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My bank has announced negative interest rates starting Q1 2016. I have CHF 250'000 in that savings account (Swiss Francs).

Now, pretty much all other banks will probably follow suit soon, if they haven't already. Also, government bonds yield negative interest, on terms up to a 15 years, and 1% at 30 years.

When I invest in foreign stocks or bonds, the problem is unstable exchange rates (Euro & US Dollar) make such an investment a pretty risky thing, especially as the Swiss Franc is too stable, while the Euro is not.

So, if I invest into foreign stocks/bonds, even if get positive results, I run into a grave risk of losing money, in case the Franc appreciates even further, which is very possible if the ECB increases QE (which has been announced).

Tax free, I can only put appx. CHF 7000/year in a pension fund (401k analog). I don't need the money anytime soon, but I would prefer not to have it in a 15+ years bond. I'd prefer having it (more or less) fluid at any time, if possible.

What are my best options to invest that money, so I can make some healthy positive interest on it (or at least no negative interest)?

Preferably without putting everything at the mercy of one stock, and I'm not convinced that funds are a good idea.

  • 31
    Gold is really not a good investment. – Almo Nov 2 '15 at 16:10
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    You're running into a situation into which this was design to have you run. The point of negative interest is to force people out of the "stable" CHF. Unfortunately there's no good solution here. – littleadv Nov 2 '15 at 16:40
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    @publicwireless why on earth would you invest in gold? or silver? What's the point in "average gold to silver ratio"? What utility is in that specific metal? It's a reminiscence of an era long gone, there's no rational justification to investing in "precious" metals. – littleadv Nov 3 '15 at 8:06
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    The OP clearly wants to invest his money, not speculate on precious metals. – Lilienthal Nov 3 '15 at 11:16
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    The truth is, you're still likely saving more with your negative interest than if you had an EUR account with a positive interest (the usual rates are around 0-2% p.a.), simply because of the massive inflationary losses. Today's world is not a good place for saving, sadly :/ We're actually exploring options to save money in swiss banks, despite the negative interest rates. And don't even get me started on real estate - the ads are full of beautiful things like "The higher your loan, the lower your interest!" - the bubble is so ready to burst it barely deserves a comment... – Luaan Nov 4 '15 at 12:53

10 Answers 10

43

I'd prefer having it (more or less) fluent at any time, if possible...

And the Swiss National Bank (SNB) will do their darndest to make this a costly option. That's exactly the point of negative interest rates. They don't want to help you saving money. So you will have to choose what to give up: liquidity, or profitability.

But for now, you still have alternatives. The way you described it one could think that all banks will soon start to charge all their clients. That's just a distortion of facts.

If you are happy with a (close to) 0 income, you might consider opening multiple bank accounts. Many banks charge the negative interest only from certain thresholds (i.e. CHF 100k). Since you're clearly a Swiss resident, that's easy to do for you.

If you don't want to give up making an income, then you have to sacrifice liquidity. There simply aren't any short term (less than 2-3 years) instruments in Swiss Franc that are both safe and yielding a positive income. Which means that you will have to take much more risk then you had with a savings account. Ask your advisor for an investment proposal, but also consider bank independent advisors.

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    I think the opening of 2 extra bank accounts is the easiest and safest method of avoiding negative interest rates. Keeping all that money in actual cash just sounds all together scary and worrisome. – Dean MacGregor Nov 2 '15 at 18:03
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    @Dean MacGregor: I've simplified the situation for clear view in my post. In reality, it's already dispersed on 5 accounts on 3 different banks. So don't worry too much. I'm not storing more than the governmental guarantee for deposits in any of the banks. – Quandary Nov 3 '15 at 6:54
  • @DeanMacGregor Was that meant to be a comment on Dan Neely's answer? Vic doesn't mention physical cash at all. – Lilienthal Nov 3 '15 at 11:19
  • @Lilienthal I think his comment makes perfect sense. It's implicit in my answer that I wouldn't even consider the physical cash solution, he just spelled it out. – vic Nov 3 '15 at 11:27
29

Withdraw your savings as cash and stuff them into your mattress?

Less flippantly, would the fees for a safe deposit box at a bank big enough to hold CHF 250'000 be less than the negative interest rate that you'd be penalized with if you kept your money in a normal account?

