Investing unplugged: Everything you need to know

Imagine you have a daily food budget of 50 francs. You spend this on food and drinks, now and again, you treat yourself to a meal at a restaurant. At some point, you realise that your 50 francs no longer stretch as far as they used to. You now need 55 francs to buy the same amount of food. The alternative is to consume less. An unpleasant situation, but one that is a reality in many countries.
Why is this? The reason is currency devaluation, also known as inflation. This means that prices rise, and so money loses its value in real terms. In other words: your money will be worth less tomorrow than it is today.

Rising inflation can have various causes. One common reason is price increases for commodities such as oil or grain. This leads to higher production costs for goods containing these raw materials – and therefore to higher sales prices.
Another possible reason is an imbalance between supply and demand. Whenever the demand for products and services exceeds their supply, the suppliers have some leeway to raise their prices – an opportunity they often seize.
The behaviour of central banks, which are responsible for the money supply and price stability, also influences inflation. There have been periods in the past when central banks «printed» a lot of money to support governments and the economy. This was most recently the case during the coronavirus pandemic. Such measures also trigger inflation as the money supply outstrips demand.

➡️ Inflation is not only noticeable at the supermarket; it also impacts your savings. The calculation is simple: if inflation is higher than the interest rate you receive on your savings account, the value of your money will fall in real terms. That’s why you should only leave as much money in your account as you need in the short term. Any sums you won’t need for the next two or three years – or longer – can be invested more profitably.

Explanation: The M2 Money Supply is a metric used to quantify the amount of money in an economy. M2 comprises cash in circulation, account deposits, savings accounts, short-term deposits and money market fund shares/units held by private investors. This chart shows the money supply in the USA. If the M2 money supply grows rapidly, this may be a sign of expansionary monetary policy and an increased risk of inflation.

Consequently, your money loses its value in real terms during periods of low interest rates and high inflation. The formula is quite simple: nominal rate of interest – inflation = real rate of interest. In other words, instead of working for you, your money just kind of «chills». Under these conditions, savers can never get a leg up.
Let’s turn back the clock: over the last 30 years, the average inflation rate was 2% per year. In 2022, inflation was measured at 2.8%.
As long as interest rates remain at a low level, you are actually making a loss on your savings.
This makes a savings account an unattractive option for a long-term investment. You can avoid losses due to inflation by investing your money in the financial markets, for example in shares and ETFs.

There are various ways to invest in the stock market. Besides securities such as equities (stocks and shares), there are also bonds, funds, ETFs and cryptocurrency products. Think of securities as little «money managers» that enable you to preserve and grow your assets. In the case of equities, growth results from any price increases and dividend distributions. With bonds, you receive a specified interest rate each year, which is known to investors in advance.
Dividends on shares are especially attractive in the long term. Dividends are profit-sharing payments that a company pays out to its shareholders when business is good. Regular dividend payments thus create an incentive to invest in these companies.
Dividends are also appealing because they are not linked to the share price. So even if the price falls, the dividends are paid out – as long as the company has made a profit. In this case, they act as «downside protection , so to speak. In this context, it is also worth mentioning that, while dividends are taxable, capital gains are tax-free.
Rather than investing in one company’s shares, it is usually preferable to buy a basket of stocks; for example, in companies linked to a specific investment trend or theme. The advantage of this approach is that, via a single transaction, you can invest in diverse companies and thus reduce your exposure to any individual stock.

➡️ Money kept in a savings account – taking inflation into account – will lose its value in real terms. Investments in securities such as equities can protect and even increase the real value of your capital in the medium to long term.
➡️ For securities investments, only use the portion of your capital that you won’t need in the short term. If you’re planning to buy an expensive car a year from now, a savings account is a better choice. In addition, you should always put aside a reserve for unexpected expenses (also known as a nest egg).

