Switzerland’s banking system has been a type of financial and banking safe haven for centuries upon centuries. They’ve been used by governments, businessmen, tyrants, freedom fighters, terrorists, organized crime lords, tax evaders, and regular investors for the sake of financial safety and stability.
The reasoning for all of this is pretty straightforward: the Swiss government has historically not taken sides and will usually just mind its own business when it comes to dealing with other people from other lands. Plus, they’ve at least traditionally kept their Swiss francs backed by at least 40% gold.
While much of this has drastically changed in the last few years (especially for money laundering and tax evasion), the Swiss franc is still often seen as a currency safehaven, and is a much, much safer currency than the US dollar.
The Swiss Franc: An Inflation Proof Currency?
Unlike the United States and most European governments, the Swiss government often operates their budget with a surplus. They have a way smaller debt-to-GDP ratio than most European country. They typically operate their banking policies with extreme caution, and changing the rules for their central banking system often takes a long time — bringing a certain degree of stability.
Of course, back in 2005, they started selling off gold, and no longer have their franc backed by 40% gold reserves because they’ve decided that it’s no longer necessary. You can read more about their decision to sell gold here.
Still, from a purely comparative standpoint, their currency is almost always much stronger than the Euro and the Dollar… especially in the last 12 months.
Investing in Switzerland
But because there’s no such thing as a sure thing, I won’t come close to saying that you should put your money into Switzerland. Plus, even if it was a sure thing, I still wouldn’t say you should invest in Swiss currencies or investments — simply because no two portfolios for financial situation is the same.
For some, storing emergency funds in Switzerland can be a great idea — for many, if not most, it could be a bad idea. Still, it’s important to look at the options, which is the purpose of this article.
Remember to factor into account how exchange rates can change.
Direct Swiss Investments
Still, if you decide that you want to put part of your portfolio toward the Swiss system, you have basically two options — direct Swiss investments and indirect Swiss investments. I’ll list the direct methods imediately below, and the indirect methods a little lower on this same page.
- Swiss Savings Account. This is a pretty obvious. Find a popular Swiss bank (UBS, most likely) and set up a savings account. If the interest rate is over 1-2% at all, you’re essentially beating inflation with your cash. That’s kind of amazing. Any interest at all with a Swiss franc savings account is incredible compared to US bank account alternatives.
- Swiss “Cash” or Bonds. Owning short-term bonds issued by the national Swiss bank is another way to potentially profit from Swiss cash holdings. These are a little less liquid, but they’re still pretty damn safe as far as bonds go.
Indirect Swiss Investments
- Swiss Franc ETF. This is an extremely interesting idea for people who want the Swiss franc intheir portfolio but don’t want to have to go through the hectic trouble of actually transferring dollars into francs. This is an ETF that tracks the dollar price of the Swiss franc. It’s a great idea if you’re OK with owning ETFs.
- Swiss Bond Funds. This is basically a way to own bonds without directly going and buying them. You can put your money in a bond fund. These often track the bond demand exponentially — so it’ll go up more than the regular bonds and drop harder than the regular bonds. Of course, this is a rough generalization and it depends on the length of the bond, the economic environment, etc.
Of course, there are plenty of other ways to invest directly and indirectly in Switzerland such as with stocks, private equity, real estate, etc. But all of those types of investments aren’t really relevant to an article on the Swiss franc, so I won’t be discussing them.
Should you invest in the Swiss franc or Swish savings or cash? I have no idea — that’s a personal investment call. I have money indirectly in Swiss cash via mutual funds, but I don’t have any directly. It depends on your purpose for your portfolio, the cash, and your goals.
Below, I’ve added a chart regarding inflation for the Swiss franc. This should stay automatically updated, so make sure to click the “like” button on this article or just share it on Facebook so we can focus on writing rather than marketing. I really do appreciate you doing that.
Disclaimer: I don’t directly own any francs or Swiss investments/stocks. I do have money in the Permanent Portfolio Fund which owns substantial portions of gold, silver, and Swiss-oriented cash.
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