I am looking for a safe fixed-income investment with around 4% income.
How can I find the best option with the lowest risk?
I don’t know much about investments, and I have my money in my saving account, which I understand is not the best idea, especially in case of high inflation.
Investing is often not low risk. Try to figure out what your risk appetite is and invest accordingly.
As they say sometimes: only invest what you can afford to lose.
it depends on your currency. in USD, you can get >4% just on cash.
And in EUR, a 3% just on cash is possible nowadays...
Generally speaking a savings account is considered a low risk option and currently gives a return of somewhere round 1%. As you are seeking a return of four times that figure it is not achievable given your current expectations. You are going to have to take on considerable risk to obtain your objective.
All investing opportunities involve an element of risk and no one will pay you more than they have to. So if someone is willing to offer you more than the going rate you can be absolutely certain you are taking on more risk. You may not see or understand the risk but it is always there.
So the questions you need to answer are how long is your time line, what type of risks are you willing to take on and how much are you willing to risk in order to obtain the return you wish to achieve.
In Switzerland or are you talking accounts in USA and Eurozone? You can get 4%+ savings accounts in UKbut you likely need to be resident.
People might recommend you invest in 'safe' companies with good dividend forecasts.
No such thing (in CHF; everything else is additional FX or other kind of risk). No free lunch of course.
Best you have at hand are:
- ~1 year promotional savings accounts with WIR bank and Bank Cler giving you 1.8% and 1.65% p.a. respectively
- mid-term deposits (Kassenobligationen) from 2-10 years by Cembra giving you 1.5-2.75% p.a.
Even if not, you're exposed to currency risk, so if you ever want to cash in, in CHF terms it might even become a loss!
You are exposing yourself to both FX and country risk...
Yes, in Switzerland, the banks have increased the rates of their fixed term deposits. But you need to have a minimum investment of 100k (or equivalent) and lock the money for a few months up to a year.
And of course there is FX risk, but if you have a stream of income in EUR which is irrespective of the FX rate so the EUR accumulate because you cannot spend them here, then it is much better that letting them sit on a 0% savings account.
Keeping your cash in EUR can easily be worse than letting them sit at 0% CHF if you are not exposed (or will be in future) to that currency in your life. There is no free lunch - the difference between what another currency is paying in interest rate and CHF will be the cost you'd need to pay to have a currency hedge (assuming the risk is the same).
If OP does not want to get exposed to any other currency and wants a no-risk investment, the only thing to do is get the 1-2% out of the savings accounts / fixed deposits mentioned above in the thread
the part in bold is where you should start. instead of asking for investment advice you should reflect on how long you want to invest, your risk appetite and your liquidity needs i.e. if you need the money do you need to get it out quick or not.
these 3 factors will immediately reduce the investable world to a few options you can then analyse
Thx for the great answers
I am happy to invest 200K+ CHF for 5+ years
The Cembra bank 2.25% - 2.75% investment looks to be a safe-enough to me
I understand (better now) the currency risk; it looks like CHF has become around 20% stronger during the last five years ... what about international fixed-income investments available in CHF and can beat Cembra with a similar level of risk?
... I mean 20% stronger compared to EUR, and USD is a different story
Cembra has, according to them, rating A-.
Does it bode well if it has the lowest ranking on this page?
https://www.moneyland.ch/de/bankenrating
You have just made my point about understand risk! Unless you are going to buy bonds issued by these banks those ratings are not relevant. As the holder of a savings or deposit account you are interested in two things - the guarantee and the institution's T1 ratio.