Most people are familiar with the Seven Wonders of the World – even if most of us can’t name them all. But have you ever heard of the Eighth Wonder of the World? According to Albert Einstein, it is compound interest: «People who understand it profit from it, everyone else pays for it,» as the world-famous scientist once said.
But what exactly is compound interest? It’s very simple: compound interest is interest received on interest already received. If you invest 100 francs at an interest rate of 10%, you will have 110 francs at the end of the year. By reinvesting the interest of 10 francs instead of withdrawing it, you will receive 11 francs in interest the following year – at the end of the second year there will be 121 francs in your account. It doesn’t sound like much, but with a little patience, compound interest pays off. After five years you will have 161 francs, and after 10 years your account balance will be 260 francs – more than two and a half times the original sum.

Compound interest allows invested capital to achieve exponential rather than linear growth. Of course, the compound interest effect doesn’t only apply to interest, but also to any investment that generates a return – i.e. income. Let’s take the Swiss stock market as an example: we’ll assume that you invested 5’000 francs in Swiss equities 10 years ago with an average return of 7% per year, and that you directly reinvested your annual returns. Your assets would have almost doubled over these 10 years: from 5’000 francs to 9’836 francs. While you «chill», your wealth grows, nice!

➡️ Use the compound interest effect to increase your wealth. Yuh helps you take advantage of compound interest: you’ll find various financial products at Yuh under «Investing». If you choose products that automatically reinvest their returns, you won’t have to worry about a thing – unlike shares, so-called «accumulating ETFs» do this automatically for you. By contrast, you would need to manually reinvest the income from your shares to benefit from compound interest. You’ll find some tips on this later in this chapter…

You’re probably familiar with the saying «time is money». It is attributed to Benjamin Franklin, one of the founding fathers of the USA. But when it comes to investing, we prefer to say: «time brings money» – the longer the investment horizon, the greater the return. The reason for this is, of course, the previously mentioned compound interest effect.
The graph below shows you how time works for you. The longer your capital remains invested in securities, the more wealth you will accumulate over time. Therefore, it’s a good idea to start investing in securities from a young age and on a regular basis.And don’t worry if your deposits are rather modest at the beginning. This can actually be a good thing, as you will have built up some investing experience by the time you’re in a position to invest larger sums later on.
Here are two examples to illustrate this.

Let’s assume you have invested 100 francs in an equity ETF every month for 10 years. This ETF has yielded an average return of 7% per year. After 10 years, you would have achieved a «profit» (i.e. a return) of 5’200 francs on a total of 12’000 francs paid in (100 francs per month for 10 years). After 10 years, therefore, you would have 17’200 francs in your account. Now let’s do the same with a savings account: assuming an annual interest rate of 1%, your savings would have earned you just CHF 622. Your account balance would be 12’622 francs.

Assuming you invested 5’000 francs in the stock market at the beginning of every year, you would have «nominally» saved 50’000 francs after 10 years. Including your return on the stock market (assumed to be 7% per year), you would have earned almost 24’000 francs (23’918 francs to be exact), which would bring you to a final amount of 73’918 francs. If you had left this sum in a savings account with an average interest rate of 1% per year, you would have earned a meagre 2’834 francs in interest, so your account balance after 10 years would be 52’834 francs. Do you now understand the power of compound interest?

➡️ Whether American, German or Swiss equities, historically the stock market yields a return of between 6 and 9% over the long term. Trying to «time the market» to find the «right» entry point will usually prove unsuccessful. Instead, start investing in securities early, make regular deposits and think long-term. And we have another tip for you, it’s called «Dollar Cost Average» – more on that later.

