Swiss Performance Index (SPI)

The Swiss Performance Index (SPI) is the most comprehensive stock exchange index for the Swiss equity market. Calculated and published by the SIX Swiss Exchange, it's a giant family photo of the Swiss corporate world. Unlike its more famous and exclusive sibling, the SMI (Swiss Market Index), the SPI aims to include every company that has its primary listing in Switzerland. This makes it a broad-based index that reflects the performance of large, medium, and small Swiss companies combined. Critically, the SPI is a total return index. This means it doesn't just track the price movements (capital gains) of its constituent stocks; it also assumes that all dividends and other distributions are reinvested. This provides a much truer picture of an investment's actual performance over time, a perspective that is essential for any serious long-term investor.

Imagine you own an apple orchard. Your profit doesn't just come from the rising value of the land (price appreciation); it also comes from the apples you harvest each year (dividends). A price index only looks at the value of the land, ignoring the fruit. The SPI, as a total return index, looks at both. It automatically accounts for the powerful effect of compounding dividends, which is a core engine of wealth creation that value investors cherish. It shows what you would have earned if you had taken every dividend payment from every company in the index and immediately used it to buy more shares. This makes it a far superior benchmark for measuring long-term investment success compared to indices that ignore dividends.

The SPI's main claim to fame is its breadth. While the blue-chip SMI index focuses on the 20 largest and most liquid Swiss securities, the SPI casts a much wider net, including over 200 companies. The main criteria for inclusion are:

• The company’s equities must be listed on the SIX Swiss Exchange.
• At least 20% of the company's shares must be available for public trading (this is known as the free float).

This inclusivity means the SPI provides a genuine, unfiltered view of the entire Swiss stock market's health, from global pharmaceutical giants to specialized local engineering firms.

Like most major indices, the SPI is weighted by market capitalization. In simple terms, bigger companies have a bigger say. A 1% move in Nestlé's stock price will affect the index far more than a 1% move in a small watch-component manufacturer. However, the SPI cleverly uses a free-float adjustment. Instead of using a company's total value, it only counts the value of shares that are actually available for trading on the open market. It excludes shares held by governments, founding families, or other corporations. This gives a more realistic picture of the market's supply and demand dynamics.

Thinking about the Swiss market through its indices is like choosing a map.

• The SMI is a tourist map: It shows you the 20 biggest landmarks—the Nestlés, Roches, and Novartises of the world. It’s useful for a quick glance, but it misses most of the city.
• The SPI is a detailed satellite image: It shows you everything—every street, park, and building. It captures the performance of the entire Swiss economy, not just its largest players.

For a value investor, the SPI's “satellite image” is a treasure map. It includes the small- and mid-cap companies where hidden gems and undervalued opportunities are more likely to be found, often away from the intense glare of analyst coverage that follows the big blue-chips.

An ordinary investor can use the SPI in two powerful ways:

1. As a Personal Benchmark: Are your hand-picked Swiss stocks beating the market? Comparing your portfolio's performance against the SPI provides the ultimate report card. Your goal as a discerning investor should be to outperform this broad average over the long run.
2. For Instant Diversification: Want to invest in the success of the Swiss economy as a whole? You can buy an ETF (Exchange-Traded Fund) that tracks the SPI. With a single purchase, you gain ownership in hundreds of Swiss companies, achieving a level of diversification that would be costly and time-consuming to replicate on your own.

While buying an SPI tracker ETF is a sound strategy for passive investing, a value investor sees the index not as a final destination, but as a starting point. It's a well-organized library of nearly every public company in Switzerland. The job of the value investor is to walk through the aisles, pull individual books (companies) off the shelf, and read them carefully to determine their true worth. Be aware, however, that due to its market-cap weighting, the SPI is top-heavy. The top three companies alone (Nestlé, Novartis, and Roche) often account for roughly half of the index's total value. This means that even when you buy a “broad” SPI tracker, your returns will be heavily influenced by the fate of just a few giants. A true value investor understands this concentration and builds their own portfolio based on the individual merit and valuation of each company, not by blindly following the index's recipe.