  • 18
    This may not have any bearing on the OP's situation, but I was talking about a safe deposit box at a Bank of America branch (in USA), and was told that storing cash in the box was prohibited, so you might want to at least make sure that's not an issue. – JPhi1618 Nov 2 '15 at 16:17
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    Plus, cash in a safe deposit box is subject to seizure (as is anything else in a safe deposit box, for that matter.) If SHTF and you go to retrieve your belongings, and they are missing, what will you do when the bank manager looks at you and shrugs? – MrWonderful Nov 2 '15 at 16:27
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    @MrWonderful who do you think is going to 'seize' the contents of the OP's safe deposit box? – jwg Nov 2 '15 at 16:41
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    I assume things are better in Switzerland but in the US I'd be genuinely afraid of being accused of criminal activity when the time came to put my cash back in the system. – Dean MacGregor Nov 2 '15 at 18:02
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    @DanNeely As for safe deposit boxes, they indeed are still very affordable but you have two main issues. Unless you are fine having rather larger amounts of money at home, you will have to go to your box for every withdrawal, and that's just a huge nuisance. The bigger issue, though, is what Dean mentioned: AML rules became very rigorous in Switzerland over the past few years. Putting cash back on the account, no matter where you held it, will prove to be a huge issue and some might need legal support to solve it. It's just not worth the trouble. – vic Nov 3 '15 at 13:11
10

You obviously pay your taxes in Switzerland and are employed (judging from your comments on your maximum possible contribution to the 3. Säule).

Under these circumstances, your best best may well be to pay into the occupational pension system ("Einkauf in die 2. Säule"). Essentially, you can add funds to your pension plan to match non-existent employer contributions from times you spent studying etc.

The 2. Säule is usually defensively invested in bonds, so it's not a completely secure investment. In addition, it's a pretty fixed investment, since you can only get your money out if you buy a house or leave Switzerland for good. However, your entire payment into the 2. Säule is tax deductible, so the tax effect in itself should be a very attractive bit of "interest".

Your pension plan can inform you about the maximum possible Einkauf.

  • 2
    I'm aware of this option. In fact, if I were certain I would see that money ever again, I'd do precisely that. But I'm not so sure of that, with all the crooks in charge, actually quite the opposite, I don't think I will ever see that money again, even when I don't do a "Einkauf". Additionally, didn't they recently take "buy a house" out of that ? Or at least talk about it ? Additionally, there's no guarantee you'll ever reach pension age alive (might well be 70 by the time that it's my time). Nah, summa summarum far too risky, and too many question marks (like not being able to get it out)... – Quandary Nov 3 '15 at 6:16
6

In Switzerland you should have access to many brokers with fair rates, e.g. Interactive Brokers.

Going through them you then put the money in various Swiss stocks like Roche, Novartis, Swisscom, Credit Suisse, Logitech, etc. No stock should be more than 10% of the total.

Since you pay 0% taxes on investment profits, you really should invest.

By going through a broker instead of your bank, you can cash out at any time without losing outrageous fees for the stock commissions (often 2% for banks, around 0% for brokers).

If you're employed you can also ask your employer to increase the amount of your salary that goes to the pension (2. Säule), which is not limited like the 7000 you mentioned (3.Säule).

  • 1
    If I was you, I wouldn't put 5 cents on any of these, Roche excepted. Credit Suisse and Swisscom is a horrible idea by the way. But thanks for the broker tip. – Quandary Nov 3 '15 at 6:44
  • Can't say anything about the stock picks, but note also that there is no need to put all the money in stocks. One could put e.g. 25% or 50% in stocks, and in good times the yields would offset the negative interest of the rest remaining in bank account. – jpa Nov 3 '15 at 6:48
  • @Quandary That's the advantage of buying stocks instead of funds. You can use your personal opinion to decide which stocks to buy. – Peter Nov 4 '15 at 8:30
4

The problem is that every option comes with risk - as you note, if you put money in stocks, you could lose (and many stocks are overpriced). If you put money in bonds, you could lose (many bonds are overpriced). If you buy precious metals, they could fall further currently. If you hold cash, central banks might try to ban cash (we'll hear the typical "This will never happen" from financial advisers - and they'll be wrong). Cryptocurrencies are an option, but boy do they fluctuate, so there's risk here too.