Investing is like starting a business or any other project. Without a plan, it’s very difficult and your prospects of success will most likely come down to mere chance. You don’t need to create a page-long business plan for your capital, but at the very least you will need to break down your monthly income and expenses. Working out your budget is the only way to calculate how much money you will have left to invest at the end of each month.
On the expenditure side, your fixed costs play a key role. These include monthly expenses such as rent, health insurance, mobile phone and internet subscriptions, car and/or public transport, etc. Don’t forget to include expenses such as the Serafe radio and television licence fee (if you live in Switzerland) as well as household insurance and utility bills, which may only be due once per year, as well as sufficient reserves for taxes. You can find out approximately how much tax you will owe by using a tax calculator – these can be found on the websites of most tax offices. These annual expenses should be divided by 12 and added to your monthly expenses.
The opposite of fixed costs are variable costs, i.e. your expenditure on food, restaurants, shopping and clothes. Outings, leisure activities and holidays also fall into this category. Since these expenses can’t be predicted down to the last franc, many people prefer to combine them. In other words, you simply earmark a certain amount to cover all your variable costs.
If you’re saving up for something specific like a car or a round-the-world trip, these monthly savings should also be included in your budget.
Your savings should be strictly separated from your investment funds, since you will need to draw on your savings in the foreseeable future.
If prices fall during this period, there is a danger that you will not reach your savings target. You should also consider building up a nest egg for unforeseen expenses such as dentist visits, car repairs or replacing your laptop/smartphone.
The income side (at least for salaried employees) is usually less complicated: it includes your salary and any additional income. If you already have an investment portfolio and receive dividends, they also belong on this list. The difference between your income and expenditure is your disposable income, which you are free to invest.

➡️ Create a budget, define your goals, i.e. what you want to achieve via the investment. Based on your budget, you will quickly see how much money you can invest; for example, to achieve your long-term financial goals.

There is a lot of stock market wisdom out there, but not all of it is helpful. However, don’t ignore the most well-known rule of all: Never put all your eggs in one basket. The key word here is «diversification», i.e: never invest all your assets in a single stock or even a single sector. Otherwise, if your chosen sector or stock experiences a sharp downturn, you will be exposed to 100% of the downside.

To avoid such risks, you should spread your investments as widely as possible. This applies to asset classes (equities, crypto), regions (Switzerland, USA, world), sectors (technology, consumer, entertainment) and individual companies. A decline in any one category will then usually be offset by your other investments.
Diversification reduces the risks to which your investments are exposed without sacrificing much in the way of expected returns.

➡️ Don’t put all your eggs in one basket when investing. By «diversifying» your portfolio, you can spread your risk across multiple investments. This will help you to achieve a stable return over time.

ETFs or «exchange-traded funds» are investment vehicles that combine multiple securities in one easily tradable product. Most ETFs contain dozens or even hundreds of underlying assets. They are a much easier way to diversify your holdings than buying many individual equities.
The ETF «Global Blue Chips (CHF) – IWDC», for example, tracks the performance of renowned companies like Apple, Microsoft, Amazon, LVMH, Roche, Novartis and over 1,500 other equities.
Our themed investments include various portfolios for you to choose from. One of these is aimed at more cautious investors, while our second themed investment is a growth portfolio. Which one you choose will depend on your appetite for risk. The greater the risk you are willing to accept, the better your chances of earning a larger return. Remember: your investment could also experience negative growth.

Now that you’ve drawn up your budget, you know how much money you can or want to invest. You also know that you shouldn’t put all your eggs in one basket and should diversify your investments. Countless scientific studies prove that, in the long run, equities outperform many other asset classes, such as cash or bonds.
But which products are worth your money? Here are some categories for smart investing with Yuh.

When you buy a company’s shares, you acquire a part of that company; the sum of all the shares in circulation represents the company’s stock market value. As a shareholder, you can generate a return in two ways: either by selling the shares at a higher price than you paid for them or via dividends that companies pay out when they make profits. The gross dividend, i.e. the dividend before deduction of withholding tax, must be added to your taxable income. It is therefore subject to income tax. In the case of Swiss shares, 65% of the gross dividend is paid out directly. The remaining 35% goes to the Swiss Federal Tax Administration as withholding tax. You can reclaim this 35% with your regular tax return. However, you do not have to pay income tax on share price gains. Of course, it is important to remember that neither price gains nor dividends are guaranteed. In bad times, the share price may fall and if a company is not making profits, there will be no dividends.

