This Is Where You Should Consider Investing In Singapore If You Want Guaranteed Principal And Returns
Investing can be like stepping into the wilderness, which is full of uncertainty, harshness, and hazards that await you. However, your chances of reaching an oasis are higher if you know the best route, and your journey will be much smoother if you are prepared. Similarly, investment requires patience and preparedness.
Singapore’s investment landscape is a bit like exploring the wilderness looking for an oasis. There are very few investment vehicles that guarantee your principal and returns. But the trick is to find the ideal investment vehicle that will allow you to optimize your investment. Some look like they might be good, and some are scams. One, therefore, needs to be careful when selecting the investments that are low risk but still deliver decent returns.
If you are wealthy but still want to invest your money, you can consider risk-free investments. These are investments that deliver returns without any risks, although there is always some level of risk involved in everything. Risk-free or guaranteed investments are also ideal for risk-averse investors. Below are some of the risk-free investment vehicles that you should consider.
- Singapore government bonds
Like many governments, Singapore’s government also raises money for its projects through bonds. The duration of government bonds may range from periods as low as two years, and some may go for longer durations such as 30 years. The yield also tends to be higher the longer the bond period. Your choice of whether to invest in long-term or short-term bonds may depend on your personal preference. Also, you might want to consider investing a large sum of money so that you can really enjoy decent returns.
- Treasury Bills
Treasury bills represent another risk-free investment avenue in Singapore. Treasury bills are just like bonds, which means that they are a means through which the government borrows money. However, treasury bills are a short-term investment option, usually l2 months or less. Singapore issued 2019 treasury bills at a 1.41% rate per annum, which might not be a big rate but a significant one considering that it is risk-free.
Just like in Singapore bonds, it is best to invest a substantial amount of cash to really take advantage of the growth potential. Treasury bills are also an ideal guaranteed investment because they are short-term, and therefore, anyone looking for a low-risk or short-term investment opportunity should consider this option.
- Fixed deposits
Fixed deposits are not usually described as investments, but they do offer an avenue of generating significant returns. Banks usually offer fixed deposit accounts to their customers at specific rates of returns. Just as the name suggests, fixed deposits allow the investor to deposit money for a fixed duration of time, during which the money will earn interest. Investors may end up forfeiting the interest if they pull their deposit early. Fixed deposits are better than just h in a savings account where it only earns a small interest.
- Singapore Savings Bonds
This is a special type of bond that was launched in Singapore in 2015. Investors who subscribe to this investment vehicle earn a step-up interest every year for ten years. This means that the interest or returns from the bonds might be small in the first few years, but then they cumulatively grow each year as the bondholders hold the investment for longer.
SSBs offer a bit of flexibility because they allow investors to withdraw their money at any given time. This also means that the longer your investment continues to run, then the more revenue you make.
- Savings plans
Insurance companies offer savings plans that guaranteed the policy holder’s capital and guaranteed returns. However, they work like fixed deposits where the money is locked for a certain duration. Savings plans also allow the investor to continue pumping in money during the predetermined duration.
The Singapore Deposit Insurance Scheme (SDIC) covers savings plans. They may also have an insurance component attached to them, including a payout in case of the occurrence of the insured risk.
- CPF top-ups
CPF top-ups can be a great way to earn some interest on your funds. You can structure your CPF top-ups so that they will be part of your Special Account. Singapore’s government provides a guarantee on such funds at a 4.0% interest rate p.a. and it also means that such funds have guaranteed returns.
There is also a likelihood that the initial $60,000 of your CPF investment might earn an extra 1% interest, especially if you have about $20,000 in a CPF Ordinary Account (OA). This would bump up your rate from 4% to 5%, allowing you some extra earnings, especially if you are consistent with your CPF SA top-ups in the first few years.
Topping up your CPF SA may also offer some added benefits such as tax reliefs worth as much as $7,000. You can also take advantage of another tax relief of around $7,000 by topping up the CPF SA of a family member.
There are a few things to note about the CPF top-ups. This type of investment allows you to redeem your investment early or even sell it. However, you will likely end up losing some value by doing that. A CPF SA happens to be irreversible, and this means that you will only start receiving your payouts every month through the CPF LIFE annuity scheme.
- Structured Deposits
Structured deposits are usually the combination of an investment product and a bank deposit. They thus have an underlying financial instrument, such as market indices or bonds. A low-risk profile usually characterizes SDs, but their returns are pegged on the underlying financial instrument’s performance. They not only provide a regular interest income but also give back the principal amount, which means that your principal is guaranteed.
Note that all the investment, as mentioned above, avenues have low risk and guaranteed principal and returns as a common theme. Other investment options may deliver higher interest earnings for similar amounts invested, but the risks involved might be higher.