neon investment plan: How to buy the 50 biggest Swiss companies with 0% trading fees
We’re excited to introduce our latest venture in empowering you to take charge of your financial journey: Our new partnership with Leonteq. Because we're dedicated to removing barriers to investing, we are building on our commitment to providing accessible and cost-effective financial solutions. We do this by offering you the opportunity to buy the FuW Swiss 50 Index with 0% trading fees as part of the neon investment plan. Continue reading to explore the FuW Swiss 50 Index and learn how our partnership with Leonteq resonates with our mission to democratise finance.
Who is Leonteq?
Leonteq is a Swiss company with a global presence across Europe, the Middle East, and Asia. It is a prominent figure in the financial technology sector, renowned for its extensive experience and for its cutting-edge technology. Specialising in structured investment products, Leonteq gained a reputation as a leader in the industry. This reputation is underlined by Leonteq regularly being honoured, among other things, for the pricing and innovation of its products at the Swiss Derivative Awards, a leading event in the sector of structured products in Switzerland. Together, we strive to expand your access to investment opportunities: As issuer of the «FuW Swiss 50» ETP (read on to find out what an ETP is below), Leonteq is responsible for the technical implementation and trading on the stock exchange, while we at neon offer you the possibility to buy the ETP without trading fees as part of our investment plan.
About the offer
You can find Leonteq’s ETP in the neon app under the «Invest» tab with the name «FuW Swiss 50 ETP». By adding the FuW Swiss 50 ETP to your investment plan, you can buy it without the usual 0.5% trading fee for ETFs, making it even more attractive. The only remaining costs for you when buying the ETP via your investment plan are the product costs (Total Expense Ratio, TER) of the ETP because there is no federal stamp duty on this product.
Read on for more information about why we chose this Leonteq ETP instead of an ETF tracking the SMI for our investment plan.
Wait, what are ETPs?
First of all, it's not a typo: ETP is short for Exchange Traded Products, meaning investment products that are traded on a stock exchange and track the performance of an index. They offer investors broadly diversified, cost-effective and easy access to the financial markets. ETFs (Exchange Traded Funds) are a specific type of ETPs that are based on a stock index. ETPs, on the other hand, enable the trading of alternative asset classes or niche products.
In addition, the «FuW Swiss 50 ETP» is secured by a deposit, which offers additional safety compared to ETFs. How? The answer is (relatively) simple: By Leonteq providing a collateral, which is basically a deposit in the form of securities that matches the value of the ETP. The collateral is deposited and held in safekeeping by SIX Group, a Swiss services provider in the fields of securities, financial information, as well as payments. If Leonteq were to default on payments (i.e. go bankrupt), SIX would sell the collateral and pay out the equivalent value of the investment product to you, the investor. Such a liquidation would be carried out quickly, especially in comparison with bankruptcy proceedings, but also in comparison with the liquidation of an investment fund with a foreign domicile. However, and this is important to understand, the collateral does not protect investors against falling prices – as an investor, you carry this risk yourself (just like with any other investment).
Why the ETP FuW Swiss 50?
The «FuW Swiss 50» is an investment instrument based on an index created by «Finanz und Wirtschaft», a Swiss financial and economic newspaper. This index is a representative reference index for the Swiss equity market.
We've chosen the «FuW Swiss 50» ETP because it gives you a broad and balanced exposure to the Swiss stock market by equally covering the largest and therefore most successful Swiss companies. It offers investors a well-diversified investment opportunity in Switzerland's key industries and sectors at a comparably low entry price. With it, you can gain access to Switzerland’s 50 top companies representing various sectors, including healthcare, financials, consumer discretionary, industrials, and more (we will talk about the balancing of companies and sectors in more detail below – so just keep on reading). As an investor, you can therefore participate in the performance of the Swiss market with a low investment amount and an annual TER of 0.72%, which is on the higher end compared to other products tracking the Swiss equity market. However, the FuW Swiss 50 is more equally balanced than ETFs tracking the SMI or the SPI, for example. And, in turn, this equal balancing in the FuW Swiss 50 ETP leads to a lower cluster risk.
Why not the SMI?
