How to Choose ETFs: What Actually Matters for Long Term Returns

You want to choose ETFs so you can start investing in ETFs – ideally for the long term, in a structured way, and without having to pick individual stocks. In Switzerland, the ETF market is huge. With a bit of ETF knowledge, the selection process becomes much easier.

This article is designed as an ETF guide for beginners and a compact step-by-step overview. It will help you understand index funds (passive investments), compare ETFs, and build an ETF investment strategy that fits your goals and your risk profile.

Note: This article is not personal investment advice and not tax advice. It is intended as guidance to help you compare ETFs and develop a suitable strategy.

Understanding ETFs: What Is an ETF (Index Fund) – and How Do Passive Investments Work?

An ETF (Exchange Traded Fund) is a fund that is traded on the stock exchange. Many ETFs are index funds, meaning they track an index. This gives you broad diversification across the market.

That is the core idea of passive investing. You do not try to beat the market. Instead, you use an ETF to replicate the market efficiently and cost-effectively in order to achieve long-term returns.

Important points for beginners:

• ETF benchmark: You compare ETF performance against a benchmark index, such as the MSCI World.
• Market capitalisation: Many indices weight companies according to market capitalisation. This affects which companies dominate the ETF.
• ETF tracking: What matters is how accurately the ETF tracks its index, often measured by tracking difference.

ETF or Fund: What Is the Difference?

The question “ETF or fund?” comes up frequently. In short, ETFs are usually transparent, exchange-traded and often passively managed, while traditional mutual funds are often actively managed and typically more expensive.

For long-term investors, cost optimisation is crucial. This is where ETFs often have an advantage.

ETF Selection Criteria: How to Compare ETFs

If you want to choose ETFs, a structured approach helps. The following ETF selection criteria have proven useful in practice.

ETF Investment Strategy: Strategic Investing Instead of Emotions

A good ETF strategy does not start with the “best product,” but with a plan.

Key steps:

• Define your investment goal (retirement, wealth accumulation, property purchase).
• Assess your risk profile realistically.
• Decide on an investment plan (lump sum or ETF savings plan).

Strategic investing means setting rules instead of reacting emotionally. This increases the likelihood of achieving solid long-term returns.

Core-Satellite Strategy: Global ETFs as the Foundation

For many investors, a core position in global ETFs makes sense. You can then add satellites if appropriate:

• Equity ETFs (global or regional)
• Bond ETFs for stability
• Regional ETFs (Switzerland, Europe, emerging markets)
• Sector ETFs (technology, healthcare)
• Commodity ETFs (often structured as ETPs or ETCs)

This allows you to diversify your ETF portfolio without overcomplicating it.

Building an ETF Portfolio: A Simple Framework for Beginners

A simple structure could look like this:

Core: Global equity ETFs for growth
Stabilisation: Bond ETFs for risk reduction
Optional satellites: Regional, sector or dividend ETFs

This is not a rigid rule, but a decision framework. Your exact allocation depends on your risk profile, investment goal and time horizon.

Rebalancing and Monitoring ETFs

Even passive investments require occasional review, but not daily monitoring.

Guidelines:

• Portfolio review one to four times per year is sufficient for many investors.
• Rebalancing: Adjust your allocation if it deviates significantly from your target.
• Evaluate performance over three to five years, not just short-term fluctuations, and always against the appropriate benchmark.

ETF tools and comparison platforms can help you conduct proper analysis.

Practical Implementation in Switzerland: Brokers and Platforms

To get started, you need an ETF account with an online broker. In Switzerland, Saxo Bank and Swissquote are commonly used.

Compare:

• Custody fees
• Trading fees
• Available exchanges
• Savings plan functionality
• Currency conversion costs

Smart All World ETP: A One-Product Alternative?

As an alternative to traditional ETFs, some investors consider ETPs such as the Smart All World ETP. This product allows exposure to multiple asset classes in one instrument, with a focus on future-oriented themes.

If you consider such an ETP, carefully review the product documentation and ensure the structure and risk profile match your strategy.

FAQ: ETFs for Swiss Investors

Are ETFs safe?
ETFs are transparent and diversified, but not risk-free. Price declines are possible, especially with equity ETFs. A long time horizon is essential.

What about ETF taxes?
Tax treatment depends on domicile, distribution policy and personal circumstances. Seek professional advice if needed.

How do I find the best ETF comparison?
Use a checklist. Compare TER, tracking difference, liquidity, index methodology and provider quality. Also consider realistic trading costs.

Conclusion: ETF Benefits, Risks and Practical Tips

ETF advantages include simple diversification, relatively low costs and transparency. They are well suited for long-term investing.

ETF disadvantages include market risk and the possibility of choosing unsuitable specialised products, such as narrow sector ETFs, which increase risk.

Beginner tip: Start simple, stick to your investment plan, rebalance periodically and use reliable tools.

If you consistently apply these ETF selection criteria, you can choose ETFs that fit your goals and build your portfolio step by step in a structured and professional way.