Fixed Deposits Singapore 2019: How Risk-averse Investors can Benefit from it
Generally, you use investment as an avenue to generate extra income from saved money. There are many ways of investing such as bonds, stocks, mutual funds, fixed deposits, and others. With the stock market in Singapore getting volatile, risk-averse investors are opting for less risky investments. Fixed deposits (FDs) Singapore is one such investment due to the preservation of capital and returns guarantee.
The reason FDs are a preference for risk-averse investors is that they are low-risk. They are almost risk-free because deposits with finance companies and full banks in Singapore have cover under Deposits Insurance Scheme. This scheme insurers up to $50,000 of your deposits in every account. Understanding the nature of FDs is vital for maximum returns. It requires that an investor finds out the banks with the best rates and favorable conditions.
An investor who wants to avoid the excessive market fluctuations mainly in the short-term can use FDs as an investment instrument. These assets provide a cushion against rough patches as returns are assured amidst these changing market terrains. FDs are quite reliable and supportive in fulfilling financial plans. Investors with different risk appetites can also incorporate them to reduce the risk of the overall portfolio.
With promotional FDs rates running often, it is particularly beneficial to open an FD account when there is a promotion. Promotional rates can run as high as 2.05% p.a as offered by Maybank.
The best approach for fixed deposits investment
If you have a low-risk appetite and you take FDs as your choice of investment, it is imperative to diversify FDs portfolio. This course will help you to meet both short-term and long-term financial goals. Thus, you should consider splitting your amount into smaller divisions and each at different tenure. Interest rates change, and promotional offers pop up often. For instance, a short tenure FD can be reinvested upon maturity to take advantage of the promotion.
When sourcing the best bank for FDs investment, look for one with innovative FD scheme. Such are backed by robust technology and processes that allow you to get instant liquidity in case of an emergency. You should consider FDs by non-banks only after verifying the nature of their business, their stability and credit rating for credibility.
As previously highlighted, interest rates and risk-appetite should be major concerns when deciding FD investment. Here are other contentious issues to consider before opening an FD account for any tenure.
- Your investment objective. You must have a goal for investing. If you just need a modest amount of cash, then FD is the right way to go. Whereas your aim is for bigger returns, then seek other products like stocks.
- Your Age. An older age means more responsibilities thus require to take lower risks. On the other hand, younger age is fit for higher risks. Older people are therefore more risk-averse, and therefore FDs are a better option.
- Liquidity. It is advisable to assess your cash flow needs before embarking on FDs investment. It will help you to establish if you will be comfortable to have money sit in the bank for months. Will you be able to fulfill your expenses? Do you have other financial sources to support your needs? Fixed deposit is for you if you can cover your daily expenses and at the same time save.
Advantages of fixed deposits investment
Are you risk-averse? Yes, but still not convinced that fixed deposit is your ideal investment. Check out these advantages.
- FDs are fit for anyone regardless of age or skills. You neither don’t require any experience to make money from FDs. You only need to give your money to the bank, and after some time you get back your principal plus earned interest
- FDs earn higher returns than an ordinary savings account and they are safer than stocks, and property investments
- You get your money protected by Singapore Deposits Insurance Corporation (SDIC)
- You can invest in any currency since many Singapore banks offer foreign currency fixed deposits
- You can invest as low as $1,000 and can even open several accounts in different banks and maximize the offered benefits
- It is an investment that supports the shortest term- a month to gain experience on the benefits, then, later on, choose your preferred longer-term.
- You can use the fixed deposits as collateral for other bank’s facilities.
- FD is the most flexible low-risk investment that allows the investor to select the most suitable tenure. This helps the investor to enjoy a highly liquid investment.
- Interests earned from deposits with approved banks and also licensed companies are not taxable. Neither will you need to declare such interest.
- The longer you can hold your money in a fixed deposit, the more interest you earn. It is unlike other investments like stocks which are subject prevailing market conditions. Holding stocks for long is not a guarantee of higher return, but for FD higher returns are guaranteed.
As much as you could be risk-averse, it is advisable to make a fully informed decision. Therefore, you should also consider the disadvantages tied to FD investment.
Disadvantages of fixed deposits investment
- You cannot withdraw your fixed deposit until the maturity date. Therefore you must have other ways of sourcing finances. In case you insist to withdraw, you attract bank charges, and you may lose your hard earned interests.
- FDs investment makes you lock your money in the bank, and you can’t use it in a more lucrative investment.
- Fixed deposits are not the best in terms of interest rates. If compared to other low-risk investments such as Singapore Savings Bonds, they are relatively low.
Which are the banks with the best interest rates for 2019?
To find the banks from which you can get the best return check out here.
Fixed deposits are attractive for investors looking for stable and guaranteed returns. With it, you can get a fixed regular monthly income. It is undoubtedly the best investment option for risk-averse customers. Many banks have synced the FD offers to the digital revolution. Thus, you can acquire an FD account through a secure online process and save time.