Fund savings plan
When is a fund savings plan sensible, what should be considered?
A fund savings plan combines the benefits of a savings account with the return opportunities of financial markets for you. However, it’s also important to pay attention to costs and fees here. We have outlined the most important aspects for you in a comparison.
Contents
- The most important points in brief
- What is a fund savings plan?
- How does a fund savings plan work?
- Difference between a savings account and a fund savings plan
- Comparison of a fund savings plan and a savings account
- When is a fund savings plan sensible?
- What is the average cost effect?
- Regular deposits or investing all at once?
- How much interest (return) does a fund savings plan yield?
- Small deposits with significant impact
- Which investment fund is suitable for my fund savings plan?
- What are the costs of a fund savings plan?
- Best fund savings plan in Switzerland
- How do you find the most affordable fund savings plan?
The most important points in brief
- A fund savings plan helps you invest even small savings amounts in funds.
- Returns of 4% to 7% are realistic.
- When choosing a provider, pay attention to fees; 1% is clearly too expensive.
- Simple and transparent investment solutions are preferable.
- Depositing 250 Swiss francs monthly results in over CHF 40,000 after 10 years.
What is a fund savings plan?
With a fund savings plan, you can start investing with small amounts. Instead of letting your savings sit in your account (earning zero interest), you can invest in the financial market this way. And benefit from attractive long-term returns. The investment is made through an investment fund. An investment fund is a collective investment that pools funds from many investors to invest them collectively in the financial or capital markets.
Additionally, the fund savings plan is also very suitable if you want to invest additional funds regularly and systematically. This applies especially to smaller amounts, ranging from a few hundred to a few thousand Swiss francs.
How does a fund savings plan work?
First, you decide on your preferred provider, usually a bank or a wealth manager. Then, you open an account there. Make sure to prioritize transparency and fees when making your choice. After opening the account, which ideally can be done online, you select the investment strategy that suits you. Now you’re ready to make the first deposit. Once the transfer is received in the fund account, it will be invested according to the investment strategy you chose.
When selecting the investment strategy, the provider may offer you the option to adopt their investment funds tailored to your risk tolerance. Sometimes, you may also have the option to select your own investment funds. If you are investing in the financial market for the first time or have little interest in investment funds, it’s advisable to adopt the suggested funds. However, also pay attention to the costs in this case.
Difference between a savings account and a fund savings plan
With a savings account, your saved money practically sits idle on the account, earning minimal interest. It’s quite different with a fund savings plan. Here, your wealth is invested in the financial market and benefits from potentially higher long-term returns.
Both options offer excellent liquidity. With a savings account, you can easily make withdrawals at the bank counter or through an ATM. Or you can initiate a transfer to another account.
Fund savings plans and savings accounts also differ in terms of volatility. Volatility refers to the fluctuation in value. Savings accounts do not experience volatility. With a fund savings plan, the value of your savings changes according to the fluctuations in the chosen investment funds. In general, the higher the proportion of stocks, the greater the volatility. However, this also means potentially higher long-term wealth growth.
Comparison of a fund savings plan and a savings account
| Savings Account | Fund Savings Plan | |
| Value fluctuations | No Account balance remains constant | Yes The higher the equity allocation, the higher the value fluctuations |
| Liquidity | Yes Anytime for smaller amounts. For amounts above a few tens of thousands of francs, usually three to six months notice periods apply | Yes Anytime and fully at the current market value |
| Direct Costs | Yes As part of a banking package, a monthly account maintenance fee may apply. Usually around 5-15 francs | Yes On one hand, any account maintenance fees of the base account. Additionally, the fee of asset management and possibly issuance commissions of the investment funds. |
| Inflation Protection | No Inflation reduces the purchasing power of your savings | Yes In moderate inflation, stock investments provide conditional inflation protection |
| Appreciation | No As long as there is a negative or zero interest rate environment, there is no appreciation | Yes Depending on the chosen investment strategy, realistically 4-10% per year |
When is a fund savings plan sensible?
If you’re starting to save and regularly set aside additional funds, and you want your savings to work for you, then a fund savings plan is right for you.
A fund savings plan is also the perfect solution for your godchild or, of course, for your own offspring. A fund savings plan is an excellent choice as a godparent account because you’re saving money for your godchild over the long term.
A fund savings plan also makes sense if you don’t want to deal with stock market prices on a daily basis.
Additionally, you benefit from the average cost effect when regularly depositing into your fund savings plan.
What is the average cost effect?
There will always be times when the prices of your investments in the financial market both rise and fall. Additionally, no one always knows the right time to make an investment. When you regularly and consistently contribute to your fund savings plan, the average cost effect comes into play. One deposit of 500 Swiss francs occurs when the prices of the fund units are at historically high levels. For the fixed 500 Swiss francs, for example, you get 5 units. The next deposit of your 500 Swiss francs happens when the prices per fund unit have just experienced a temporary decline of 10%. So now you get 5.5 units for your 500 Swiss francs.
