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Index Funds Switzerland: Instructions & Index Funds vs. ETF Differences
Index funds offer a simple and effective way to invest in the broad stock market to invest. By buying shares in a fund that tracks a certain index, you can Taking advantage of diversification and professional managementwithout having to select individual shares.
In this guide you will learn, what index funds are and how they work. You will also find a guide on how to Buy index funds at DeGiro and Swissquote can.
Table of contents
What are index funds: Index funds meaning
Index funds are a type of investment fund that allow you to buy shares in a basket of securities such as shares, bonds and other assets. Index funds form the Performance of a Index which is usually made up of hundreds or thousands of different securities.
They offer you Access to diversified portfolios with (partly) low costs and Minimum administrative burden on your part. Index funds are a good way to build wealth without having to go to the trouble of researching and selecting individual stocks.
The most important features of index funds in brief:
- Availability: Unlike ETFs, index funds cannot be traded at any time via stock exchanges, but only once a day directly with the fund provider.
- Value for money: The average management costs of index funds are around 0.37 % (from Schwiizerfranke consideration of 100 index funds)
- Tax efficiency: Stamp duty prevents frequent switching of index funds, as the costs quickly take on high proportions. Index funds domiciled in Switzerland have a clear advantage here: stamp duty does not apply at all.
As you can see, index funds can be a great way to build wealth. In the following, you will learn more about how they work and how you can independently in an index fund via Swissquote or DeGiro invest can.
How do index funds work?
Index funds are a form of investment that is based on a Index oriented. They can contain different types of assets: Shares, bonds, commodities, real estate and more. Index funds replicate the performance of the underlying index by containing the same securities that make up the index in the same proportion as the index.
If a share is included in the index and has a weighting of 10 %, then the index fund usually also tracks 10 % of this share. Index funds attempt to replicate the performance of the index as closely as possible.
Index funds are Passively managed. They are designed to replicate the performance of the underlying index as closely and cheaply as possible. Compared to actively managed funds, the aim is not to beat the index. Through this strategy have Index funds less administrative burden and therefore usually lower fees than actively managed funds.
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The advantages of investing in index funds
As an investor, you have numerous advantages when you invest in an index fund. On the one hand, there are no large fees, as the fund is passively managed. On the other hand, you participate in market events with little effort and can thereby build up a fortune in the long term (!).
Here are some advantages of investing in index funds:
- Diversification: Index funds allow you to spread your capital across different shares, bonds and other assets. This reduces the risk associated with investing in just one stock.
- Lower fees: Index funds usually have lower fees than actively managed investment funds because they require less administrative effort on the part of the fund management.
- Taxes: No stamp duty on index funds domiciled in Switzerland
- Automatic rebalancing: If there are changes in the tracked index, these changes have a simultaneous effect on the fund. Your investment is always up to date.
Index fund disadvantages
Where there are advantages, there must also be disadvantages:
- Selection: The selection of available index funds for private investors in Switzerland is not yet particularly large. Accordingly, it will often be easier to find a suitable ETF to find
- Performance: Index funds do not outperform the market, they only replicate it. So in the long run you will perform as well as the market, but not better.
- Risk: They are just as susceptible to sudden shocks in the markets as the market itself, as they replicate that market. Accordingly, you also get the Risk of the market depicted.
- Access: Index funds may not give you access to certain stocks or sectors that an actively managed fund would. In general, the choice of index funds available to us private investors is not yet very broad.
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How to buy index funds at Swissquote
In the first step you again need a Client account with Swissquote. Here are the Instructions for the Swissquote account including a CHF 100 voucher. Done? Good, then continue with the programme.
Next, you search for the Search function your fund. Let's use the SPI Small and Mid Cap Indexfons with ISIN CH0222624659 as an example.
Click on your product and you will be taken to an Product overview. She shows you important details such as the fund typenet assets or even the performance.
Once you have found a suitable fund, click on Trade to open the Start buying process. You now see a Simplified mask with the most important informationFor example, the available prices, the maximum number of shares you can buy, the type of order you choose or the minimum subscription (minimum amount).