Those are options and all come with risks, and here's my preferred approach to handling negative interest rates:

  • I agree with people who say that precious metals are a very bad investment choice; look at their record right now.
  • Make a list of everything that I expect that I'll need for the next thirty years that doesn't expire. Buy a 25 year supply of it. This still comes with risk of loss, like theft, so be aware of the possible downsides.
  • Make a list of trade-able goods that I think are under priced, and this helps if I know the market. Think of something simple like baseball cards; there are kids who make hundreds from these because they know the market well.
  • Invest money in a community. Think of taking friends and colleagues to dinner, lunch, you name it. Invest some money organizing groups that strengthen your community. This will pay dividends not only financially, but physical, social and mental health. You lose money investing in community and you gain so many benefits.
  • Consider "insurance shorts" such as betting against something that you think may not do well with a small fraction of your money that you're willing to lose, like only 1000 Francs. Expect to lose it, but if you're right, it might help you earn multiples.
  • There is one logical error in your post. Bond prices always reflect the relationship of current interest rates and the risk of issuer bankruptcy. The latter cannot be less than 0. Therefore bonds can hardly be overpriced (unlike equities). So, if you truly believe in further QEs or other measures to cut interest rates, bonds will be the best performing asset class. That's not an opinion, that's how it works. – vic Nov 5 '15 at 9:40
  • @vic K bruh. If you can't imagine the scenario that I'm referring to, you really don't know what you're talking about. – DoubleVu Nov 5 '15 at 15:11
2

This does not really fit your liquidity requirement but consider buying a one or two room apartment to rent out with part of your savings. You will get income from it and small apartments sell quickly if you do need the money. This will help offset the negative interest from the rest. One downside is that other people have the same idea at the moment and the real estate prices are inflated somewhat.

  • 7
    A one or two room apartment with "part of your savings"? Have you checked real estate prices in Switzerland lately? I'm not sure he could buy something even if he invested the whole amount. And "somewhat inflated" seems a very modest description of the current situation. Rental yields are around and even below 2%. What do you think will happen to the value of your property once interest rates start to rise? If you want to buy to save on rental cost, fine. But buying as an investment at this time is just ludicrous. – vic Nov 3 '15 at 14:32
  • @vic: I completely agree. However, a one or two room apartment is well in range with my savings; Using the 20% minimum capital rule, I could buy something as expensive as 1'000'000 CHF. However, using the interests should not exceed 1/3 of your salary rule, I'd say CHF 600'000 is more realistic at this time. With that you can surely buy a one or two room appartment (though not in the center of Zurich, of course). But an appartment will be far harder to re-sell (without loss) than a house, especially if interests rise again. You can buy a older one starting from 270'000. – Quandary Nov 12 '15 at 14:05
1

How about placing the money in a safety deposit box at the same bank? This will probably work out cheaper than the loss due to negative rates.

Although, I'm quite sure the banks won't like this idea.

0

You might want to talk with your financial planner about any or all of the following:

  • Permanent life insurance
    • Whole Life Insurance
    • Universal Life Insurance

as well as

  • Annuities
    • Fixed
    • Variable
    • Equity-indexed

Some of these offer the guarantee of a minimal amount of interest, as well as the ability to take a loan out against the cash value, without lapsing the policy. They may also offer certain tax advantages depending upon your jurisdiction and situation.

  • 2
    As my great-grandmother (born 1897) always said: life insurance is the safest way to guarantee you die early ;) And the more things change, the more they stay the same. So - a no no no no no no no no no to that. – Quandary Nov 3 '15 at 6:34
0

First off, the answer to your question is something EVERYONE would like to know. There are fund managers at Fidelity who will a pay $100 million fee to someone who can tell them a "safe" way to earn interest.

The first thing to decide, is do you want to save money, or invest money. If you just want to save your money, you can keep it in cash, certificates of deposit or gold. Each has its advantages and disadvantages. For example, gold tends to hold its value over time and will always have value. Even if Russia invades Switzerland and the Swiss Franc becomes worthless, your gold will still be useful and spendable. As Alan Greenspan famously wrote long ago, "Gold is always accepted."

