Long-term wealth building with ETF savings plans for beginners

 
If you’re NOT interested in a stress-free way to build long-term wealth, then you’d better stop reading…
Oh wait, you’re still here! Great, let’s go then. So you’re new when it comes to financial investing? Have you ever heard of ETF savings plans? They’re an easy and effective way to invest your money long-term across a wide range of companies. We will lead you through the process step-by-step; show you how to start an ETF savings plan with minimal costs, and how you can let compound interest do the work for you.

ETF doesn’t stand for «Endless Terrific Finances» (although that would be amazing) but rather for Exchange-Traded Fund. That is an exchange-traded fund that represents an index, a sector, or a specific market. A famous example of this is the SMI (Swiss Market Index).
 
With an ETF, you automatically invest in a multitude of securities. For beginners who would like to invest in ETFs, it’s a hassle-free way to invest your money across a wide range of companies and minimise the risk of losses. Such diversification reduces the risk of financial deficits, as losses from individual companies can often be offset by the gains of other companies included in the ETF. In general, ETFs offer lower volatility compared to individual stocks because they often cover entire market segments and industries.

Unlike actively managed funds, ETFs don’t try to outperform the market, so ETF costs are typically much lower compared to actively managed funds. However, you should make sure to select ETFs with the lowest possible TER. The TER (Total Expense Ratio) indicates the percentage of annual management cost. These costs are directly deducted by the fund manager (e.g., iShares, Vanguard, or Invesco). Trading costs are also cheaper compared to traditional mutual funds, as there are no front-end loads or redemption fees. Another advantage is that ETFs are traded on the stock exchange, so you can sell them at any time. Thus, ETF savings plans offer a cost-effective, diversified, and flexible way to invest your money.

If you’ve read this far, don’t stop now! We’re getting to the interesting part. For long-term wealth building without high risk, a broadly diversified investment strategy is essential. By spreading your capital across different industries, currencies, and regions, you minimise risk and increase your chances of stable returns. Diversification contributes to the stability of your portfolio and reduces potential losses. Also, pay attention to low fees; even minor differences can make a significant impact over the years. The lower the fees, the higher your chances for nice returns.
 
This is where Yuh’s ETF savings plan without any trading fees come in handy. With an ETF savings plan, you can invest regularly at low cost and with a built-in diversified strategy, without worrying about the perfect timing for purchasing. Your investments will be automatically executed regularly, whenever you decide (weekly or monthly). The ETF savings plans without any trading fees from Yuh are particularly ideal for long-term investment horizons, as – apart from mandatory stamp duties – no added fees are charged when purchasing. Once set up, your ETF savings plan basically runs itself. You can sit back and enjoy life without worrying about your financial future.

If you want to buy ETFs regularly, an ETF savings plan is a great option. This way you can invest a fixed amount at regular intervals, allowing you to benefit from the average cost effect, known as «dollar-cost averaging» while continuously building wealth. By investing regularly, you buy at different prices and avoid the risk of investing a lump sum at a time when prices are high.
 
Additionally, an ETF savings plan also helps disciplined wealth building; once it’s set up, it runs happily by itself, meaning you can resist the urge to micromanage your investments constantly. A portion of your income is continuously and automatically invested; although you can, of course, adjust the amount or frequency at any time. Thanks to the combination of discipline, cost efficiency, and flexibility, an ETF savings plan is a simple and effective way to build long-term wealth.

First, you choose one or more ETFs. Currently, Yuh offers a range of ETFs that you can include in your ETF savings plan. Six of these ETFs do not have purchasing fees, meaning they can be invested without any trading fees: only the stamp duties and ETF management costs (TER) apply. The following ETFs can be invested without trading fees:
 

• iShares SMI ETF (CH): Invest in Switzerland’s 20 largest companies and benefit from their success.
• iShares MSCI World CHF Hedged UCITS ETF (Acc): Widely diversify your investment by covering companies from the developed world.
• Vanguard FTSE All-World UCITS: Invest in large and mid-sized companies for both developed and emerging markets.
• Vanguard FTSE All-World High Dividend Yield UCITS: Focus on large and mid-sized companies that pay above-average dividends.
• Invesco EQQQ Nasdaq-100 UCITS ETF CHF Hdg Acc: Invest your money in the top-performing non-financial stocks of NASDAQ.
• Invesco CoinShares Global Blockchain UCITS ETF Acc: Support companies involved in the blockchain ecosystem with this ETF.