If you are satisfied with your entries, click on Create orderto enter the final step. Check now again all details in the overview. Now you can also see the expected fees. So you know exactly what this purchase will cost.
To buy your fund, all you have to do is click on Create order click. You will then see a Order overview. The fund should be in your portfolio shortly. The Current status of your order in the tab Workspace -> Orders.
How to buy index funds at DeGiro
The first step is the hardest: Create an account with DeGiro if you don't already have one. You can use the following this guide. The The registration process is simple, fast and uncomplicated – Three good features of the online broker DeGiro.
Once you have arrived at the interface, you can either use the search to find your Search index funds or navigate via the menu over the individual products. The direct search is recommended, as otherwise you will have to struggle with numerous filters and parameters and may not find the desired product straight away.
In this example, you want to buy an iShares index fund that tracks the Swiss Market Index (SMI) (not an investment recommendation).
Now you choose your preferred stock exchange for the purchase. In the example, we choose the Swiss SWX.
After clicking on the appropriate fund, the Degiro overview menu for the respective product appears. There you can do things like Course dates or specific documents to your product.
A useful function is the Notes function of DeGiro. There you can save all your important personal information and have it always in front of you when you call up your investment.
Now click on the purchasebutton to select the Start buying process. This opens another user interface on the right side of your screen.
Now you can use your Specify order and, for example, select the price and the number of shares and set the order type.
You can choose between the most common order types: Limit, Market, Stop Loss and Stop Limit. A limit order is recommended, as you can set the maximum price yourself. If your index fund is currently available at a lower price, the system automatically buys at the lower price.
Once you have filled in everything, click on Place order.
Now DeGiro shows you another Total overview of your planned order. At this point it has not yet been executed! You can therefore calmly Check everything and then the order via the Release confirm button. Only then will your request enter the system and be executed promptly.
By the way, DeGiro shows here in an exemplary way the Breakdown of expected transaction costs and even the impact on your budget.
If you agree with everything, click on confirm and wait until your fund is booked into your portfolio. Done!
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Conclusion: Index funds still not widely enough available in Switzerland
The objective of an index fund is to achieve the Exact and cost-effective replication of an index. Since an index fund is usually very inexpensive, it is Ideal as a passive investment. Depending on the fund domicile, index funds are not subject to a TER (Total Expense Ratio), but to a so-called Stamp duty.
Do you buy a Index funds with fund domicile in Switzerland this stamp duty is even waived. Please note that you can only buy (referred to as subscribe) or sell an index fund once a day via fund providers.
In principle, index funds are an ideal way to invest in the broad market and build up assets over the long term. When choosing an index fund, you should always consider your investment strategy. Another product may be a better choice for your investment strategy, such as an ETF. This is because ETFs are broader and more available, which is why private investors in Switzerland tend to use ETFs.
Do you already invest in index funds? Please share in the comments where you do it and in which funds (preferably with ISIN) you invest!
Hello Eric
Thank you for your contribution. A quick question about your statement that index funds are not traded via the stock exchange, but via the fund provider: The index fund used in your example (CH0222624659) is also part of my portfolio. However, unlike other index funds (e.g. iShares SPI Equity Index Fund (CH0342181622)), it is not bought and sold via the fund provider, but via Six, according to Swissquote's statement and also listed as a trading centre in your illustration. Also unlike other index funds, it is bought immediately and no subscription is ordered. Finally, stamp duty is charged on the index fund you used in the article (according to my Swissquote statement). However, unlike ETFs, the price remains largely stable throughout the day. (Incidentally, the same applies to the UBS (CH) Investment Fund - Equities Switzerland Passive Leader (CH0389550945)). Is there a difference between index funds that have to be subscribed to first, index funds that are traded via Six and ETFs?
Thank you very much for the interesting contribution. How can I measure the performance of an index fund? With an ETF I look at the tracking difference, how do I do that with an index fund?
Hello Martin
If applicable, the comparison with the respective benchmark is given directly. If not, you can do this yourself. Check the performance of the index and what your fund has achieved.