Why Singapore Savings Bonds and ETFs are the Best Investments in Singapore in 2019
With 2019 finally upon us, you are maybe aching to make some significant changes in your life. You are starting to feel that 2019 is the year you should begin to invest for long-term growth. Perhaps you are aiming at an inflation-immune investment. Or you think that the best way to invest is to make your savings work hard for you.
While there is no investment guaranteed, Singapore Saving Bond (SSB) is one platform that offers almost a risk-free investment. On the other hand, Exchange-Traded Funds (ETF) makes it possible to invest even when you relatively have low capital.
However, what makes them the best investments in Singapore? Let’s start with Singapore Saving Bonds.
Why are Singapore saving bonds the best investment today?
Since its launch in 2015, SSB is changing to an investing platform with decent returns. People who initially overlooked Singapore Saving Bonds are now starting to keep a keen eye on it. It might be a saving platform, but it has investment characteristics that make it outshine other investment options.
Let’s see the critical investment elements SSB has.
1. SSBs are a secure investment
The government of Singapore issue SSBs with the aim to provide access to a long-term investment where investors earn interest and bear no risk. These government bonds carry high credibility with a triple-A credit rating. They are therefore principal-guaranteed investments any investor can trust.
2. SSBs are fairly liquid
Investors can get their money back at any time without a penalty. Most of the SSB come with a ten-year tenure. In case you require cash and decide to redeem your bonds, you get back your investment plus your coupons up to that point. No penalties are chargeable. You get back your investment within one month of application.
Something that several investors dread is to have their money locked up in an investment. Singapore Saving Bond offer flexibility, and thus you can choose to terminate the investment before maturity
3. Double capped as of 2019 (Larger Holding)
Firstly, SSBs are preferable in that you can start with a minimum of S$500. Then recently, the holding has expanded. As from February 1, 2019, the government of Singapore has doubled the individual cap of SSB from S$100,000 to S$200,000. In addition, it has allowed Singaporeans to buy SSB using their Supplementary Retirement Schemes (SRS). This development is a plus to Singaporeans as they can use their retirement benefits in a safe investment.
As an investor, you have the certainty of having a portfolio with a large portion of safe assets. If you are a risk-averse investor, SSB should be your better option.
4. No fluctuation in value
Whereas traditional bonds, stocks, and commodities fluctuate in value, SSBs don’t fluctuate. You receive full value at maturity and also the par value is guaranteed at any time. There is no likelihood of losing your initial investment. Unlike other assets like stocks, these investments are not affected by the prevailing market conditions.
Though the interest rates of SSB may fluctuate throughout the year, investors have their returns guaranteed. Also, a rise or drop of market interest rates does not affect the price of the Bonds in any way. There can be no price gain or loss. Therefore, there is no chance of losing your original amount.
5. Tax-free investment
For any other investment, the government will tax every interest you earn. However, with Singapore Saving Bond the interest you make on your capital is tax-sheltered. You`ll pay no tax to the government. Neither are capital gains taxed, and this translates to higher returns.
Why are ETFs another great investment?
EFTs have characteristics that are worth your attention, especially if you’re aiming at higher interest portfolio diversification.
1. Provide market exposure
ETFs enables you to gain exposure to the specific sector, style, and industries. The exposure helps you diversify your portfolio. For example, if you invest in an ETF that tracks the Straits Times Index (STI), you get exposure to the Singapore market. You get to learn about the top trading stocks, and this helps you in diversification.
2. Lower fees
ETFs being passively managed have lower fees than actively managed investments funds. This essentially means there are lower management fees. Also, there are no sales charges you may incur unless you trade ETFs on the SGX. In which case, you would have to pay brokerage fees or transfer tax
3. Highly liquid
These investments are highly liquid as they are traded on a stock exchange. You can trade ETFs throughout the day
4. Give high returns
Singapore STI ETFs precisely replicate the performance of STI. STI comprises the stocks of the largest companies in Singapore. Most of these companies are well performing; therefore ETFs mostly give high returns.
5. Provide access to high tier stocks
ETFs offer the capability of buying blue chip stocks without a large capital. You don’t have to spend money buying stocks of a constituent company in an index. It can be quite an expensive exercise to buy the stocks of the company individually.
6. Well diversified
Mostly, ETFs are highly diversified. They give a broad exposure to many individual companies rather than investing in one single company. This gives them a characteristic of a low-risk investment. They are thus suitable even to the newest investors with no clue of picking the right stock
Lastly, ETFs are a good vehicle for investment as well as a way to secure your future. Knowing how to secure your financial well-being before retirement is an essential skill you’ll ever learn. Because saving alone is not enough. For example, it takes you 36 years to double your investment value in a saving account paying 2% interest annually. However, if you invest in EFT that gets you 6% annually, in 36 years, your money will have multiplied by 800%
In summary, there are many investment platforms for an investor to choose from. However, Singapore Saving Bonds and ETF have several benefits you can take advantages of. If you’re targeting an investment with almost zero risk and high liquidity, SSB might suit you best. Again, if you’re looking aiming at high interests and portfolio diversity, ETF will address your needs better.
Here are more for you: