Overview of types of investment: which ones are right for you?

A savings account is probably the most common way to save money. Together with your personal account, you can use it to set aside a certain amount of money – for example, for a rainy day, a trip or medium-term savings goals. Individuals aged 20 and over can open a savings account for adults. Young people aged 12 and over have the option of opening a savings account for young people. Opening and maintaining an account is generally free of charge. In special cases, clients may incur costs when closing accounts. The UBS Savings Account can be used to save in both Swiss francs and in euro.

A savings account is ideal for those looking for an uncomplicated, low-risk way to set money aside. Interest rates on savings accounts are typically variable and relatively low. Furthermore, your assets in a savings account are not protected against loss of value due to inflation and cannot be accessed on an ad hoc basis. If you want to withdraw money, you should always first transfer it to your personal account.

Bonds, also known as debentures, can be used to stabilize a portfolio, as they are subject to less price volatility than stocks. Bonds enable states, cantons or companies to borrow money on the capital market. The conditions, such as the repayment amount and frequently also the interest rate, are established at the start of the term. Since bonds are a form of debt security and are not company shares, you do not have voting rights at the annual general meeting.

Bonds are suitable as an additional component of a stock portfolio for investors who prefer something low risk. Viewed historically, over the past 20 years, bonds have almost always helped stabilize investments when the stocks in the portfolio lost 15 percent or more of their value. Their advantages include regular interest payments. However, their returns are comparatively low. 

An ETF – short for Exchange-Traded Fund – is an investment fund that is traded on the stock exchange and tracks a stock market index, such as the SMI or DAX. As with all funds, investors buy shares in various securities. With ETFs, you automatically share in the gains of all stocks that are included in the particular index. Each ETF or fund contains securities from different sectors or thematic areas. This broad diversification ensures risk is more widely distributed than it would be when investing in individual securities.

Unlike ETFs, traditional investment funds are generally managed actively and seek to achieve a higher return compared to their benchmark index by buying and selling individual securities. Since ETFs are mostly managed passively and require less administration, costs are lower. However, you will not benefit from the expertise of professional fund managers.

ETFs are the right choice for investors who want to invest for the long term and can cope with short-term fluctuations in value. In addition, you can invest even small savings amounts (CHF 50 to CHF 100 per month) in ETFs. 

Stocks are securities that allow you to acquire shares (ownership) in a company. If you buy these sorts of stocks, you – as a shareholder – are entitled to vote at the company’s annual general meeting (if it is a common share) and have a right to a share in profits. In this case, you benefit from dividends, which are based on the company’s profitability and its distribution policy.

Shares are usually traded on the stock exchange. If demand increases, the price of the share also increases. This means that this type of investment is subject to price fluctuations. External factors, such as the geopolitical situation, which cannot be influenced by investors, also have a decisive impact on price movements.

Stock trading demands a solid grasp of political and economic contexts and that you keep a close eye on the market. Shares that you buy in bundles, like funds or ETFs, are easier to manage. This is because losses on some stocks can be offset by gains on others, lowering the overall risk of loss.

The performance of stocks is unpredictable.

Stocks are suitable for someone who wants to benefit from higher profits in the medium and long term and is willing to take on a certain amount of risk. 

Besides traditional forms of investment, there are numerous alternatives that can diversify a portfolio and generate higher returns. Many of them are not traded on the stock market and require in-depth investment knowledge.

Hedge funds: strategies for every market situation

Hedge funds are investment funds that pursue various investment strategies to achieve the highest possible returns regardless of market developments. They often invest in different asset classes such as stocks, bonds, currencies or commodities, while using complex techniques such as short selling or leverage. Hedge funds are usually less regulated than traditional funds and are generally aimed at experienced, wealthy investors who are willing to take higher risks.

Private equity: investments in non-listed companies

For a long time, private equity was reserved for institutional investors, but now private individuals can also invest in emerging companies – within certain limits. Private equity allows you to invest in companies that are not yet listed on the stock exchange but are expected to perform well. Your investment gives these companies the opportunity to grow, and you can later benefit from a return on your investment, for example through a sale, initial public offering (IPO) or merger.

Usually, you need to invest your assets over a long period of several years to turn a profit. If you lack the means to invest in this way, you can also put your money into a private equity fund that invests in multiple ambitious start-ups.

Real estate: tangible assets with high stability

Investments in real estate are considered a store of value and offer a high degree of protection against inflation as well as opportunities for returns through rental income and increases in value. If you have sufficient capital, you can buy real estate as investment properties through direct investment and rent the properties out. Doing this requires a lot of up-front capital, and the risk goes up if you put it all into one investment.

Alternatively, you can invest in real estate funds or ETFs. Real Estate Investment Trusts (REITs) are a special form of real estate investment. A REIT is a company that owns and usually operates income-producing real estate or related assets.