Selecting the appropriate investment channel is vital for safeguarding your substantial wealth. Numerous financial prospects exist in Singapore and understanding how fixed deposit rates measure up against comparable, low-risk investment options could really change the way you plan your finances. One financial expert claims that fixed deposit rates in Singapore are horrible.
What Are Fixed Deposits?
Fixed deposits present a direct method for increasing your money with very little risk. When you put your cash into a fixed deposit account, you are essentially lending that cash to the bank. In return, the bank pays you interest at a rate that is set in stone, just like your deposit. You do not touch the principal amount, and you do not touch the interest amount until the term of your fixed deposit is up. And, above all, you live in peace, knowing that the bank is paying you modest returns for your trouble.
Exploring Alternative Low-Risk Investment Options
Savings Accounts
Accounts put in place for savings are a popular option because they offer flexibility. They are unlike fixed deposits where the money is not readily accessible. In fact, it tends to be quite the opposite a savings account offers accessibility, allowing you to easily withdraw your money, and in some cases, perform electronic transfers. Interest rates on savings accounts are lower than on fixed deposits; however, when considering what is accessible and what is not, a savings account appears to be a better option for the day-to-day financier.
Government Bonds
Another low-risk investment option is government bonds. These securities are backed by the government, ensuring a high level of safety that is hard to beat. They typically offer higher interest rates than savings accounts, though they might require a longer investment horizon. And they can provide regular interest payments, making them quite suitable for people who are seeking steady income. Still, bonds do not come without risks.
Money Market Funds
Pool of funds from many investors to invest in short-term, low-risk securities. These funds are managed by professionals and offer greater liquidity than bank deposits. The returns of the funds can compare very well with the returns of other types of short-term investments. Also, the funds are extremely safe. The reason for this is that they invest in very safe, short-term instruments.
Comparing Fixed Deposit Rates
In fixed deposit accounts, the terms of the deposit and the financial institution offering the account determine the rate of interest. As a general rule, the longer the term, the higher the rate of interest, meaning fixed deposit accounts can yield better returns than most other options—if you are willing to keep your funds locked up for a decent length of time. But you also should shop around: not all banks offer the same rates, and the rate can vary significantly from institution to institution.
Benefits and Drawbacks of Each Option
Fixed Deposits
Advantages: Returns that can be counted on, and a yield that is worth having. Risks: Limited to no risk, except for the demand risk that pertains to all fixed-price and fixed-rate government bonds; that is, if liquid and safe investments with decent yields become available.
Savings Accounts
Pluses: Very liquid—the funds are always available when you need them.
Minuses: The interest rates are very low and probably won’t keep up with inflation over time.
Government Bonds
Advantages: Interest rates that are higher than those of savings accounts, a necessary revenue stream through regular interest payments, and full backing by the government.
Disadvantages: A commitment of time to invest that is longer than might be desired and less flexibility than savings accounts offer.
Money Market Funds
Advantages: Competent management, commensurate returns, and greater liquidity compared to fixed deposits.
Disadvantages: Returns depend on the market, and management may charge a fee.
Making the Right Choice for Your Financial Goals
Selecting the most suitable low-risk investment can only be done with knowledge of your financial goals, the time you’re able to commit to an investment, and your liquidity needs. For individuals whose investment time frames stretch far into the future, fixed annuities—that is, those that are not immediately accessible—are a very good option for investment. These insurance products pay a fixed sum over a set time frame, usually much longer than the times an individual is likely to report in a case study. They perform well over a long stretch of time and don’t fluctuate.
If you are an investor seeking a balance between secure investments and ones that yield higher returns, consider government bonds. They are a good choice for those who can commit to an investment over a longer time period.
In the end, combining various low-risk assets in your investment portfolio can help you achieve the kind of returns you’re looking for, all while managing risk and keeping the total volatility of your portfolio somewhere around the mild level of a low-risk investment.
Final Thoughts
Charting a course through low-risk investment options in Singapore is not all that difficult. Indeed, the favorable features of these instruments tend to make the choice somewhat obvious. But that is only if you are aware of the available choices and the key characteristics that make each one distinct. Therefore, to get you started, let us present several choices for low-risk investments in Singapore, along with the identifiers that make each choice a safe bet.