Therefore, with regular contributions, you no longer have to guess whether the financial markets are currently at a high or low. When prices are high, you automatically buy fewer units, but when prices are low, you get more. This smoothens out the average cost of acquisition.
Regular deposits or investing all at once?
Regular contributions within a fund savings plan help your investment portfolio grow into a substantial sum over the long term, even if you start with little money and a small amount. However, regularly investing smaller amounts also means you can start investing earlier. The earlier you start, the more you benefit from the long-term growth potential of financial markets and thus from the compounding effect.
How much interest (return) does a fund savings plan yield?
The interest rates, termed as returns in fund investments, vary depending on the fund or strategy you have chosen. The higher the equity component of your strategy, the higher the expected long-term return. In this table, along with further details provided here, you will find an overview of the returns of the strategies/investment solutions offered by findependent.
If you want to perform calculations yourself and incorporate your personal situation, feel free to play around with our return calculator:
Small deposits with significant impact
Even seemingly small contributions to your fund savings plan can, if made regularly and over the long term, grow into a substantial fortune. For example, with a monthly investment of 90 Swiss francs over a period of 10 years, you could accumulate around 15,000 Swiss francs. Investing 250 Swiss francs per month over 15 years could result in over 70,000 Swiss francs. And with a monthly deposit of 500 Swiss francs for 25 years, the wealth could grow to well over 300,000 Swiss francs.
Asset development with monthly deposits:
| Monthly Deposit | Investment Duration 10 Years | Investment Duration 15 Years | Investment Duration 25 Years |
| CHF 90 | 15’174 | 26’039 | 58’797 |
| CHF 250 | 40’631 | 70’345 | 159’936 |
| CHF 500 | 80’408 | 139’574 | 317’966 |
| CHF 750 | 120’184 | 208’803 | 475’995 |
The displayed returns are based on an annual return of 5.5% (net) with an initial capital of CHF 500 and with advance payments.
Small deposits with significant impact
Even seemingly small contributions to your fund savings plan can, if made regularly and over the long term, grow into a substantial fortune. For example, with a monthly investment of 90 Swiss francs over a period of 10 years, you could accumulate around 15,000 Swiss francs. Investing 250 Swiss francs per month over 15 years could result in over 70,000 Swiss francs. And with a monthly deposit of 500 Swiss francs for 25 years, the wealth could grow to well over 300,000 Swiss francs.
Asset development with monthly deposits:
| Monthly Deposit | Investment Duration 10 Years |
| CHF 90 | 15’174 |
| CHF 250 | 40’631 |
| CHF 500 | 80’408 |
| CHF 750 | 120’184 |
| Monthly Deposit | Investment Duration 15 Years |
| CHF 90 | 26’039 |
| CHF 250 | 70’345 |
| CHF 500 | 139’574 |
| CHF 750 | 208’803 |
| Monthly Deposit | Investment Duration 25 Years |
| CHF 90 | 58’797 |
| CHF 250 | 159’936 |
| CHF 500 | 317’966 |
| CHF 750 | 475’995 |
The displayed returns are based on an annual return of 5.5% (net) with an initial capital of CHF 500 and with advance payments.
Which investment fund is suitable for my fund savings plan?
In principle, most types of investment funds are suitable for your fund savings plan. It could therefore also be called an investment fund savings plan. However, the term is a bit cumbersome. Equity funds, bond funds, money market funds, investment strategy funds, all are generally possible. Unfortunately, banks often restrict the selection from the range of funds and sometimes only offer internally managed strategy funds. The latter often have high to very high management fees. In contrast, index funds and exchange-traded funds (ETFs) can score with very low annual management fees. Therefore, you should look for a provider for your fund savings plan that also allows you to choose from cost-effective index funds or even ETFs.
What are the costs of a fund savings plan?
In addition to annual management fees, investing in funds in Switzerland incurs costs in the form of custody fees (also annual) and stamp duties (with each transaction). Additionally, some providers charge entry fees for investment. However, there are no entry fees for ETFs. The fees for managing a fund savings plan with passive funds (ETFs) should be between 0.5% and 0.8%. Custody fees range from 0.1% to 0.3% and are already included in the management fee with attractive providers. Unfortunately, it is still the case that many banks use fund savings plans to sell investment funds (which are pro forma actively managed) with excessive fees. Anything over 1% is rather expensive and should be avoided.
The independent comparison portal moneyland.ch found that digital investment apps are significantly cheaper than traditional asset managers. You can find the entire study here.
Best fund savings plan in Switzerland
From an investor’s perspective, you should therefore not (only) focus on historical returns. Because past performance is not a guarantee of future results. The level of annual management fees also plays an important role. In addition, providers that offer low minimum investment amounts and thus make it easier for you to get started are suitable. Good to know: At findependent, you can start with as little as 500 Swiss francs. In addition, there are no management and custody fees for the first 2,000 Swiss francs invested. And that’s for life!
Digital account opening – register without any paperwork in around 15 minutes and free of charge.