If you want to invest for the long term and prefer an uncomplicated and cost-efficient approach, then look no further than exchange-traded funds, or ETFs for short. For example, these products allow you to invest in the entire US or Swiss stock market via a single transaction. Exchange-traded funds are funds that – like shares – are traded daily on the stock exchange. ETFs are based on a specific theme and invest in many different individual equities which best reflect this theme. ETFs not only ensure a healthy degree of diversification, but are also relatively cheap. The providers of these efficient and broadly diversified investment vehicles charge an annual fee, which varies depending on the product and investment theme. Nevertheless, ETFs are significantly cheaper than the large number of traditional funds out there. Possible themes for ETFs could be «Swiss equities with high dividends», «Swiss real estate», «US tech» or «Gold». ETFs are among the most successful financial products of the last three decades, which is why we have dedicated an entire chapter to them, see here.

Themed investments are based on ideas that are deemed to have great future potential, such as blockchain technology, cannabis, mobility and renewable energy. They are represented via certificates that – as with ETFs – track a basket of different equities, all of which share the same underlying theme. This means you don’t need to worry about diversification as this is ensured by the product providers. Like equities and ETFs, themed investment products are tradable daily.

Opinions about «crypto» differ widely. Some people believe it is the future of the financial industry, while others are predicting its total collapse. What is certain is that cryptocurrencies are among the riskier investments the financial world has to offer. They have seen huge price jumps in the past, but these spikes have frequently been followed by massive declines. Therefore, it is often crucial to find the right moment to enter and exit these trades. Due to the risks involved, the general advice is to invest no more than 5% of your capital in crypto.

Many people are put off trading in securities altogether, as they think it is too complicated. However, while a healthy amount of respect for the process is essential (after all, money is at stake), we strongly disagree that stock market trading is complicated. At Yuh, we’ve made it as easy and clear as possible for you.
And remember: Rome wasn’t built in a day. In other words, you don’t have to be a high roller to invest with Yuh. Whether you invest 20’000 or 200 francs, it doesn’t matter to us. The important thing is that you don’t wait too long to take your first steps. And since we only require a very small minimum investment, you can gain some initial investing experience with very little money – just 25 francs, to be exact.
This is possible at Yuh because we don’t make you buy whole shares, so you can simply invest an amount you feel comfortable with. Even if a company’s shares cost 100’000 francs each (like those of Lindt & Sprüngli), you can still invest from as little as 25 francs. In this case, you can simply buy a fractional share, whose value will change in line with the stock price.
The same applies to ETFs, themed investments, cryptocurrencies and all other investment products at Yuh. We don’t force you to buy a specific number of securities – you can simply specify your total budget in francs and invest exactly as much as you want.
Always remember: don’t put all your eggs in one basket. Diversification is important. For example, either buy eight or nine (or even more) different equities, preferably from different sectors and different regions, or if this sounds too complicated, simply invest in an ETF or a themed investment product, which will automatically give you a basket of different shares.

➡️ At Yuh you can invest from as little as 25 francs. Thanks to fractional trading, you can choose to buy a small portion of a share instead of the whole thing. The same applies to Bitcoin & Co.

Have you ever heard of the «core-satellite strategy»? This is an investment approach used by many professionals, pension funds and asset managers. Read on to learn more about this strategy and how you can implement it.
At the centre is the «core», i.e. your main investments, which should make up around 70–80% of your portfolio. These should be broadly diversified investments with a long-term focus that are not too risky and therefore give your portfolio some stability.

The core is then complemented by the satellites that orbit it. You create these by investing the remaining 20–30% of your capital in several smaller secondary investments that offer higher potential returns – but also involve greater risk. Should one of your satellites experience a sharp decline, this is by no means a tragedy, as the core won’t be affected and will continue to provide stability.

