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Assets
Successfully invest with little money
Investing even small amounts with a plan can help you avoid retirement gaps and achieve financial independence.
- In the long run, investing your money is more financially rewarding than leaving it in a savings account because of the potential returns.
- You too can become an investor. In the long run, you can build substantial wealth by regularly investing smaller amounts.
- Pillar 3a retirement savings are a good way to start investing and close pension gaps early. This is especially important for women, who statistically receive less from the state pension system than men.
- Funds are the ideal way to start investing even without much prior knowledge.
Not quite sure how to start investing? Perhaps you don’t see the urgency, because your money is in a savings account. This view is understandable, especially if you are cautious about investing and have not yet delved deeply into the topic. But leaving money dormant in a savings account is a missed opportunity.
The reason is inflation: over time, your money loses value. This is because life gets more expensive, but the amount in your account is barely growing due to low interest rates. As a result, you can buy less with the money you save, which is worth less than before.
Long-term performance of a savings account compared to a portfolio
You can usually get started with as little as CHF 50 and it will pay off in the long run. When it comes to investing money, it’s better to deposit smaller amounts regularly than to wait and invest a larger amount all at once.
The main reason: If you don’t wait until you have a certain amount or until a certain time, you’ll get started sooner. This gives you a longer investment horizon and allows you to benefit from positive market developments for longer. Then there is the compound interest effect: if you reinvest the returns from your investment, the assets with which you can generate future gains will increase.
To illustrate this, we have prepared a sample calculation. This is not an investment recommendation.
Sample calculation: You invest CHF 50 a month for ten years. On average, you earn a profit – also called a “return” or “capital gain” – of 5 percent per year. After ten years, your capital has grown to CHF 7,764. CHF 6,000 are your monthly contributions; the remaining CHF 1,764 are what you earned from your investment. The proportion of capital gains increases from year to year. This is the effect of compound interest.
Example of capital growth with CHF 50 per month
In general, the following applies: only invest as much money as you can afford to lose. This means that you should first have enough money to cover current expenses, including a reserve. Then you should invest in a restricted pension plan. Whatever you have left as free savings can be invested according to your needs and goals.
An easy way to start investing small amounts is through a personal retirement plan. Instead of a pillar 3a account, you can invest your money in a pillar 3a custody account, which allows you to invest for the long term.
The advantage is that not only does this type of restricted pension plan offer a long investment period, it is also supported by the government. You benefit twice: first from the compounding effect due to the long investment horizon, which generally results in higher potential returns. In addition, you can save on taxes in the year you make the contribution – up to the current maximum limit (as of 2024: CHF 7,056 for employees with a pension fund).
Do you regularly have money left over that you would like to invest? If you want to get started right away but lack the necessary financial knowledge, funds are a great way to invest. Funds are “pots of money” where capital from different investors is pooled and then invested in different securities.
The advantage is that there are different fund products with different risk profiles and focuses (e.g., sustainability) allowing you to diversify sufficiently and invest according to your goals and values, even with small amounts.
