I want to invest 40'000 Swiss Francs (= about 25'000 USD) in
Switzerland. What is the best possible investments, i.e. highest
return at lowest risk?

Hi,

It’s a very interesting question with a lot of possible angles and
options.
First let me give you some sort of disclaimer: I’m not going to give
you straight investment advices as I’m not a banker. The answer
provided here is based on my own wisdom and experience (as I have some
in this area). I am not going to give you names of companies you
should buy; instead, I’ll give you an overview of the different types
of investment options you have and I will give you an advice which
_type_ of investment is suitable for your situation.
This is only a personal advice and no rights can be claimed from it. 

The first thing you think about when you want a safe investment is
real estate. Especially near the urban areas like Zurich the value of
real estate will continue to rise. Basically, you can’t go wrong with
it. The problem is: with $25000 you can do very little in real estate.
You will definitely need more cash in order to make a good investment
in that area. So this is not an option.

Stocks are also interesting. It really depends on whether you want to
make a long-term or short to mid-term investment. If your investment
is short to mid-term, don’t go into stocks. The European stock markets
are not good at the moment and it is very unsure if they will rise
within the next few years. This way you are running to big of a risk.
If your investment is long-tem (say, at least 10 to 15 years) than
stocks would a very good option. This is because most of the current
stock prices are low and, although we can’t exactly say when, it is
certain that over a longer period of time the stocks will go up.
If you are going for stocks, don’t invest in IT: the stability of that
sector is really bad at the moment and we can’t foresee which
companies are going to survive in the next few years and which aren’t.
There are however some very good Swiss pharmaceutical companies. This
is a sector which I would have no problem investing is (as long as
it’s long-term): you can be sure this sector will continue to grow in
the western world for the next few decades as more and more people are
spending more and more cash on medication and health.
Another note: don’t invest in Swiss banks. Currently, these banks are
running beautifully because of the option of having anonymous bank
accounts still exists in Switzerland; however, it is uncertain if this
will stay that way because Switzerland does have to join the European
Union at _some_ point and then they will have to give up this “bank
secret”.

Another option is convertible bonds. The advantage to these bonds
compared to stocks is that you have more freedom and you will be less
dependable on the market situation.
Bonds will give a fixed interest rate which the company from which
you’ve bought it will give you. Unlike stocks, the rate and the amount
you will yearly receive is not tied to the performance of the company.
This means that even if the company is not performing well, you will
still receive interest (with stocks you will only receive dividend
when the company is making a profit).
The moment the company start to perform better, you can swap you
convertible bond for stocks of that company and you can start
receiving an even possible higher rate of dividend with the
possibility of making capital gains.

Basically it comes down to this: 
-real estate would be the most ideal investment because you are
running very little risk while at the same time you have a possibility
of high returns. The problem is that $25000 is too little to do
anything major in this area.
-stocks are a good option if your investment is long-term (at least 10
years). Don’t invest in IT or Swiss banks.
-convertible bonds are the best option if your investment is short to
mid-term. This way you will get a fixed interest rate.

If you want more information about which stock or bond to buy, you
will really to need contact a bank which can give you detailed,
professional and up to date advice.

Hope this answer is to your satisfaction! If you have any further
questions, don’t hesitate to ask!
paul_b_18-ga

Cheese?

The only rating information readily available is for US, German,
french and dutch based funds through morningstar.com, morningstar.nl,
etc. (these funds do invest in swiss securities and some of these
funds are themselves offered by swiss banks - however the jurisdiction
(and usually the currency) is in the country that the fund is listed
(see below for some funds that are managed under swiss law) :

I found the following ranking of CHF (swiss franc) based funds through
morningstar.nl (direct URL not available, translation into english
mine) :

Fund name   Returns 1day% 1week% 1month% 3month% 6m% YearToDate%      
  Date

Average                0.1      0.0      0.9      2.0      1.4     
1.8       Fidelity Swiss Franc Currency Fund Acc      30.70      0.1  
   0.0      0.8      1.9      1.2      1.7      15/5
Parvest Short Term CHF Classic Acc      284.96      -      0.0     
0.9      2.0      1.4      1.9      15/5
Parvest Short Term CHF Classic Inc      260.36      0.1      0.0     
0.9      2.0      1.4      1.9      15/5

Based on this, the bottom one has the highest return for a money
market fund :

http://www.morningstar.nl/funds/overview.asp?cid=FXLUX03740&lastpage=Fonds%20selector&LastPageURL=/fundselect/result.asp?|sMEC=|lMSCategory_Id=101|sSearch=Search|sFCCurrency_ISO=|sDomicile_ISO=|sManagementFee=|sYTD=|s1Month=|s3Month=|s1Year=|s3Year=|sRating=|sStd3Year=|sSharpe=|lSize=0|sSector_Id=-1|lRegion_Id=0|ISA=0|PEP=0|CAT=0|sCouCat=|tab=RSLTS|SortBy=b_FundName|SortOrder=ASC|FirstLetter=|Page
o=1

You may also want to try UBS (Large swiss bank with international
locations. Here is information on their fund performances.

http://www.ubs.com/e/investmentfunds/products/portfolio/swisslaw.html#bond
There is always a risk return tradeoff between funds, my suggestion is
that you pick one of the funds on morningstar.nl with the highest
morningstar rating. The higher the morningstar rating in the
particular risk class you are looking for, the higher the star rating,
the better the performance of that fund, given the risk that it is
taking on.

If I was fully registered (3 weeks and counting since I submitted my
initial application), I'd write more as an answer, but for now here's
a comment that should give you all the tools you need to make a
decision (there is no one answer to "what is the best fund" - it
depends on your risk preferences.

Started Comment POST prior to answer ... yet the system locked me out
(So far the comment box has been locked for 15 minutes - I think the
answer was started before the research was done... either that or
we're gearing up for an answer of shakespearean proportions :). Guess
that's why this is a beta system at the moment.

Neither poster answersed what the OP asked. He asked for the highest
return for the lowest *risk*. He is therefore very risk adverse, and
should either be putting his money in a bank, or he should be buying
the swiss equivalent of gilts or t-bills. If he is slightly less risk
adverse he should put a proportion of his cash that he is comfortable
risking into a fund that tracks the broadest possible section of the
swiss stock market, equivalent to the FTSE 500, and the rest into the
bank and or government debt.

Further reasurch should be directed at "Portfolio Theory", as
developed by Markowitz (1957), or "Modern Portfolio Theory"

Charlie

Can I say in my defense that all of the funds I listed were currency
funds denominated in swiss francs. And the funds offered by UBS
provide that risk/return tradeoff that you mention.

As for Markowitz' portfolio theory, morningstar.com (If I plug them
one more time I am going to demand that they pay me royalties :) has a
great "university" section where you can learn about portfolio theory
as well as the situations where portfolio theory fails. While they
have a little bit of information on their US site about investing
internationally, there is better information to be found through their
regional sites/offices.

One of the most important developments of the last 20 years has been
the continued erosion of the functional difference between bank,
mutual funds and other financial insitutions. While some countries put
restrictions on this blending of services, it is becoming harder and
harder to distinguish between the various types of institutions.
"Putting it in a bank" is as vague a directive in Switzerland as "buy
your food at a grocery store". Getting impartial information on the
exact decision to make is still very difficult - perhaps that's where
google answers comes in :)