The products you choose for the satellites are up to you. They could be individual securities that you expect to increase in value, a specific themed investment or cryptocurrencies. However, especially with the latter, you should be aware that the prices tend to move very sharply in a very short time – and in both directions.
Another difference between the core and the satellites is the time horizon. The core investment should be geared to the long term and only adjusted occasionally, if at all. Even if the price falls, don’t immediately panic and sell – as long as you still believe in the investment for the long term. Satellites, on the other hand, are tactical assets that are deployed in the short to medium term. If one of your satellites performs particularly well, we recommend realising at least part of your gains. In other words, by selling the securities.

➡️ The core-satellite approach lets you accomplish all kinds of goals. Your long-term investment is your core portfolio, which should be as broadly diversified as possible. You can take advantage of short-term opportunities in the form of satellite investments. Never put all your eggs in one basket. You can gradually build up your portfolio using this approach; for example, if you make a nice profit on a trade, you can reinvest your gains into one of your longer-term investments.

Many newcomers to investing view the stock market as the epitome of «making a quick buck». Accordingly, they approach it with the goal of making a lot of money quickly. However, in doing so, they often ignore the risk of losses. A particular danger arises when new investors listen to supposed «experts» promoting stocks or cryptocurrencies with enormous upside potential on YouTube, Instagram or TikTok. Their recommendations are aimed precisely at inexperienced investors. Our tip: never follow these tips blindly, and constantly look for other, trustworthy sources of information. Pay careful attention to critical voices. Ultimately, you are investing your own money. Always DYOR – do your own research.

Don’t start out by investing all your assets in one go. If you do this, you run the risk of entering at an inopportune time and paying too high a price for a security. On the other hand, if you invest in your desired securities in stages, for example every month, you will minimise your risk. Depending on market developments, you can choose to buy more or fewer shares each month. It’s also important to automate your investments; for example, by setting up regular deposits. This lets you take advantage of «dollar cost averaging», which comes into play if you regularly invest constant amounts in your securities.

Research indicates that private investors lose their risk aversion when prices rise, i.e. their «greed» for more profit increases. The opposite is also true: when prices fall, many investors panic and rush to sell. In both cases, many investors end up buying or selling shares or cryptocurrencies at inopportune times. Ultimately, you will see bigger profits with a cool head and a clear game plan. Therefore, never act without a strategy. With investing, it’s not only important to know when to get in, but also when it’s the right time to get out. We all find it hard to accept losses, as this often feels like admitting we made a mistake. But sometimes you simply need to cut your losses if an investment doesn’t perform the way you thought it would…

Transaction fees can be a real pain and eat into your returns. Therefore, it is essential to keep an eye on the cost of investing – each time you trade on the stock exchange, you have to pay for the privilege. At Yuh, these fees are extremely low compared to other providers. Why? Because we don’t have expensive brick-and-mortar branches or financial advisors and our services rely on lean, modern technology. For you, all these advantages mean lower transaction fees.
However, depending on the type of investment, other fees may apply. This is the case when you invest in our themed investment products, which are developed by established banks and adapted for the stock market. The product providers charge an annual fee for their work, which is only fair because they ensure that there is sufficient diversification within each themed investment and «manage» the product over its term. This includes providing the product with daily liquidity, i.e. ensuring that it can be bought and sold at all times. You can therefore enter or exit these positions at any time during market hours. Typically, the associated fees are added automatically to the product.

Not everything can be traded 24/7. The stock markets have fixed opening hours; for example, on the Swiss stock exchange equity trading begins at 9 am and ends at 5.30 pm. These times also apply to themed investment products, which are also traded on the Swiss stock exchange. You can trade US equities between 3.30 pm and 10 pm (Swiss time), so you have the option to buy and sell American shares after work. With cryptocurrencies, things are a little different as they are traded around the clock, seven days a week. You can buy or sell your favourite cryptocurrencies in the Yuh app at any time.
With Yuh, there is no need for panic if the market is closed. You can place your orders at any time. Your order will be automatically executed when the market reopens.