Fund savings plan in Switzerland: Effective investing through investment funds

A fund savings plan allows you to systematically build wealth by making regular investments in investment funds. While once considered a niche product with limited offerings, the market has expanded significantly. Today, in addition to traditional banks, digital providers offering low-cost ETF savings plans have entered the scene.

In the current financial environment, well-informed investors are particularly looking for flexible, digital investment solutions that make their money work for them. This is where the fund savings plan comes in, offering a structured approach with numerous advantages.

What is a fund savings plan, and how does it work?

A fund savings plan is a structured way of investing in investment funds regularly. Instead of investing a large sum all at once, you contribute a fixed amount periodically (e.g. monthly) into a selected fund.

These contributions are usually set up as standing orders or automatic debits, ensuring a seamless and disciplined process. Rather than leaving your money idle in a savings account, you invest in funds—starting with small amounts—and benefit from greater return potential. This makes a fund savings plan a smart option for those looking to build wealth over time without actively managing individual securities.

One of the key differences between a fund savings plan and other investment strategies is its regularity and diversification. Unlike direct stock purchases, where your risk is concentrated in individual stocks, a fund savings plan spreads your investment across multiple securities.

Advantages of a fund savings plan in Switzerland

A fund savings plan offers several advantages over traditional saving and investment methods. In particular, for Swiss savers looking to invest flexibly over the long term, the key benefits include:

Diversification and risk reduction

By investing in an investment fund, your money is spread across various assets—companies, industries, and even countries. This reduces the risk of losing your entire investment compared to investing in individual stocks. Depending on the fund, different asset classes such as equities, bonds, or real estate funds may be combined to further balance risk.

Modern options even allow investments in alternative asset classes, such as crypto ETF plans, enabling exposure to cryptocurrencies. However, despite this diversification, it is important to remember that fund investments are subject to market fluctuations. Unlike fixed-term deposits or savings accounts, there is no guaranteed return, and the fund’s value constantly changes with market movements.

Higher return potential

Historically, well-diversified funds—especially equity funds—have offered significantly higher returns than traditional savings accounts or fixed-term deposits.

For example, if you had invested CHF 100 per month in an equity fund between 2015 and 2024, you would have contributed CHF 12'000 in total. However, your investment would have grown to approximately CHF 15'354, generating a profit of CHF 3'354. In contrast, a savings account over the same period would have earned only around CHF 136 in interest.

While past returns do not guarantee future performance, long-term fund savings plans benefit from reinvested earnings and market growth, significantly increasing the likelihood of wealth accumulation over time. Patience is key—historical data shows that the most substantial returns are generated over many years, benefiting from compound interest and market upswings.

Flexible contributions

Fund savings plans offer great flexibility. You can start with small amounts, making them accessible even for investors with limited capital. Additionally, you remain in control: you can increase, decrease, or even temporarily pause your contributions as needed.

If you need unexpected liquidity, you can stop payments or withdraw funds before schedule. Many providers also offer withdrawal plans, allowing you to receive regular payouts during retirement or as needed.

Tax benefits

Switzerland offers a tax-friendly environment for individual investors. In general, capital gains from fund investments are tax-free for private individuals. This means that if your fund increases in value, you won’t have to pay tax on the profit when you sell. Only the income generated by the fund, such as dividends or interest, is subject to income tax.

Additionally, fund savings plans can be used within the Swiss pension system (Pillar 3a). If you opt for a 3a fund savings plan, your contributions are tax-deductible up to the legally defined maximum limits. The investment’s growth remains tax-free until retirement, at which point a reduced tax rate applies. This makes a pension fund savings plan a smart way to combine investment growth with immediate tax advantages.

Regardless of whether it’s used within or outside the pension framework, funds offer significant tax benefits in Switzerland, enhancing their return potential compared to traditional savings accounts. However, it is important to remember to declare fund income in annual tax returns. Most banks provide tax statements to simplify the process.

