Are ETPs Safe for Swiss Investors? (Risk vs Reward Guide)

Did you know that exchange traded products, or ETPs, are becoming increasingly popular in Switzerland, even though many investors are unsure how safe they really are? I still remember my first ETP very clearly. It felt exciting, but also a little intimidating, mainly because I did not fully understand the risks involved.

That is exactly why I wrote this article. Here, I explain in a practical and easy-to-follow way which risks come with ETPs, how you can protect yourself as a Swiss investor, and what to look out for to keep your investments smart and well balanced.

If you have never bought an ETP before or are wondering how ETFs differ from ETPs, it helps to start with these guides: (einfach-erklaert-exchange-traded-product-etp) and (etf-oder-etp-unterschied-erklaert). They will give you a solid foundation.

What are ETPs and how do they work?

ETPs are exchange traded products that track one or more underlying assets such as shares, bonds or commodities. They are similar to ETFs in many ways, but can also have more complex or specialised structures.

The idea is to use one product to gain exposure to different asset classes or to implement specific investment strategies. If you are new to this topic, you can find a beginner-friendly overview here: (etps-schweiz-was-musst-du-wissen).

When I first started, I was surprised by how flexible ETPs can be. At the same time, I quickly realised that a basic understanding is essential to properly assess the risks.

Typical risks associated with ETPs

ETPs are not risk-free. Market movements and currency fluctuations can have a significant impact on performance.

There are also issuer and collateral risks. Many ETPs are legally structured as debt instruments. If the issuer or another key party involved in the structure fails, losses may occur even if the underlying asset performs well. A product being described as secured does not automatically mean it is risk-free. What matters is the type, quality and custody of the collateral.

Counterparty risk can also play a role, as well as leverage risk in structured or leveraged ETPs. In addition, there may be asset-class-specific risks, such as default risk in bonds.

Liquidity is another important factor. Some ETPs are traded less frequently, which can make buying or selling more difficult. Tracking differences between the underlying asset and the ETP’s performance can also occur.

For investors, it is crucial to look beyond the price and understand the product structure. Transparent products make risk assessment much easier.

Protection mechanisms for Swiss investors

Diversification is one of the most effective ways to reduce risk. Combining different asset classes or multiple ETPs helps avoid concentration risk.

It is also important to understand the legal framework. In Switzerland, many ETPs are classified as structured products and are not subject to the Collective Investment Schemes Act. This means they are not supervised by FINMA in the same way as funds or ETFs at product level.

Protection mainly comes from the regulated environment around the products. This includes exchange rules and listing requirements, such as disclosure obligations. On the Swiss stock exchange, ETPs are defined as secured debt instruments.

There is also a prospectus requirement, with formal review by a FINMA-licensed review body. This ensures completeness and consistency, but it does not replace your own risk analysis. For retail investors, a key information document is also required for complex financial instruments. This provides a compact overview of risks, scenarios and costs.

Looking closely at the product structure is essential. For many ETPs, issuer and collateral risk are key considerations.

Choosing liquid and transparent ETPs can further reduce unpleasant surprises. While market makers are required on SIX to support tradability and usually help keep spreads narrower, this does not guarantee strong liquidity during periods of market stress.

A practical example is multi-asset ETPs such as the Smart All World ETP (smart-all-world-etp-inhalt). Broad diversification can help reduce the impact of sharp movements in individual asset classes.

Practical tips for investing more safely

Start by understanding your own risk profile and choose products that match it. Beginners are often better off starting small and building experience gradually.

Review your portfolio regularly and adjust allocations if needed. If you hold international ETPs, currency risk should also be taken into account.

From a tax perspective, Swiss investors should be aware of the rules. A look at /etp-steuerfolgen-schweiz can help avoid surprises. Understanding the difference between ETFs and ETPs is also important in this context: (etf-oder-etp-unterschied-erklaert).

Common mistakes and pitfalls

A common mistake is investing in products without fully understanding their structure and risks.

Emotional decisions during periods of strong market movements can be costly. Liquidity is often underestimated as well.

Investors who inform themselves in advance, use checklists and follow guidance such as /etps-schweiz-was-musst-du-wissen significantly reduce their risk exposure.

Conclusion

ETPs are not risk-free, but they are traded within a regulated environment. With careful selection and sensible diversification, Swiss investors can improve their chances of achieving stable, long-term results.

Transparency, regular monitoring and a healthy awareness of risk are key to investing in ETPs more safely.

Call to action: Review your ETP holdings, adjust your portfolio where needed, and invest with confidence. If you are still unsure, start with the basics here: (etf-oder-etp-unterschied-erklaert) and (etps-schweiz-was-musst-du-wissen).

FAQ

1. Are ETPs safe in Switzerland?
   ETPs are widely used financial products but they are not risk-free. In Switzerland, many ETPs are treated as structured products and are not supervised at product level like funds or ETFs. Key factors include underlying asset risk, issuer and collateral risk, costs, liquidity and documentation such as the prospectus and key information document.
2. What risks do ETPs involve?
   Market risk, currency risk, default risk in bonds, liquidity risk and tracking differences are among the most common.
3. How can I reduce risk when investing in ETPs?
   Diversification, choosing transparent products from reputable issuers, and reviewing your portfolio regularly all help reduce risk.
4. Do I need to consider tax aspects?
   Yes. Reviewing the information at (etp-steuerfolgen-schweiz) can help you understand the tax implications.
5. Where can I find reliable information for Swiss investors?
   Articles such as (etps-schweiz-was-musst-du-wissen) and (etf-oder-etp-unterschied-erklaert) provide solid foundations.