 
Once you have chosen one or more ETFs, you can set the amount you want to invest (a minimum of 25 CHF) and the frequency you want to invest it (weekly or monthly). As long as there is sufficient money in your Yuh account, the specified amount will be automatically invested on an ongoing basis. Of course, you can adjust the amount or frequency of your investments any time, as well as pause or stop the plan altogether.

1. Planning: Decide your available savings amount (e.g., 150 CHF per month) and your investment horizon (e.g., 20 years).
2. ETF Selection: Choose the ETF(s) you want to invest in regularly.
3. Setting up and managing your savings plan: Select your investment interval (weekly or monthly) as well as the execution date. If your life circumstances change, you can stop or adjust the plan at any time.

The prices of stocks, real estate, and other assets are driven by supply and demand, making it nearly impossible to determine the perfect time to invest. Prices don’t move in a straight line; there will always be periods of stagnation or even decline. But even after a stock market correction, markets have always recovered. Overall, the global economy continues to grow steadily. If you wait for the perfect moment, you may miss out on valuable opportunities where your money could already be working for you. No one can predict the ideal time, so it makes sense to invest your funds based on a long-term and suitable investment strategy that works for you.
 
An example of why waiting can be the biggest mistake you’ll ever make: it’s August 1979 and the investment magazine Businessweek runs the following headline: «The Death of Equities – How Inflation is Destroying the Stock Market.» Fast-forward 45 years, and we know this predicted scenario never happened. The Dow Jones, the best-known stock index in the U.S., has increased by more than 4’500% since that headline. If someone had invested just 100 USD in a broadly diversified portfolio in 1979, that investment would now be worth over 4’500 USD today.
 
It is crucial to stick to your investment strategy and avoid making impulsive decisions solely based on gut feelings. The stock market is unpredictable – even experts can’t foresee the future clearly. However, what you can control is your own behaviour when investing. Emotions and uncertainties are often the main causes of poor decisions. Stick to your strategy, no matter what’s happening in the world or in the markets. If you let fear drive your decisions, you risk selling at the worst possible moment.
 
With a savings plan, you automatically invest your available money regularly and with a solid strategy, avoiding the temptation to chase an idea of «investment perfection» based on unpredictable timing.

With an ETF savings plan, you are most successful when following a long-term investment horizon. Time is your greatest ally in building wealth. The longer you invest, the more likely you are to reach your financial goals thanks to the power of compound interest. Compound interest occurs when you earn interest on interest that you’ve already made. Instead of spending the interest or dividends from your ETF investments, you reinvest them. The following year, you earn interest on both your initial capital and the previously earned interest. The longer this process continues, the more powerful the effect becomes—your wealth doesn’t just grow steadily, but exponentially. For beginners who want to invest in ETFs, it’s especially important to start early in order to see the maximum benefit from the power of compound interest.
 
Albert Einstein didn’t name compound interest «the eighth wonder of the world» for nothing. A clear example of its power is the Rule of 72: divide 72 by your expected average annual return, and you’ll know how long it will take for your wealth to double. For instance, with a 4% return, it takes 18 years (72 ÷ 4 = 18) to double your capital. In contrast, with a % interest rate in a savings account, it would take a full 72 years to achieve the same effect. The Swiss stock market has generated an average annual return of over 8% since 1969, meaning your wealth would have doubled every nine years.
However, a doubling of your money doesn’t necessarily mean you can afford twice as much. Due to the central banks’ target inflation rate of around 2%, your money loses purchasing power over time. To maintain your buying power, you need a return that is at least equal to the inflation rate.
 
To better understand the impact of compound interest, we recommend using a compound interest calculator. It allows you to see how any given amount grows over time. Once you’ve run a few scenarios, you’ll clearly see how time positively affects investment success. Therefore, start by investing early to fully benefit from the power of compound interest.

• Start early and invest regularly: The earlier you begin, the more you can benefit from the power of compound interest. With an ETF savings plan, wealth building happens almost by default – your money is invested regularly and automatically.
• Set long-term goals: Define an investment strategy and stick to it. An investment horizon of at least 5 to 10 years gives you enough time to ride out market fluctuations.
• Diversify: Spread your investments across different asset classes, markets, industries, regions, and currencies. For beginners who invest in ETFs, this is a deciding factor for reducing risks.
• Be patient: Don’t get discouraged by short-term market developments. Stay committed to your strategy and keep investing consistently.
• Watch out for low fees: High fees can eat into your returns. Always choose investments with low fees. There are six ETFs from Yuh that are especially attractive, as they can be purchased through the savings plan without any trading fees.