Depot check: Avoid these yield killers
Securities often end up in Swiss custody accounts that you would be better off getting rid of. This is due to the ingenuity of the financial industry. Many banks create products that look good, but on closer inspection are real yield killers. That’s why we recommend that you regularly check your portfolio.
Free securities account check by the experts at finpension
Send us your custody account statement by e-mail and refer to the description on this page. We will be happy to take the time to scrutinise your custody account statement for yield killers. We currently offer the custody account check free of charge.
Check your portfolios yourself for yield killers
Yield killer 1: Overpriced funds from Swiss banks
There are a large number of banks in Switzerland, 235 in fact. Many of them sell their own funds, which is very inefficient and leads to high costs. The costs of a fund are shown in the factsheet under the key figure Total Expense Ratio (TER). Many funds from Swiss banks incur costs of more than one per cent of the investment amount per year, as our comparison of fund savings plans also shows.
Funds from providers that are active worldwide are significantly better. These include BlackRock (iShares) and Vanguard, to name just two of them. Unlike many Swiss banks, these providers do not sell their funds over the counter, but on the stock exchange. This is much more cost-efficient.
Anyone with a securities account can buy and sell the funds on the stock exchange. The funds are therefore called Exchange Trades Funds, or ETFs for short. They are generally much cheaper than funds from Swiss banks. However, an ETF should not cost more than 0.20 per cent.
Setting up and managing a fund is time-consuming and complicated due to the regulatory requirements. This is why these services are often purchased externally by the banks. However, the fund is still marketed under the name of the respective bank. In technical jargon, this is also referred to as white labelling when another company specialising in fund management issues funds for various banks.
Yield killer 2: Only invest in well-known stocks
It’s a mistake that many investors make: they only buy shares that they know. These can be international stocks that are currently the talk of the town, such as Tesla or Nvidia. Or Swiss stocks that people know anyway, such as UBS.
From a psychological point of view, this behaviour can be easily explained. To use an old saying: “What the farmer doesn’t know, he doesn’t eat”. However, it is still not wise to only invest in shares that you know. The reason: individual stocks lead to a concentration of risk.
It is demonstrably better not to put all your eggs in one basket. If you invest in as many shares as possible at the same time, you may lose your personal connection to the individual investment, but you benefit from a better risk/return ratio.
Yield killer 3: Only invest in Swiss equities
The next mistake is very similar to the previous one. Investing only in Swiss equities significantly limits your opportunities. It also increases the risks. Only one per cent of the world’s shares are traded in Switzerland (measured by company values). The risks are not well distributed if you only take this one per cent into account when investing.
Experts also speak of home bias in this context. Home bias means that investors tend to overweight investments in their home markets. It has been proven that a home bias leads to a poorer risk/return ratio.
The situation is even worse if you invest in regional equities in Switzerland. This leads to a further deterioration in the portfolio structure. Products such as those launched by Sparkasse Schwyz in 2023 with a certificate on Central Swiss equities (German only) are therefore not recommended. Unless you do this for other reasons, such as patriotism.
Yield killer 4: High custody account fees and brokerage fees
High custody account fees or brokerage fees are the most obvious return killers. Custody account fees are usually transparent and are periodically charged to the custody account.
Brokerage fees are costs that are charged on buy or sell orders. As a rule, compensation in the form of brokerage fees is included in the buy or sell orders. This means that you have to pay more for purchases and receive less for sales. You can see how high the brokerage fees are on the banks’ stock exchange statements.
Customers of banks are often unaware of how high the custody account fees and brokerage fees are.
Yield killer 5: Hidden costs (on currency exchange)
In contrast to custody account fees, currency exchange fees are often not transparent. As a result, most people do not realise that the bank also earns money from the currency exchange.
How does it work? Suppose you have CHF 100,000 that you want to invest in shares. If these shares are only traded in US dollars, the bank must exchange your money into US dollars in order to make the purchase.
The decisive factor is what exchange rate the bank gives you. When buying US dollars, you pay a premium on the exchange rate, when selling you get a lower rate. This means you lose money again when exchanging currencies, often to the tune of +/- 1 %.
Asset management through finpension
With finpension asset management, you can avoid yield killers. We select the best ETFs for you and automatically reinvest your dividends. With total costs of less than 0.50 %, you can invest in equities worldwide with finpension. Without currency exchange fees. The advantages of the finpension investment solution.
