Buy and Invest in Swiss Francs
Invest in one of the world’s strongest currencies.
Investors and businesses often rely on gold and foreign currencies to hold a portion of their money. For the most part, the U.S. dollar has been the primary currency in this regard. Those searching for a strong alternative to the U.S. dollar that has really proven itself as a solid way to save and earn money, however, should look at the national currency of Switzerland: the Swiss franc.
Without fail, the Swiss franc, or CHF, has proven to be one of the strongest currencies globally, and the country has been considered a safe haven in the world of finance. In a world of financial worry and trouble, investors can seek refuge in Switzerland’s national currency, known for keeping its value.
Investing in the Swiss franc can promise high security, low risk, and protection from inflation. Investors are always looking for a high return with minimal downside. Stocks can often offer high returns, but they can also come with high risks and high inflation.
Why the Swiss Franc?
There are many benefits of the Swiss franc as an investment option. One of these benefits is Switzerland’s strong economic system with controlled requirements and slight growth. This stems from the size of the country.
The economy is so strong that there is no national deficit. The Swiss income exceeds its expenses, so the currency is fully backed by a self-reliant economy. The country also boasts low unemployment, high per capita income, and a popular banking destination utilized worldwide.
Even in times when the rest of Europe was experiencing financial turmoil, the Swiss franc stayed solid. During the European debt crisis in 2011, the EU international investors began relying on the CHF, which drove up the value of the currency. As the franc became stronger, the country’s exports began to feel negative consequences. Because of this, the Swiss government placed an artificial cap on their currency at 1.20 against the euro so the franc couldn’t become too strong. The Swiss Central Bank bought euro with newly printed francs.
In January 2015, the Swiss National Bank removed the cap they implemented just 3 years prior. The stable franc soared. This was a shock to the forex market, and traders and brokers took a huge loss. After this, many investors were cautious to place their money in the Swiss franc, but it continues to be a staple in the investment world.
The Swiss franc remains a safe haven despite the setback. With a fruitful financial system and a competitive economy backing the franc, investing in the currency proves to be a smart decision.
For American investors, the Swiss franc can prove to be attractive because there has been low short-term volatility in the exchange between the CHF and USD. The monthly fluctuation in the exchange rate of the dollar and the Swiss franc has averaged around 1.95% since 1999, higher than the monthly change in exchange rate of the euro and the Swiss franc, which is around 0.85%.
Because of their liquidity and availability, institutional and sovereign entities choose Swiss francs. Many are also choosing the franc because it is more available than other safe havens like gold.
How to Invest
There are several ways investors can buy into this leading currency. Two of the most well-known ways is through ETFs and the forex market.
One of the easiest ways to invest in Swiss francs is through exchange-traded funds, or ETFs, that trade in U.S. stock exchanges. CurrencyShares’ Swiss Franc Trust tracks the price of Swiss francs in comparison to the U.S. dollar.
ETFs are easy to purchase using traditional brokerage accounts. They are also eligible for margin, meaning investors can leverage their positions. Another advantage of ETFs is that they cost less. Since ETFs are traded as securities, the price of transaction is lower than the forex market.
The forex, or the spot foreign exchange, market is the platform for trading in different currencies that offer a wider variety of currency pairs. It works in the same way a stock market provides a platform to buy and sell stocks.
In the forex market, one would borrow one currency in order to buy another currency and close the transaction for profit or loss later. A profit occurs when the currency that was purchased increases in value compared to the currency used to buy it.
In terms of Swiss francs on the forex market, the U.S. dollar is most popularly used to invest.
The forex markets are in operation 24 hours a day and 5 days a week, allowing investors and traders a lot of freedom. Trading on margin is allowed in this market. This allows participants to increase investment amounts without having capital.
It is advised that those looking to get involved in forex should gain some basic knowledge of the market.
In general, long-term investors choose ETFs over the forex market.
Where We Come In
If you haven’t invested in foreign currency before, or you’d just like a guide through your investments, Alpen Partners can walk you through the whole process. The Swiss franc can be a safe haven for your money. The strong Swiss economy with steady growth and low debt doesn’t seem to be changing anytime soon – and it will continue to be an important banking destination.
Alpen Partners offers the possibility for clients to buy Swiss francs and deposit them in an account at one of our partner banks in Switzerland. The Swiss francs can be left in cash, or invested in CDs, bonds, equities, or any other CHF-denominated security.
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