ETF savings plan Switzerland: How to do it right

04.02.2024
Felix Niederer

You shouldn't wait to build up your assets and invest the money you have already saved, after all, the market offers opportunities. But what comes next? Most investors receive a monthly income. This is where the savings plan comes into play.

What is an ETF savings plan?

An ETF savings plan is a way of investing regularly in one or – even better – several exchange-traded funds (ETFs). An ETF is an exchange-traded index fund that tracks a basket of individual securities, e.g. companies from a specific country, various commodities or bonds from a specific currency area.

ETF savings plans are popular with investors as they are low cost, offer broad diversification and can provide a solid return over the long term. However, it is not possible to diversify across multiple asset classes with a single ETF. This is where the ETF portfolio savings plan, as offered by True Wealth, comes into play.

Almost double in 25 years: Due to the compound interest effect, a regular investment of CHF 100 results in an additional return of over CHF 28'000. This calculation example assumes an investment of 100% in stocks and an annual return of 5%.

What are the benefits of a regular investment?

Investors can expect a premium for the risk they take. The longer the investment horizon, the better the risk/return ratio. If you start investing regularly at an early stage, you will also benefit from the compound interest effect.

Capital markets are volatile – and always will be. After market slumps, the value of your previous investments is also estimated to be lower. However, with the lower market valuations after a slump, you receive more real assets with each additional investment, specifically, using shares as an example, more parts of the company and therefore a larger share of future dividends.

And finally: with a savings plan, you don't have to worry about whether it's the right time to invest or whether a better opportunity will come along. And you don't have to worry if the stock markets have risen against your expectations. The savings plan takes the emotion out of investing and ensures maximum participation in the market.

Investing regularly often leads to better results. In this video podcast, True Wealth CEO Felix Niederer explains why. (In Swiss German with English subtitles).

How does the ETF savings plan from True Wealth work?

All you have to do is answer a few questions about your risk tolerance and investment goals and the online wealth manager will do the work for you. It selects the best ETFs for you and manages your portfolio automatically.

With True Wealth, each customer receives an individual ETF portfolio, which can be personalized within the specified risk bandwidths. In order to implement the individual investment strategy, we invest in a handful of carefully selected ETFs. This allows the investment mix to be adjusted in detail, even retrospectively. This would not be possible with a single global equity ETF.

Each time a payment is received, the money is invested directly in the entire portfolio – while maintaining the personal investment strategy. In the fastest possible case, this happens on the same afternoon after receipt of payment, but at the latest within a few working days, depending on the opening hours of the stock exchanges. Our algorithm keeps the investment mix on track at all times: if the price of an asset class falls, the ETFs in that class are bought first.

And we use foreign currency inflows directly whenever possible – we only exchange what cannot be avoided. At True Wealth, each customer receives four accounts in four currencies with a personal IBAN. In addition to the Swiss franc, these are the euro, US dollar and pound sterling. This allows you to deposit your foreign currency holdings free of charge and also set up a savings plan in a foreign currency.

How do I set up a savings plan?

The easiest way to set up an ETF savings plan is in your bank's e-banking. You decide when, how often and how much you want to invest. You can do this with a simple standing order.

If you do not want to set up a standing order and occasionally forget to make a deposit, you can use our deposit reminder by e-mail. You can configure this according to your wishes.

Unlike brokers, we have no minimum transaction fees. You are therefore free to decide whether you want to invest a smaller amount each month or a larger sum each quarter. All trading commissions are included in our management fee of 0.25-0.50%.

As you can see: We make our case for regular investing, but ultimately you remain in control. Just the way you want True Wealth to be.

Are you interested in the topic of one-off deposits vs. standing orders? Read more in our blog "Staggering Investments: Forgoing Returns for a Good Night's Sleep".

Disclaimer: We have taken great care with the content of this article. Nevertheless, we cannot exclude the possibility of errors. The validity of the content is limited to the time of publication.

About the author

author
Felix Niederer

Founder and CEO of True Wealth. After graduating from the Swiss Federal Institute of Technology (ETH) as a physicist, Felix first spent several years in Swiss industry and then four years with a major reinsurance company in portfolio management and risk modeling.

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