyo                 
102-0083 Japan                                      
TEL:(81) 3-5357-1750                       
FAX: (81) 3-5357-1760                          

Maierna Trustee
Bleicherweg 30,
8002 Zürich
Switzerland
TEL: 0041.44.5862387
FAX: 0041.44.5862014



投稿者 Kuribayashi Sogo Law Office

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