Investing your money in 2020, yes, but with which products?
Before investing your savings, analyzing the potential investment vehicles, with their strengths and weaknesses, is fundamental.
Discover a list of the different solutions available on the Swiss market for investing. Plenty of ideas for you as a future investor!
Stocks
When you invest in stocks, you hold rights in a company, such as voting rights and profit participation. Generally, stocks are traded on the stock market. Due to their price fluctuations (and the purchase fees they generate), stocks are more suited for long-term investment.
Pros and Cons
While stocks offer an attractive long-term return potential, they are also subject to market fluctuations and risks. It is advisable to carefully diversify your portfolio and avoid excessive risks.
Bonds
Standard bonds are fixed-income securities issued by companies, the state, or banks borrowing money from investors.
The difference compared to stocks, where you invest at the equity level, is that with bonds you invest at the debt level.
Pros and Cons
The bond specifies the amount to be repaid and the date, as well as how much and when the investor will receive interest. This type of security generally has a fixed term during which you receive a fixed or variable interest. With a bond, you hold no ownership stake.
The risk profile remains the same as with a stock since it is the same company. If the company goes bankrupt, you lose everything.
The interest rate at which a bond is issued depends on the capital market situation and the debtor's creditworthiness.
Funds
Funds are investment or collection vehicles created by investment companies and offered on the capital markets.
By purchasing shares, you become a shareholder of the fund.
Fund investments can be in real estate but also in stocks, fixed-income securities, or commodities.
Funds consist of shares of various securities: stocks, bonds, money market instruments and/or derivatives, wine, artworks, truffle trees, etc.
For example, a real estate fund is a collective investment vehicle whose assets consist of real estate, held either directly (through properties) or indirectly (through companies). In other words, the real estate fund is a retail product whose collected funds are invested in property.
Pros and Cons
The popularity and demand for these real estate funds in Switzerland are beginning to reach their limits. The most sought-after funds show agios (purchase premiums) of 100%, i.e., double their net asset value. Such an investment therefore presents a considerable short-term risk and theoretically, it will take many years before an investor can realize a return on their investment.
Investment in Rental Real Estate
With historically low interest rates, buying real estate as an investment offers a profitability in terms of risk/return profile superior to other types of investments.
Pros and Cons
Between regular cash flows and potential capital gains on resale, investing your money in properties that generate rental income is far more advantageous than savings sitting idle in a bank account.
But you must know the real estate market, its mechanisms, and the legal specifics.
Not to mention the rigorous management that a property requires.
Participatory Investment or “Crowdfunding”
Participatory financing is a fundraising tool often operated via an online platform. It allows collective financing, directly and in a traceable manner of tangible assets.
Generally, three main forms of crowdfunding are distinguished: donation (crowd supporting), lending (crowdlending), and investing (crowdinvesting).
When you want to invest, it is called crowdinvesting, participatory financing in exchange for equity participation. A startup or company can raise equity funds on an investment platform.
Crowdfunding is no longer limited today to financing associations, charitable projects, or innovative startups. It now targets more mature and profitable companies. It also extends to all sectors of activity, such as real estate, for example.
Pros and Cons
An investment accessible to everyone that allows you to invest at your discretion in profitable income-generating assets chosen by you, enabling you to build a real estate portfolio.
In Conclusion…
Several investment solutions are possible in Switzerland. They depend on several factors specific to you. But it is essential to take into account the different risks that each solution may entail.
The interest of an investment is that it can generate returns for you in the long term without taking excessive risks.
Make the right choice to offer yourself an investment solution that pays off!
