Swiss Franc ETF (FXF): Your Complete Guide to Investing in CHF

What is the Swiss Franc ETF (FXF)?

The Invesco CurrencyShares Swiss Franc Trust (FXF) is an exchange-traded fund designed to track the price of the Swiss franc relative to the US dollar. Launched in 2006, FXF holds actual Swiss francs in deposit accounts and short-term debt instruments, providing investors with direct exposure to CHF/USD exchange rate movements without needing a forex account. Trading on the NYSE Arca under the ticker FXF, this ETF offers a convenient way to:

• Gain currency exposure through a standard brokerage account
• Benefit from the Swiss franc’s safe-haven status
• Hedge against US dollar volatility
• Avoid the complexities of direct forex trading

Why Consider Investing in the Swiss Franc?

Switzerland’s currency has earned a reputation as a “financial sanctuary” during economic turbulence. Key advantages include:

• Stability: Switzerland’s political neutrality, strong rule of law, and low debt levels (under 30% of GDP) create exceptional currency stability
• Safe-Haven Demand: During market crises (2008 recession, COVID-19 pandemic), investors flock to CHF, driving its value up
• Inflation Hedge: Historically maintains purchasing power better than fiat currencies during high inflation periods
• Diversification: Low correlation with equities and other risk assets (typically 0.2-0.4 correlation with S&P 500)

How FXF Works: Mechanics and Performance

FXF operates by holding physical Swiss francs in JP Morgan Chase deposit accounts. When you buy shares, you’re effectively purchasing a slice of these holdings. The ETF’s value rises and falls with the CHF/USD exchange rate, minus a 0.40% annual expense ratio. Historical performance highlights:

• Outperformed USD by 37% over the past decade (2013-2023)
• Delivered positive returns in 8 of the last 10 years
• Average annual yield: 0.5-1.5% from interest on deposits
• Liquidity: Average daily trading volume exceeds 100,000 shares

Key Benefits of Choosing FXF

• Accessibility: Trade like a stock with no forex account required
• Transparency: Daily disclosure of CHF holdings
• Cost Efficiency: Lower fees than forex brokers (typical spreads under 0.1% vs. 1-2% for retail forex)
• Dividend Income: Monthly distributions from interest earned on deposits
• Portfolio Protection: Acts as a hedge during equity market downturns

Potential Risks and Limitations

• Currency Volatility: SNB interventions can cause sudden drops (e.g., 2015 when CHF fell 15% in minutes)
• Negative Rates: Switzerland’s negative interest rate policy (ended 2022) could return, reducing yields
• US Dollar Strength: Prolonged USD rallies diminish FXF’s value
• Inflation Risk: Unlike TIPS or commodities, offers no direct inflation protection
• Opportunity Cost: During bull markets, capital may grow faster in equities

How to Invest in FXF: A Step-by-Step Guide

1. Open a brokerage account (e.g., Fidelity, Schwann, or TD Ameritrade)
2. Fund your account with US dollars
3. Search for ticker symbol “FXF”
4. Choose order type: Market (instant execution) or Limit (set price)
5. Monitor positions and set price alerts for significant CHF news
6. Consider dollar-cost averaging to mitigate timing risk

FXF vs. Alternative Swiss Franc Investments

Method	Pros	Cons
Forex Trading	Leverage options, 24/5 trading	High spreads, complex for beginners
Swiss Bank Accounts	Direct ownership, deposit insurance	High minimums ($500K+), paperwork
Swiss Stocks (NVS, ROG)	Equity growth potential	Company-specific risks, currency-hedged versions available
FXF ETF	Liquidity, low entry point ($70/share)	Management fee, no leverage

Frequently Asked Questions (FAQs)

Q: What’s the minimum investment for FXF?
A: You can buy a single share (currently ~$70), making it accessible to most investors.

Q: How are FXF dividends taxed?
A: Distributions are taxed as ordinary income. International tax treaties prevent double taxation.

Q: Can FXF be held in retirement accounts?
A> Yes, it’s eligible for IRAs, 401(k)s, and other tax-advantaged accounts.

Q: How does FXF react to SNB rate decisions?
A> Interest rate hikes typically boost CHF value (and FXF), while cuts have the opposite effect.

Q: Are there leveraged alternatives to FXF?
A> No major leveraged CHF ETFs exist currently due to low demand and regulatory constraints.

Strategic Considerations for Investors

FXF works best as a tactical allocation (5-10% of portfolio) during:

• Periods of elevated geopolitical risk
• US dollar weakness cycles
• High inflation environments
• Equity market corrections

Rebalance quarterly to maintain target allocation. For long-term holders, reinvest dividends to compound currency gains. Always consult a financial advisor to align with your risk profile and investment objectives.