Opportunities for Investors

Exchange-traded funds (ETFs) have become one of the most popular investment vehicles for individual investors in recent years. In Switzerland, too, there is a clear trend toward passive, low-cost index funds. ETFs allow investors to invest in the financial markets with broad diversification and relatively little effort. At the same time, they offer tax advantages and a high degree of transparency.

This article explores why ETFs are becoming increasingly popular, the opportunities they offer, and the tax considerations that investors in Switzerland should keep in mind.

The ETF Boom in Switzerland

The Swiss ETF market has been growing rapidly for years. A comprehensive analysis is provided by the Lucerne University of Applied Sciences and Arts’ “ETF Investor Study Switzerland 2025,” for which more than 3,400 people in German- and French-speaking Switzerland were surveyed. The results clearly show that ETFs have become a central component of asset allocation. Although ETFs account for only about 16% of fund products in Switzerland, they already represent approximately 26% of total fund assets. At the same time, for several years now, a large portion of new investment capital has been flowing into ETFs rather than into traditional actively managed investment funds.

The study also shows that interest continues to grow:

About 87% of current ETF investors would like to increase their exposure.
About one-third of investors who have not yet invested in ETFs plan to start doing so.

These figures illustrate that ETFs have become a central component of many investors’ long-term investment strategies and wealth-building plans.

Why ETFs Are Attractive to Investors

1. Broad diversification

According to the ETF Investor Study, 83% of Swiss investors cite diversification as the most important benefit of ETFs. This reduces risk compared to individual stocks and allows for efficient diversification across countries, sectors, and asset classes.

2. Low costs

A key advantage of ETFs is their relatively low costs. Since they passively track an index, they do not require expensive active fund management.

Many actively managed funds fail to outperform their benchmark index over the long term. As a result, more and more investors are turning to low-cost ETFs that track the market as efficiently as possible.

Even small differences in fees can have a significant impact on returns over many years.

3. Transparency and flexibility

ETFs are traded on the stock exchange and can be bought or sold during trading hours, just like stocks. In addition, investors can always see which index the fund tracks and which securities are included in the fund.

This transparency makes ETFs particularly attractive to self-directed investors who want to manage their own portfolios.

4. Building Wealth the Easy Way with Savings Plans

ETF savings plans are also becoming increasingly popular. With this approach, investors regularly—for example, on a monthly basis—invest a fixed amount in an ETF.

This strategy has several advantages:

Disciplined wealth building
Cost-Average Effect
You can get started even with smaller amounts

This method is particularly well-suited for young investors looking to build long-term wealth.

Tax Considerations for ETF Investors in Switzerland

The tax environment is one of the reasons why Switzerland is particularly attractive to private investors.

1. Capital gains are generally tax-free

A key advantage is that capital gains from the sale of securities are generally tax-free, provided the investments are held as part of one’s personal assets.

This means that if investors sell ETFs at a higher price than they paid for them, no income tax is owed on the profit.

This rule clearly sets Switzerland apart from many other countries where capital gains are taxable.

2. Dividends and distributions are taxable

The situation is different when it comes to current income. Dividends or interest income from ETFs are considered income and must be reported on your tax return.

In addition, a withholding tax of 35% is levied on Swiss securities. However, this tax is fully refunded provided the income is correctly reported.

3. Don't forget the wealth tax

In addition to income tax, property tax at the cantonal level also plays a role. ETFs are considered taxable assets and must be reported on your tax return at their year-end market value.

Trends: Thematic ETFs and New Investment Strategies

In addition to traditional index ETFs, specialized products are also gaining in importance. According to the ETF Investor Study, many Swiss investors are showing growing interest in so-called thematic ETFs, for example in areas such as:

Artificial Intelligence
Robotics
Healthcare technology
Sustainable Investments

At the same time, the study shows that knowledge about new types of ETFs—such as actively managed ETFs—is still relatively limited. There is still a need for more information for investors in this area.

The Safety of ETF Investments in the Event of the Provider's Insolvency

Many investors wonder what happens to their invested money if the ETF provider or custodian bank runs into financial difficulties. In most cases, however, there is a high degree of security.

ETFs are generally structured as so-called separate funds. This means that the fund’s assets are legally separate from the assets of the fund company or the custodian bank. The securities held in the ETF—such as stocks or bonds—therefore do not belong to the provider, but to the fund’s investors.

In the case of physically replicated ETFs, the underlying securities are actually purchased by the fund and held as part of its assets. Therefore, if the ETF provider or asset manager becomes insolvent, these fund assets do not become part of the company’s bankruptcy estate. Instead, they remain the property of the investors and are either managed by another management company or transferred to the investors.

This structure ensures that the invested capital is generally protected in the event of the provider's insolvency.

Different methods of replicating ETFs

ETFs can track an index in various ways. It can be helpful for investors to understand the main methods, as they differ in terms of structure and risk.

Physical replication
In physical replication, the ETF actually purchases the securities included in the index and holds them in the fund’s portfolio. An SMI ETF, for example, would directly purchase shares of companies such as UBS, Novartis, or Roche.

Synthetic replication
In synthetic ETFs, the performance of the index is tracked using so-called total return swaps. In this process, a counterparty—usually a bank—guarantees the return of the underlying index. This creates a certain degree of counterparty risk should that party become insolvent.

Optimized Sampling
In what is known as optimized sampling, the ETF holds only a selection of the securities included in the index. The remaining index performance can be partially tracked using derivatives or swaps. This method is often used when an index comprises a very large number of securities or when individual securities are difficult to trade.

For example, an ETF that tracks an index comprising the shares of UBS, Novartis, and Roche might hold only the UBS shares physically, while the performance of Novartis and Roche is replicated through a swap agreement with a counterparty.

The younger generation is placing greater emphasis on personal retirement planning

Another factor driving the growing interest in ETFs is increasing skepticism toward government-sponsored retirement plans. Young adults, in particular, doubt that existing retirement systems will be sufficient in the long term to maintain their standard of living in old age.

For example, the Swiss Life Self-Determination Barometer shows that only about 23% of 18- to 29-year-olds have confidence in the current pension system. At the same time, according to the Deloitte Gen Z & Millennial Survey, about 49% of Generation Z are concerned about their financial situation in old age.

As a result of this trend, many young people are increasingly taking charge of their own retirement planning. In addition to tax-advantaged private retirement savings through Pillar 3a, long-term ETF investments are therefore gaining in importance, as they enable cost-effective and broadly diversified wealth accumulation. Meanwhile, there are also Pillar 3a providers, such as Viac, that offer investments via ETFs and are therefore more cost-effective than traditional Pillar 3a products.

Conclusion

ETFs have become an important tool for long-term wealth accumulation in Switzerland. They offer investors a simple way to invest in the financial markets with broad diversification and at low cost.

ETFs are particularly attractive due to their low costs, high transparency, and tax advantages. At the same time, investors should keep an eye on the tax treatment of dividends as well as the wealth tax.

Investors who take a long-term approach, diversify broadly, and keep an eye on costs can use ETFs to build a solid foundation for their own wealth accumulation.