Currency hedging is expensive in the long term, that is clear. I am not in favour.
The key point to consider is when you have Cash, such as in brokers in a different currency than your home currency. That should be avoided, as it can be good… but in most cases with CHF it will be a disaster.
Hi, just to clarify - do you mean it will be a disaster if you live in Switzerland and hold cash in other currencies (in my case, GBP)?
Yes, but a disaster due to uncertainty. In general, strong currencies tends to get stronger than others, such as GBP. So you better save in CHF than in others. HOWEVER, you never know what can happen with GBP in the next 20 years, or with any FIAT currency in general.
The general recommendation is to hold cash in the currency you need it, otherwise, you are speculating with currencies and their future value.
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Especially, since 2008, the CHF is strong only because people think it’s strong. There are even so many people believing it, that ironically the Swiss National Bank is lead to weaken the CHF massively at each emergence of the crisis. Additionally, the newly created CHF’s are backed by “weak” currencies!..
I would disagree, since 2008 the CHF is strong because EU had a severe Euro crisis, and US took a while coming out of & recovering from its greatest depression in 80 years. CH also mostly has current account surplus with these trading partners and generally low debt in comparison.
That argument would be perfectly valid… if you’d set aside the efforts of the SNB to weaken the currency - that’s precisely what people forget when they sell their euros or their dollars. When you sell your euros, you don’t get necessarily francs that were circulating in the Swiss economy, you’ll likely get francs “printed under the desk”, basically Monopoly bills backed by the euros or dollars you thought and hoped you’d get rid of. The SNB draws to that purpose 4.3 Billion new francs from the magic hat each month on average since 2008.
Thanks again for all the replies!
Re the non stock % of my portfolio, is there a consensus as to invest it in bonds or just hold cash? I will definitely keep some in GBP and CHF cash, but I’m not sure if I should also buy bonds.
If bonds makes sense, then based on the replies here I gather they should be CHF hedged. And that I should avoid Swiss bonds due to the negative interest rate. Any recommendations on the best bonds to look at?
I am already planning to fill the gap on my 2nd pillar as this seems like a safe option with tax benefits.
Cheers
Mark
The question is : what interest rate do you have / could get ? If it is enough, no need to buy bonds. The answer would normally also depend on the investments fees, but you have an IB account so the bonds might make sense for you.
If they’re hedged, you should expect the same (risk adjusted) return as if they were in CHF. Non local bonds add diversification not extra return (which risk-adjusted would be negative).
Interest rate on cash is between 0 and 0.5%, so is basically very little. I was hoping that bonds could offer a better return whilst still minimizing risk.
Sounds pretty high compared to the baseline 
Hi all. I am having the same problem as Spark getting my head round the currency side. Im probably missing something obvious but to give a practical example of one of my investments as of 5 minutes ago.
Today I look at my investment in ishares Core S+P 500 ETF (invested via CornerTrader in USD)
Trade P+L since purchase is +17% +2252 USD (started investing last year)
Then there are some costs to close
Then there is a conversion loss of -1,117 chf
So my P+L Total (inc costs and conversion) as of today is +941 chf
So my investment on a gross basis is in line with the fund performance. But if I sold today, I would get back that performance less chf 1,100 for conversion.
So it seems that FX plays a part in my investments. Or am I missing something.
My point is, I am fine with Investment risk but i don’t like the big gap between the Trade P+L and the Net P+L and the effect of FX.
Help me understand please, sorry, i am new to this investing business 
You bought S&P500 companies. They are in USD. The currency of the ETF doesn’t matter, but the currency of the companies does.
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In IB there’s a settings to show number in base currency Probably cornertrader has that too.
Then you don’t have to think about it.
Yes, that’s correct.
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Ok but that profit of chf 941 is not the ETF performance. That fund is up nearly 20% since I bought it. 941 chf is the ETF performance… less the movement in usd/chf from when I bought it to now.
So I see an FX effect on the performance of my investments.
BTW…I am not arguing that I am right, as there is everyone on here agreeing the other way. Hopefully I am just able to explain why some people struggle to understand it as quickly as the majority.
What you would need to do to get the correct performance is the following (and that’s where it doesn’t matter the ccy you use to buy the etf)
Let’s say your base ccy is chf and you buy an etf in eur that would also be available in chf.
Buy
EUR 1.50 CHF
ETF 10 EUR or 15 CHF
You buy 100 => 1000 EUR or 1500 CHF
So the cost for you should be tracked in your base ccy, 1500 CHF
Sell
EUR 1.20 CHF
ETF 20 EUR or 24 CHF (important, it did double for EUR but not for CHF as the fx between the two changed)
You sell 100 => 2000 EUR or 2400 CHF (which would be exactly the same as if you would have bought the etf in CHF)
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Hi Tarioch
Thanks for taking the trouble to do an example, and I have just one last question
In your example, the price of the ETF doubled (10 to 20)
But in CHF, I spent 1500, and received 2400.
This is not double, due to FX. So if a swiss ETF doubles in value, so does my Swiss Investment. If I buy a foreign investment, I am also exposed to fx movement.
What am I missing. Im sure its obvious.
There is more inflation in the countries whose currency is going down. The nominal gain in currency X is not the real gain of the local investor
A good example is if you look at an etf that is available in different currencies
CHF one
https://www.bloomberg.com/quote/VWRL:SW
EUR one
https://www.bloomberg.com/quote/VWRL:NA
As you can see they seem to have different performance characteristics, but if you overlay the fx over this, it will cancel out (it is in the end the exact same fund that you buy).
Important for you is to always calculate in the currency that is important for you. So if you would buy the EUR one and look at the fx it would result in the same performance curve as the CHF one.