Why is investing in Swiss francs a good idea ?
Protect your portfolio with one of the world’s strongest currencies.
By buying multiple currencies, investors can hedge themselves against losing out on another investment or gaining from another nation’s economic strength. It’s a common strategy for investors and businesses to invest in 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.
Because of the strong economy in Switzerland, the 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. The franc offers 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 have high risks and inflation.
Continue reading to determine why investors choose the Swiss franc as a safe haven.
Is Swiss franc a good investment?
Investors choose to purchase Swiss currency for many reasons. The first is the strong economy of Switzerland. One of the most significant factors for the country’s success is its small size and population.
The country also takes advantage of its natural resources. Limited investments are required for production and agriculture that support the strong economy. Switzerland is in such good standing economically that there is no national deficit, and the Swiss income exceeds its expenses, so the currency is fully backed by a self-reliant economy.
There are low rates of unemployment and high average income. Economic success entices investors from all around the world to invest and bank.
Is Swiss franc a strong currency?
The value of the franc has always been strong. Even when other European countries are facing financial strife, the franc perseveres.
Swiss francs remained stable during financial crises
For example, during the financial crisis of 2007-2008, many investors bought Swiss currency out of concern.
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. As the franc strengthened, the country’s exports took a toll. Later, 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 franc remained a safe haven for investors during the pandemic
As of 2022, the Swiss franc has remained in high demand for investors looking to safely keep their wealth, even as the COVID-19 pandemic has caused market uncertainty. The Swiss National Bank governing board announced in November of 2021 that investors worldwide continue to purchase francs as a safe haven.
Why Investing in Swiss francs is particularly lucrative for American Investors
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 in Swiss Francs
It can be fairly easy to invest in Swiss currency, and there are options. The most popular ways are through ETFs and on the Forex market. However, if you are interested in making this type of investment, connect with a professional. Alpen Partners is equipped to help you reach your safe haven.
Invest with ETFs
One of the easiest ways to invest in Swiss francs is through exchange-traded funds or ETFs. An exchange-traded fund, or ETF, is a security that tracks a commodity, bonds, basket of assets, or index, that is traded like a stock on the stock exchange.
With high daily liquidity and lower fees than mutual fund shares, they experience daily price changes as they are bought and sold. ETFs are a very popular alternative for investors. With ETFs, an investor can take advantage of short-term and long-term opportunities without owning a foreign exchange account. 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 the lower cost. Since ETFs are traded as securities, the price of transactions can be lower than forex market transactions.
Invest with Forex
The forex market allows investors and traders to buy currencies, offering a wide array of currency pairs and operating similar to other financial markets. You buy and sell currencies at the current rate. An exchange rate is the currency’s price as it compares to another.
Since the U.S. currency dominates the financial markets, exchange rates are primarily expressed in USD. When investing in the forex market, individuals borrow one currency to buy another currency and close the transaction for profit or loss later. The forex market operates 24 hours a day and five days a week, which grants investors and traders a lot of freedom. Currently, a Swiss franc is worth 1.05 USD.
The forex market can be tricky. If you are new to currency trading, many mistakes can be made. However, with the help of an advisor who is well versed in the art of trading currencies, you can choose transactions that will benefit you safely.
Invest in Swiss francs with Alpen Partners
Switzerland’s franc remains one of the world’s strongest currencies and a safe haven for investors and traders worldwide and is set to remain this way. For those who have never invested in foreign currency before, or those looking for a professional eye, Alpen Partners guides clients through the process of choosing the best currency that works for your plan and the investment process. No matter your preference, such as ETfs or on the forex market, our clients can also purchase Swiss currency 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 C.D.s, bonds, equities, or any other CHF-denominated security. Beyond investing in foreign currencies, our expert team can help high-earning clients with investing, financial planning, wealth management, and more. Connect with us today!