If you want to invest money and make it grow, yet still have the money "fluent" which I assume means liquid, your main option is a major equity, since those can be readily bought and sold. I know in your question you are reluctant to put your money at the "mercy" of one stock, but the criteria you have listed match up with an equity investment, so if you want to meet your goals, you are going to have to come to terms with your fears and buy a stock.

Find a good blue chip stock that is in an industry with positive prospects. Stay away from stuff that is sexy or hyped. Focus on just one stock--that way you can research it to death. The better you understand what you are buying, the greater the chance of success. Zurich Financial Services is a very solid company right now in a nice, boring, highly profitable business. Might fit your needs perfectly. They were founded in 1872, one of the safest equities you will find. Nestle is another option. Roche is another. If you want something a little more risky consider Georg Fischer.

Anyway, what I can tell you, is that your goals match up with a blue chip equity as the logical type of investment.


Note on Diversification

Many financial advisors will advise you to "diversify", for example, by investing in many stocks instead of just one, or even by buying funds that are invested in hundreds of stocks, or indexes that are invested in the whole market. I disagree with this philosophy.

Would you go into a casino and divide your money, putting a small portion on each game? No, it is a bad idea because most of the games have poor returns. Yet, that is exactly what you do when you diversify. It is a false sense of safety. The proper thing to do is exactly what you would do if forced to bet in casino: find the game with the best return, get as good as you can at that game, and play just that one game. That is the proper and smart thing to do.

  • Your assortment of stocks sounds more reasonable than that of Peter. Georg Fischer is probably exporting a lot, so with a strong Franc, might not be the best of ideas. I have been thinking about this option as well. It seems to be the most reasonable in my opinion. – Quandary Nov 3 '15 at 6:38
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    @Tyler "Focus on just one stock--that way you can research it to death." Wow, that is just about the worst advice I've ever read here. Ever heard of a little thing called bulk risk? Quandary, Trust me, that's the least reasonable thing you could do. – vic Nov 3 '15 at 9:10
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    @vic: I skipped reading that part. I meant investing into an assortment of already long-lived "blue chips". Otherwise, you're right, all assets on one card is a terrible idea. – Quandary Nov 3 '15 at 10:50
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    The problem with any of those stocks is that no matter how much research you do, you can't predict things like the VW "defeat device" scandal. Choosing several of them because they're safe (like @vic suggests) is reasonable. Choosing one because you think you know everything there is to know about it... bad idea. – Bobson Nov 3 '15 at 18:10
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    The casino analogy only works with negative sum games, the more low value games you play the closer your results will be to the "odds" of the game. For casino games those odds are almost always less than 100%, often around 80% so the "average player" will keep 80% of the money they use each game. Investments should (hopefully) be a positive sum game, so the average investor makes money, so assuming the "average investor" ends the year with 105% of what he started with diversification will ensure you get closer to 105%, not much more or less. Lack of means you make an unpredictable %. – Vality Nov 4 '15 at 15:29
0

You could buy Bitcoins.
They are even more deflationary than Swiss Francs.
But the exchange rate is currently high, and so is the risk in case of volatility.
So maybe buy an AltCoin instead.

  • LiteCoin
  • Ethereum
  • Ripple
  • Monero
  • Dodgecoin
  • Peercoin
  • Namecoin
  • Auroracoin

See altcoin market capitalization for more information.
Basically, all you'd be doing is changing SwissFrancs into Bitcoin/AltCoin.
You don't need a bank to store it. You don't need to stockpile cash at home.
Stays liquid, there's no stock portfolio (albeit a coin portfolio), unlike in stocks there are no noteworthy buy and sell commissions, and the central bank can't just change the bills as in classic-cash-currency.

The only risk is volatility in the coin market, which is not necessarely a small risk.

Should coins have been going down, then for as long as you don't need that money and keep some for everyday&emergency use on a bank account, you can just wait until said coins re-climb - volatility goes both ways after all.

  • Why would you expect any of these other coins to have stable pricing. Do you really think there's that much demand for random crypto currencies? – NL - Apologize to Monica Jun 8 '17 at 8:36
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    @Nathan L: I don't. But Bitcoin looks like it is currently near to a local maximum. In order to minimize risks, you don't want to buy coins that look like they are currently near a local maximum. – User1 Jun 8 '17 at 9:31

protected by NL - Apologize to Monica Jun 8 '17 at 8:35

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