As soon as you want a return on your money, you are exposed to a more or less high risk – security also has a price.
Published: 01/18/2021, 5:30 am—
Because of the record-low interest rates, it is hardly possible to generate decent returns on bonds.
Illustration: Christina Baeriswyl
Some time ago it was read that Postfinance intends to levy negative interest from smaller amounts. Since I have a mortgage and a savings account with the ZKB, I turned to this bank. She suggests the Swisscanto (CH) Portfolio Fund Balance AA CHF or the Swisscanto (CH) Portfolio Fund Select AA CHF. Do these suggestions make sense? Are there any other options? FS reader question
The Swisscanto (CH) Portfolio Fund Balance AA CHF proposed to you by your bank offers you broad diversification and, in fact, small-scale asset management. The fund invests worldwide in bonds, shares and other investments. A minimum of 30 percent and a maximum of 70 percent of the capital is invested in bonds or comparable paper and at least 20 percent and a maximum of 65 percent globally in shares. The fund management company therefore has some leeway. With this vehicle, you primarily rely on bonds that are generally less volatile, but at the same time benefit from stocks that promise higher returns in the long term.
The problem right now is that because of the record-low interest rates on bonds, decent returns are hardly possible anymore. The Swiss government bond yield is even negative. If you forego stocks entirely for security reasons, it will be difficult for you to generate any return at all right now.
“Very safe investments like the aforementioned Swiss franc bonds from first-class borrowers hardly generate any returns.”
The second proposed fund is set up similarly. However, the Swisscanto (CH) Portfolio Fund Select AA CHF relies even more strongly on bonds with a range of at least 65 percent and at most 90 percent and only to a small extent on shares. With a total expense ratio of 1.26 percent, this is a little cheaper than the first with 1.46 percent. These fees reduce your return on investment. However, both funds offer you regular, albeit very low, income. However, you have to accept more or less strong price fluctuations with both vehicles. If you are only interested in the returns anyway and simply leave the funds for several years, the price fluctuations play less of a role. But you have to have the nerve to do it or simply ignore the exchange rate fluctuations.
Swiss dividend pearls as a possible alternative
If you can really do that, you could also invest in Swiss dividend pearls like Nestlé, Swiss Re, Zurich Insurance, Swiss Life, Swisscom, Roche and Novartis. These bring a far higher dividend yield of around two to five percent per year. However, this is never guaranteed and you would be exposed to far greater price fluctuations than with the funds mentioned and would have significantly less diversification, since you only bet on a few stocks.
If a high level of security is important to you and you cannot live with exchange rate fluctuations, this is probably not an alternative. Very safe investments such as the aforementioned Swiss franc bonds from first-class borrowers or the medium-term bonds that were popular in the past hardly generate any returns or you have to choose long terms. At Cembra Money Bank, for example, you will receive at least 0.8 percent per year on the medium-term note with a term of eight years and are not exposed to any fluctuations in exchange rates. However, you are then bound for eight years. There is no return without risk or other disadvantages.