I’d consider Structured products (from Swissquote for example): Some products guarantee to return capital if markets go down with potential for upside
Guarantee is only as good as the issuer: if SQ bank go bust you lose your money
I am personally using crowdlending with foxstone.ch
Return 5-6% with a duration of 12-36 months.
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minus 35% dividend taxes, but yes.
I agree with you. The throw it all in is usually said by very seasoned investors or very naive.
It is not appropriate for most investors who cannot take the psychological stress and risk is also not suitable.
And the worst outcome is not that they just take a hit on their investments, panic and sell at a loss, but that the whole bad experience puts them off investing for a long time.
Actually, given the high valuations, the long easy bull markets of the last few years and the potential challenges ahead, we could be in for a huge drop which gets worse as newer investors face fear for the first time and panic sell en masse.
For a nervous and new investor, I’d probably go with investing in very short term T-bills. You get paid 5% and you can gradually drip feed into stocks as confidence grows.
Ah. I just joined the forum. Back in April I would have told you to stick it in NVDA 
I guess now you could put it in T-bills and get over 5% and take the FX risk on top.
Hi Phil,
I understand you are from finance/investment world, thus two questions on your T-Bills suggestion:
- Why do you suggest USD product? Some say USD might continue depreciate vs CHF. I personally think SNB would never allow CHF to be too strong (eg 1.3 and above) against USD due to export, etc. Would you second that?
- Are T-Bills issues at discount tax free as per CH law? Seems so, but still not 100% sure.
And how would it change if you sell them just before the maturity instead of letting them expire 
.
Because OP talks about USD investments.
If I could predict FX movements with accuracy, I wouldn’t need to have a job!
I would assume that they are taxable.
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The market expects CHF to strengthen vs USD as implied by the difference in interest rates. Interest rate parity theory.
Otherwise it would be possible to borrow in CHF and invest in USD to make profit (carry trade)
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Do you think it is impossible to make money from carry trades?
that reminds me of
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Short JCBs were the traditional widow-maker trade - though it seems like finally it might come good. The demise of the dollar has long been touted but has so far failed to pass. Though the outrageous monetary expansion post-GFC and post-Covid might mean things are different this time. I wouldn’t stake my life on it though!
No. But the current market price is the equilibrium set by all the different participants in the market.
If you are confident you have superior knowledge than the rest of the market including big financial institutions, hedge funds and FX traders you should go ahead and make a carry trade.
If your argument is:
Premise 1: The market expects CHF to strengthen vs USD as implied by the
difference in interest rates. Interest rate parity theory.
Premise 2: It is impossible to borrow in CHF and invest in USD to make profit (carry trade)
Conclusion: CHF cannot weaken because you could borrow in CHF and invest in USD to make a profit
Then your logical argument is broken as your premise #2 is false. If you’re trying to make a different argument, it might help to re-state it as it is currently doesn’t make sense.
That is not my argument. I answered above that no, this is not impossible
What is your argument then and what has it got to do with the carry trade?
Article: what is interest rate parity
"…
- Interest rate parity means that it doesn’t matter whether a person invests money in their home country and then converts those earnings to another currency, or converts the money first and invests the money overseas. The investor makes the same amount of money either way.
- Without interest rate parity, banks could exploit differences in currency rates to make easy money." (carry trade)
CHF just dropped substantially vs USD today and has been trending down from 1.16 in mid-July to 1.10 today.
Personally, I’m positioned for continued weakness in CHF vs USD in the near term.
If USD/CHF reaches or nears parity, I will bring a chunk of USD back into CHF. Below 1.08 will be when I start to drip feed back into CHF.
Longer term, I see weakness for USD as the economy is going in a hole and the US will need to borrow a lot to stimulate the economy and pay for everything. On the flip side, it might get more affordable as I would expect US interest rates to collapse and inflation will rear its ugly head again.
I flipped about half my stock portfolio into USD bonds so quite exposed to FX movements.
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Had to dig bit more and it seems both coupon/interest (applicable to regular bonds) or capital gain after redemption (applicable to regular and 0 coupon bonds) is taxable as income. Not very attractive after all due to marginal rate for most. Probably better to go to preferred shares where you can reclaim half of the divident tax.
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Yes, income is of course not tax efficient compared to capital gains. In my case it will hopefully be a temporary measure and I neutralize the tax by contributing all the income back into the pension scheme.
I’m not a big fan of preferred due to the typical lack of liquidity. I find them to be the worst of both worlds.