How to start a fund savings plan

If you're convinced of the benefits and want to start a fund savings plan in Switzerland, follow these steps:

1. Finding the right provider

In Switzerland, both traditional banks and digital platforms offer investment savings plans. However, costs can vary significantly. Depending on the provider, you may encounter custody fees, subscription charges, or product costs (such as a fund’s TER), all of which can impact your returns. Some investment plans come with high overall fees, particularly when only expensive in-house funds are available. To optimise your returns, look for cost-effective options, such as plans that invest in low-cost ETFs.

It’s also important to review the provider’s fund selection. While some banks offer only a handful of in-house strategy funds, others provide a wider range of funds from various providers, industries, or sustainable investment approaches. Finally, ensure that the provider is a reputable institution licensed by FINMA. This applies to both Swiss banks and regulated fintech companies.

2. Defining your savings goal – amount, duration, and strategy

Before opening an investment savings plan, take the time to define your financial objective. Are you saving for retirement, planning to buy a property in 10–15 years, or simply looking to invest excess income?

Your goal will determine your investment horizon and influence your choice of funds and savings amount. Set a realistic monthly contribution—high enough to make meaningful progress but low enough to sustain even in challenging times.

Consider how long you want to invest (e.g., until retirement or at least 5–10 years). A longer investment horizon allows for a higher allocation to equities and helps smooth out market fluctuations. Based on your objectives and risk profile, choose funds that align with your strategy. You may also want to invest sustainably or focus on specific industries or regions.

Having a clear plan—with a target amount, savings rate, and investment strategy—helps maintain discipline. Knowing exactly why you are saving and what you hope to achieve keeps you motivated and focused.

3. Opening your investment savings plan

Once you’ve chosen a provider and strategy, the next step is to set up your plan. Most providers now allow you to do this easily online.

If you don’t already have one, you’ll need to open an investment or custody account with your chosen bank or platform. You then select your preferred funds, set your savings amount and frequency, and set up an automatic standing order. Once activated, funds will be deducted from your linked account at the chosen intervals and automatically invested.

Best practices for a successful investment savings plan

An investment savings plan is a long-term commitment. To make the most of this strategy, consider the following best practices:

Think long term

An investment savings plan is most effective over several years, if not decades. In the short term, markets can be volatile—this is normal. The key is to stay committed and continue investing regularly, even when markets decline.

The longer you stay invested, the more time you have to recover from short-term fluctuations. Set a minimum horizon of at least 5, ideally 10 years or more, to maximise your chances of achieving attractive returns.

Review and adjust regularly

Although an investment savings plan doesn’t require constant management, reviewing it at least once a year is a good habit. Check whether your performance aligns with expectations and whether any personal circumstances have changed.

Some providers offer automatic rebalancing, adjusting your portfolio to maintain its original allocation. This can help keep your risk level consistent. Check if your provider offers this feature or if adjustments need to be made manually.

Avoid common mistakes

Learning from the experience of other investors can help you avoid costly errors:

• Don’t panic during market downturns: A common mistake is selling investments out of fear when markets drop. Market fluctuations are normal, and sticking to your plan is usually more beneficial than selling at a loss. Investment savings plans are designed for regular investing, allowing you to buy more fund units when prices are low. Trust the process rather than trying to time the market.

• Choose a risk level that suits you: If you’re risk-averse but invest in a 100% equity savings plan, market downturns might cause unnecessary stress and lead to impulsive decisions. Pick an investment strategy that aligns with your risk tolerance so you can stay invested long term.

• Keep an eye on fees: Over time, high costs can significantly eat into your returns. Regularly compare providers to ensure you’re still getting competitive rates. If necessary, consider switching—many funds can be transferred to a new provider without selling your investments.

Conclusion: an investment savings plan as a long-term strategy

An investment savings plan is a smart and modern way to grow your wealth in Switzerland. With low savings account interest rates and rising living costs, it allows you to combine saving and investing—potentially earning higher returns over time.

Start your ETF savings plan today. Contact Alpian for personalised advice.