Investment strategy: Seeing the big picture

In the next Flash articles, we will consider the topic of asset structuring and the definition of a suitable investment strategy.

First of all, I would like to invite you to the relevant level of consideration for this question. For you as a private individual – as for any other economic entity – the balance sheet perspective is decisive. Your personal balance sheet is the relevant playing field for tackling the issue of asset structuring.

On the assets side of the balance sheet, Swiss households had total assets of CHF 5,703 billion at the end of 2023. On the liabilities side, debts (with mortgages accounting for more than 90 percent) amounted to CHF 1,015 billion, meaning that the net assets or equity of Swiss households amounted to CHF 4,688 billion. With a population of 8,962,300 at the end of 2023 according to the Federal Statistical Office, this results in an average (not to be confused with the median!) per capita net wealth of CHF 523,000.

Almost 50% of the average Swiss person’s assets are tied up in real estate, a good fifth are pension assets from the 2nd and 3rd pillars, another 16% are cash and current account balances, and the rest are securities holdings. The color coding of the balance sheet items distinguishes between fixed or variable interest-bearing assets and liabilities (green, retirement assets from the pension fund are also allocated here), real estate (orange) and shares (blue). A corresponding allocation is not possible for fund holdings (gray).

Even at this altitude, two interesting theses can be formulated for the wealth structuring of the average Swiss man and woman:

1. Avoid leverage effects: Swiss households have sufficient liquid assets and bonds to pay off their outstanding mortgage debt. At an individual level, there are hardly any good reasons – apart from liquidity considerations – to hold cash and bonds on the assets side while simultaneously maintaining a mortgage on the liabilities side. The difference in interest rates between the assets and liabilities side generally leads to a loss. Of course, the bank is happy, as it collects fees twice.
2. Low equity allocation: At CHF 388 billion and therefore less than 7 percent of assets, the equity share of Swiss households is rather low – especially considering that in Switzerland, a country of SMEs, this figure also includes all holdings in non-listed companies. Even if some additional equity exposure is included through fund holdings and pillar 3a assets, this equity allocation remains very low compared with other investors.