Good Stock To Invest In Now – 6 investments in Singapore that provide guaranteed capital and returns If guaranteed capital and returns sound good, here are 6 types of investments you should check out.
No wonder more and more people are leaning towards safer investments. Financial markets are extremely volatile and rising interest rates increase the return on even the safest investments. However, there are not many investments in Singapore that provide guaranteed capital and returns.
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For some investments that require guaranteed returns, potential scams need to be ruled out, i.e. investments that sound too good to be true. You can refer to the MAS Investor Alert List with a list of unregulated individuals or companies as a first level of scrutiny. Note that if a company is not listed, it does not mean that it is not a scam.
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Another thing to understand is that when you enjoy such investment security and visibility of investment returns, you should be willing to accept a relatively lower rate of return that is closer to a risk-free rate.
Risk-free return refers to the rate of return that can be expected even if no risk is taken. Theoretically, there is no such investment, because there will always be some risk that we take when making an investment.
Below we will look at the six types of investments you can invest your money in: 1) guaranteed capital and 2) also provide a guaranteed return on investment. This can be a good way to start for those who are risk averse or unsure about investing. Such investments can also act as a springboard to start investing in riskier investments.
As mentioned, you can also find relatively decent returns on investment in today’s high interest rate environment.
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A good approximation of Singapore’s risk-free interest rate is the yield the Singapore government, one of the few triple-A-rated economies in the world, pays on its 6-month or 1-year government bonds. Treasury bills or promissory notes are the shortest government securities available.
The last 6-month banknote issued in January 2023 offered a yield of 4.0% per annum. The last one-year note was offered in January at an interest rate of 3.7%, which is a slightly lower interest rate.
Treasury bills are generally useful for investors who are looking for a very short-term investment of six months to one year without taking a lot of investment risk.
The Singaporean government also issues long-term bonds ranging from 2 to 30 years. These bonds typically offer higher returns than shorter-dated Treasury bills. All things considered, it is generally believed that a bond with a longer maturity carries more risk than the same bond with a shorter maturity. However, it is also considered to be close to risk-free and thus offers a rate of return that is close to the risk-free rate.
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However, under current interest rate conditions, short-term bonds yield higher interest rates, while long-term bonds yield lower interest rates.
In September 2021, the government issued the first tranche of SINGA bonds to finance major long-term infrastructure projects such as new railways, coastal defense projects and other infrastructure projects that will benefit current and future generations of Singaporeans. SINGA bonds are also considered Singapore Government Securities (SGS) bonds. The Singapore government also launched a 50-year Green SGS bond in August 2022.
According to the yield curve displayed on the MAS website, Singapore government bonds should pay such rates. As you can see in the chart below, the longer the bond’s maturity, the lower the yield will be – again the opposite of what a typical yield curve should look like.
By now you would have noticed a recurring theme. The investments most likely to guarantee your capital and return are bonds issued by the government.
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SSB was first launched in October 2015 and pays an increased interest rate annually for up to 10 years. This means that bonds give a lower return in the early years, and if investors don’t redeem the bond every year until year 10, it will yield a higher rate of return. This is mainly to recognize the fact that investors hold bonds for a longer period of time.
Below is the score for each SSB issue over the entire 10-year period since its release in October 2015.
Overall, SSB offers excellent liquidity, allowing investors to redeem it at any time without worrying about its market price. This generally means that SSBs must pay similar but slightly lower interest rates than other comparable government securities that do not offer this feature.
As shown in the chart above, SSB yields have fallen since early 2019 but have since increased significantly in line with inflation and Fed rate hikes. The latest SSB issue from January 2023 offers a 10-year yield of 3.26% per annum. If you only have SSB for one year, you can still earn 2.95%.
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Although not usually called an investment, fixed deposits offer a way to put your money to better use instead of leaving it in a savings account or under your pillow. In comparison, three local Singapore banks currently offer the following Singapore dollar fixed deposit rates.
Of course, there are many other banks that offer their own fixed deposit schemes as well as promotional rates that can be much better than board rates. Many of them, including the three above, may have specific conditions that must be met in order to get ad rates.
Looking at the numbers offered, DBS offers the best board rates for fixed deposits. Also, it looks like OCBC board rates are not following the other two banks. Please note that these are rate based and individual banks may offer promotional rates which may also be more competitive.
In addition, deposits with all legitimate banks and financial companies in Singapore are covered by the Singapore Deposit Insurance Scheme, which covers up to $75,000 in deposits per account. All Singaporean banks and financial companies, a total of 37 listed on the SDIC website, are members of the Singapore Deposit Insurance Scheme.
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You may also consider topping up the CPF on your Special Account (SA) under the Retirement Sum Top Up (RSTU) scheme for better interest returns. These funds are guaranteed by the Singapore government and offer a minimum guaranteed return of 4.0% per annum. Voluntary contributions (VC) can also be paid into your regular account, special account and MediSave account.
In addition, the first $60,000 of your CPF money up to $20,000 in your regular CPF (OA) account will earn an additional 1.0% per year. in interest returns. This means your add-ons can earn up to 5.0% per year. if you top up your CPF in the early years of SA.
You can also get a tax credit of up to $8,000 if you add RSTU to your CPF SA, and an additional $8,000 tax credit when you make a cash contribution to your loved one’s CPF SA. Making voluntary payments to CPF accounts does not involve tax relief.
However, before doing so, you should know that unlike the investments listed in this article, which can be sold or redeemed in advance (although you may lose value this way), your CPF SA credit is irreversible. You will only receive this once you reach 65 monthly CPF LIFE payments and not in cash.
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Also read: What would have to happen for CPF interest rates to rise by 2.5% (OA) and 4.0% (SA and MA)
Savings plans offered by insurance companies, especially those of a non-participating nature, are able to guarantee your capital and returns. Also, keep in mind that there are also savings plans that guarantee your capital but do not guarantee a return.
Investing in a savings plan usually involves locking in money for a certain period of time or continuing to make contributions for a certain period of time. Failure to do so may result in the loss of a significant portion of your anticipated profits if you are unsure of your liquidity needs.
These plans are also covered by Singapore’s Singapore Deposit Insurance Scheme and may also offer an insurance component that pays out in case something bad happens to you.
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Also Read: Singlife Account, Dash EasyEarn, Gigantiq: Which Savings Plans Offer Higher Interest Rates and Better Benefits
Once you’ve set up a foundation or started your investment journey, you’ll have more knowledge and courage to make riskier investments. Riskier but still relatively safe investments, such as cash management accounts, can provide competitive returns on free cash while providing a high degree of liquidity.
As you progress on your investment journey and realize that taking calculated risks can be financially rewarding in the long run, stocks, real estate and other alternative investments such as cryptocurrencies and even wine can become investment options with much higher returns.
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