Index Fund

An index is a list of companies picked by fixed rules, together with how much weight each one gets. The SMI, for example, follows the 20 largest and most liquid Swiss companies. An index fund simply buys what is on the list, in the same proportions or close to them, and adjusts when the list changes. Nobody decides which shares look promising: the index decides, and the fund follows.

That's the opposite of an actively managed fund, where a manager picks stocks in the hope of beating the market. An index fund doesn't try to beat the market. It aims to be the market, at the lowest possible cost.

Indices like the SMI and the SPI weight each company by its market value: the worth of its shares available for trading. Take a made-up index of three companies and CHF 1,000 in a fund that tracks it:

If company A's share price rises 10%, the index rises 6%, because A makes up 60% of it. Your fund rises the same 6%, to CHF 1,060, and A's weight grows to 62.3% on its own. The fund didn't have to buy or sell anything to keep up, which is why index funds trade little. Real indices work on the same principle with more companies: 20 in the SMI, more than a thousand in a world index.

Weighting by market value lets the largest companies dominate an index. SIX, which runs the SMI, has capped any single company at 18% of it at each quarterly review since 2017, in line with the EU's diversification rules for funds.

An index fund and an ETF aren't opposites. "Index fund" describes what a fund holds: a copy of an index. "ETF" describes how it's traded: on a stock exchange, during the day. Most ETFs are index funds, but index funds also exist as ordinary funds you buy through your bank, at a price usually set once a day, and some ETFs are actively managed.

Following the index instead of trying to beat it gives you three things:

Keeping pace has been hard to beat. Over the 10 years to the end of 2025, 84.07% of the active funds investing in Swiss shares and priced in francs trailed their index or closed, according to S&P's SPIVA report, which counts fund returns after their yearly costs. The active vs passive investing page has the full record.

Three questions settle most of the choice:

• —Which index. The SPI covers the Swiss market, more than 200 companies, with their dividends. A world index holds more than a thousand companies in many currencies, so it brings currency risk.
• —What it costs. In September 2026, the four index funds and ETFs on Swiss shares compared on the active vs passive page cost 0.09% to 0.41% a year, their total expense ratio.
• —Where you buy it. An index fund through your bank, at the price the fund usually sets once a day: subscribing new units of a Swiss fund carries no stamp duty. An ETF through a bank or broker, on the exchange during the trading day, with a broker fee and, at a Swiss bank or broker, stamp duty.

An index fund gives you the market's return, all of it, including the crashes. When the market falls 30%, your fund falls about 30% too. Nobody is trying to sidestep the fall, and nobody will move your money to safety. And because the fund has costs and the index doesn't, the fund usually trails its index slightly.

That's the deal: you give up any chance of beating the market in return for never falling far behind it. For many people saving over decades, that's a trade worth making, as long as they can sit through the bad years without selling.