Placing your wealth in savings accounts today offers very little, if any, benefit. Indeed, after a steep decline in the returns of various asset classes, investing your capital in the bank long-term now results in losing money rather than making it.
Fortunately, there are other long-term investment solutions. Each has its own advantages, but some are better suited than others to increase the return on your wealth in Switzerland in 2020.
Investing Your Wealth in Financial Assets
Stocks
Stocks are undoubtedly the most well-known assets; they represent shares of a company that can be purchased by investors who believe in the company’s growth potential. These shares can be bought on a stock exchange or over-the-counter, meaning directly between parties. The principle of stocks is that the more demand there is, the higher the price rises; the fewer potential buyers, the more the price falls.
Depending on market fluctuations, stocks can offer high potential gains but also significant financial risks. Indeed, this asset class experiences very high volatility, as evidenced by various stock market crashes. Returns can therefore be very strong at times and low or even negative at others.
Conclusion:
Stocks certainly represent high potential but also significant risk. Therefore, it is strongly advised not to have 100% of your financial assets invested in this asset class, even when diversifying your stock holdings.
Bonds
Bonds are a much safer investment than stocks. Essentially, they represent a loan to a company, which must be repaid with interest. As with most loans, the interest rate and loan duration are set in advance.
The expected return is certainly lower than with stocks, but bonds offer the advantage of being much safer. Indeed, interest payments are not linked to the company’s financial situation. However, in extreme cases where the loan is not repaid, bonds can still result in a loss.
Conclusion:
Bonds provide a certain level of security to the investor. However, with current interest rates being low, the highest-yielding bonds are also the riskiest.
Ensuring a Return on Your Wealth with Real Estate
Although the real estate market experiences fluctuations, it remains an excellent way to invest your financial assets (low volatility for a very attractive return). However, there are three ways to invest in real estate, each with its own advantages and disadvantages.
In Condominium Ownership (PPE)
Investing in Propriété Par Étage (PPE) means acquiring a property to rent out and/or for personal use.
This investment method can be interesting but is particularly demanding. Indeed, it requires some administrative management to be profitable unless you delegate management to an agency.
Moreover, rental risk is high. With only one property, vacancy or unpaid rent can make the investment costly rather than profitable.
Finally, investing in PPE real estate requires a good understanding of the market to avoid mistakes. The characteristics of the property and its environment must be objectively considered to make a sound long-term investment.
In Real Estate Funds
Investing in real estate through a fund allows you to benefit from high security and a minimum return on your wealth. Indeed, this involves placing your money in a common fund that is then invested in various properties.
This requires no management, as everything is handled by the fund, and the investor does not own the real estate directly. Additionally, the entry threshold is accessible, allowing you to keep liquidity to diversify your portfolio.
However, the real estate investment fund (FPI) does not allow the investor to choose the properties invested in. Furthermore, the investor has no information about the properties or their management.
In Crowdfunding
Crowdfunding represents an intermediate solution between the two above. It involves investing collectively in a building without owning one or more apartments outright. Each investor’s share is proportional to their investment.
This way, the investor can choose the property they invest in while benefiting from some security. Rental risk is minimal because it is spread among all owners. Management is handled by a specialized agency that takes care of tenants, maintenance, and administrative tasks. The burden is therefore light for the owner, who still retains the advantage of participating in co-ownership decisions.
The entry point is accessible, as it is possible to become an owner starting from 20,000 CHF. Resale is quick because a waiting list of investors is constantly updated.
Conclusion
Real estate, especially when financed through crowdfunding, is both an interesting and reliable investment. Whether to diversify your portfolio or invest the majority of your wealth, the investor is assured of choosing a reliable and sustainable investment.
Key Takeaways
In any case, to ensure the return on your wealth, it is always more advantageous to diversify your portfolio. With real estate crowdfunding, diversification becomes easier. Indeed, entering the real estate market requires less capital than a traditional investment, allowing better asset allocation. It remains a safe investment that is easy to exit.