Since Leonteq’s «FuW Swiss 50» replicates the Swiss market, why not just go with an ETF that mirrors the Swiss Market Index? The short answer is: Because the FuW Swiss 50 Index ETP offers a more diversified and balanced portfolio compared to the Swiss Market Index (SMI) ETF. While the SMI is mainly influenced by a few large companies, the FuW Swiss 50 evenly weights its 50 largest companies, providing broader exposure across sectors and reducing concentration risks.
To give you a more detailed answer, let’s first have a closer look at the Swiss Market Index, or SMI in short: The SMI consists of the 20 largest and most liquid Swiss stocks and tracks their performance. In an attempt to ensure a fair representation of their influence on the market, the 20 stocks in the SMI are weighted according to their free-float market capitalisation – a technical term that calls for a short digression: Free-float market cap is the total value of each company's outstanding shares, excluding restricted shares held by insiders, for example. Or in simpler terms: Imagine you’re a kid (named Forrest Gump) with a box of chocolates – and your mum (apart from giving you life lessons) told you not to eat them all at once. Calculating free-float market capitalisation is like only counting the chocolates you can munch on right away, and ignoring the ones that are off-limits for now.
Free-float market cap is a widely used calculation method for representing companies in an index. Mainly because it offers a more accurate representation of a company’s true value on the open market compared to what is called full market capitalisation, which takes into account both available and restricted shares – i.e. counting all the chocolates in the box, including the ones you’re supposed to keep for later. However, apart from not being allowed to eat all the chocolates in one sitting, there’s another disadvantage in basing the weighting of an index on the underlying companies’ free-float market cap. Namely that larger companies take up more space because they often have a significant portion of their shares available for trading (= higher free-float market cap) than smaller companies with a smaller portion of tradable shares (= lower free-float market cap). And that’s the case with the SMI, in which the three giants Nestlé, Novartis, and Roche make up almost half the weight of the index. As a result, they can heavily sway the index's performance, leaving the other 17 companies with comparably little impact. In addition, this also means that the SMI contains only 6 sectors with a significant weighting, leading to an overexposure to the healthcare (~40%) and consumer goods (~20%) sectors.
On the flip side, the FuW Swiss 50 index contains the fifty largest companies listed on the SIX Swiss Exchange. While – like in the SMI – the 50 companies in the FuW Swiss 50 index are also selected based on their free-float market cap, they are divided into two weighting classes to avoid imbalance: The 25 largest companies each have a weighting of around 2.67% each, while the 25 smaller companies are weighted at roughly 1.33% each. This means that the first half of the companies accounts for two thirds of the index, while the second half accounts for roughly one third. Last but not least, this weighting concept developed by the editors of «Finanz und Wirtschaft» also leads to the FuW Swiss 50 ETP providing significantly more visibility to the 13 sectors that are most important for the Swiss economy, 12 of which each have an individual weighting of more than 2%.
All of this creates a more diversified and evenly balanced portfolio with reduced concentration risks. In short, the FuW Swiss 50 provides you with a well-rounded exposure to a broad spectrum of Swiss companies, industries, and sectors while protecting you as investor against a possible issuer default by covering the counterparty risk.
While Forrest Gump’s mum was right when she said that life was like a box of chocolates because «you never know what you're gonna get», please don’t transfer this analogy to your investments. Because you can (and should) definitely know what you buy with your money when participating in the markets. With that being said, we recommend you inform yourself further – for example here – before making a decision for or against buying the FuW Swiss 50 Index ETP.
Please read this before opening neon invest!
This blog post is an offer according to FIDLEG, Art. 3 lit. g, and is aimed to inform about our our promotion with Leonteq for the FuW Swiss 50 ETP. However, please note that we do not advise you to buy or sell any specific financial instruments. In other words: It is up to you if you want to buy or sell the FuW Swiss 50 ETP or not. That's why, before you engage in neon invest, you should always seek guidance from independent experts and remember that investing involves inherent risks. It's crucial to only invest money that you can afford to lose – in the worst case all of it. And finally, past performance of financial instruments never predicts the future. If you want to read the complete version of this disclaimer in proper legalese, please head this way.
You can find more information on how we earn money on our Partner philosophy blog.
If you want to know more about our investment plan, click here. And if you want to have more information about other assets you can buy with 0% trading fees as part of our investment plan, check out this page.