Bonds as an alternative
What this all means is that it is impossible to find a really safe investment with good returns and high liquidity. Certainty, returns and liquidity are three goals that are at odds with each other when it comes to investing. The article “The link will open in a new window The “magic triangle” of financial investments” features a video on this conflict.
That said, there are investments that do yield comparatively attractive returns whilst still being fairly safe bets: bonds. This is especially true of bonds in Swiss francs that have good creditworthiness, though they too do still come with certain risks. If interest on the market increases, for instance, then a current bond will fall in value because newly issued bonds offer a higher coupon, making them more appealing. A bond with a face value of CHF 100 and an interest rate of 5% is more valuable in a low-interest environment than a bond with the same face value, but which has an interest rate of 2%. These scenarios can occur as bonds bear interest at a fixed rate over several years, whereas market rates can change constantly. When it comes to foreign bonds, however, we cannot forget about currency risk. Exchange rates depend heavily on monetary decisions made domestically and abroad, as well as on economic trends. It is hard even for experts to predict how these exchange rates will behave. This means careful investors should firmly hedge their currency risks against share price losses, or they should simply avoid securities in foreign currencies full stop. A lot of convertible bonds are also examples of securities that are considered to be conservative, yet they do have some characteristics that investors should be aware of. Find out more in the article “Convertible bonds”.