How to get higher yields when interest rates are low
Do any of these describe you?
▢ My children are going to school soon
▢ We’re going to upgrade to a new flat in 2-3 years’ time
▢ My parents are looking for somewhere to “park” their pension monies
If you’ve checked-off on one or more, you might be looking for somewhere safe to grow these cash in the meantime.
Thing is, in many parts of the world, yields on cash is only a bit above zero. That’s because of ultra-low interest rates. (If you hold on to cash, inflation will just whittle down its value and make it harder for you to earn it back with each passing day.)
Singapore is no exception. Here, the basic current and savings accounts have interest rates that are barely above zero. (Besides special bank-as-you-earn accounts such as the Multiplier Account.) Term deposits do a little better. But there is still a zero in front of most term deposit rates, except during special “promotions”.
And the pursuit of significantly higher returns will take you into riskier territory. How then can you get higher returns on your cash?
There are 3 things you can do.
- Invest in Singapore Savings Bonds (SSBs)
A safer alternative is the Singapore Savings Bond, where returns generally match those of Singapore Government Securities that have an equivalent tenor. And they are guaranteed by the Singapore Government.
And because the interest paid increases each year, the longer you hold SSBs, the higher the return.
This can work well if you are diversifying your investments, saving for retirement – you can buy SSBs with your Supplementary Retirement Scheme (SRS) monies – or saving for a rainy day. Just log into your iBanking account
- Invest in Dividend-Paying Stocks
This extends your options to shares, REITs, exchange-traded funds (ETFs) and unit trusts. It enters riskier territory, which means there is potential for loss of capital. But generally, the longer you hold good quality stocks, the lower the risk of a loss. And stocks that consistently pay dividends may provide some insulation, because you are paid income while you wait out market volatility.
You can start investing with Vickers Online or through the Online Funds Investment Platform.
- Take up Short-Term Endowment Policies
But if you need the funds within a few years, for example for a wedding, or a child’s tertiary education, you really want your cash to grow.
Or you might have just received your pension pay-out, and are looking for a short-term place to “park” your money, while earning a better yield.
Short-term endowment policies are a way of getting nearer your financial goal.
Here’s how one such short-term endowment policy, SavvyEndowment, stacks up against longer-term endowment policies:
|Shorter-term endowment policies, e.g. SavvyEndowment||Longer-term endowment policies|
*Note: Non-guaranteed bonuses are not fixed. They are determined and declared on an annual basis.
SavvyEndowment works best if you’ve prioritised a goal over the excitement of investing in a risky proposition. When you've already visualized the house or wedding in a few years, you really need something that grows.
No need to dig around for a pen…that's because we don't need your signature. You also don't need to check your calendar for an appointment with a wealth planning manager.
The ease and speed of how this is done online also makes the entire process simpler, easier and more convenient for you.
This advertisement has not been reviewed by the Monetary Authority of Singapore.