Question to everybody:
As swiss investors, so somehow tied to the CHF currency, how do you go about swiss bonds?
Obviously one wants bond to counter volatility, which means you want them in CHF. But swiss bonds have at the moment bad yield, which makes them a difficult investment, and indeed in the last months they have done nothing but go down.
So, what is your alternative (if any) or your course of action in this case?
The negative interest rate environment is creating a brave new world with all new issues.
If bonds are less attractive than cash you should just keep it in cash. Conventional wisdom dictates that bonds should be better than cash but, well, these arenít conventional times.
You could look for bonds in another currency and then buy something like a currency option to cover the currency risk. But COPT (currency options) are usually not available (or expensive) for a retail client.
Since you are asking about cash or bonds in CHF I am assuming you are planning to stay in Switzerland for the next few years.
Some out of the box ideas to put your CHF cash at work.Stock up on non-perishables
. The negative interest rate environment is making this A LOT more interesting.
Example: 10.000 CHF ins saving account or bonds giving you close to 0% interest is after three years still worth around 10.000 CHF.
Buying 10.000 CHF in non perishables (yes, you now enter the totally ridiculous world of buying three years of toilet paper or tooth paste) at a 10% discount (and big volume or making a trip over the boarder to get the stuff cheaper can get you this discount) is actually giving you around 3% return per year on your money. When bonds or saving account rates used to be around 2% it wasnít really worth the hassle but now that interest rates are 0 or negative, well itís a brand new world Ö
The only issue is: you can only do it for non-perishables that do not increase your consumption of them (I could stock up on cans of coca-cola for a year at a nice discount, but that would only increase me drinking coca-cola and completely killing the savings). Buying big volumes of tooth paste or washing machine products or shower gels is not going to have me use more of it. These limitations make it only usefull for about 15.000 CHF max (I would not advise in stocking up for more than three years, who knows what interest rates will be like in three years).
These savings are of course just going to make the problem worse and give you more cash in CHF to invest, three years down the line. But stocking up can give you around 3% return on your money for an amount up to 15.000 CHF.
- Interest rates could start going higher, but I do not see them go higher than 3% in the next three years (hence the limit on the years to stock up)
- Products could become cheaper if we would get hit by deflation. But price decreases of more than 3% per year? Governments are going to do all they can to avoid that. (the limit on the years to stock up also help for this, just do not stock up anymore if you think there is a serious change of deflation)
- You are going to have to put some time and effort in it
- You need space to stock it all (although you would be amazed at how little space a couple of thousand euroís of washing and shower products take up)
- Your stock could get damaged destroying more value than your savings (hence the choice of non perishables)Solar panels
may or may not be attractive. It is investing CHF now to avoid having to pay future CHF. In Belgium I do not find them attractive, liking stock investments better (we have a few decent companies paying out around 3% dividends each year so they have my preference). I do not know what the Swiss situations is there. Giving the fast evolving possibilities (and government rules) in this field, I personally want a decent return before committing the 5.000 to 10.000 euro it takes for an average installation. And at the moment, in Belgium, you are not getting that (in Swiss, it might be different).Home isolation
can produce nice savings: wall and roof isolation is not very expensive and will get you nice savings in heating costs (again spending CHF now to avoid having to spend future CHF). Our roof isolation cost around 400 euro, an amount we made back in less than 2 years in the reduction of our gas bill.
The issue with all these things is, you are spending it now to get savings in the future and those savings give you a nice Ďreturní on the spend money but the amount you can spend in this manner is limited and will provide you with more CHF cash in the future.