Defensive Investment Vehicles: What Are Some Safer Ways to Invest For Beginners
Doesn’t it feel like everything is getting more and more expensive?
Back then, I used to enjoy my favourite Ramly Burgers at just $2.50 each, and now I am seeing all the shops and stalls sell them for $4 each.
I used to really buy into the idea that keeping your money in the banks is the safest.
Lucky for us, there is a simple way for us to beat inflation, and that is through investing!
But one of my biggest reservations about starting investing is worrying that I will lose money.
After all, it is a famous trope I always see in TV dramas growing up.
But the fear of “burning my hands” shouldn’t be the biggest reason I lose out to inflation.
This is why I’m here to show you defensive investment vehicles to go for if you are starting out and prefer a “safer” investment strategy!
TL;DR: Defensive Investment Vehicles For Newbies
What is Defensive Investment?
Defensive investments will include making investing decisions where you want to reduce the loss of the money you put into the stocks as much as possible.
In an aggressive investment strategy, the investor takes advantage of market changes (such as buying stocks as the market prices are falling) to buy more stocks.
Defensive investment strategies would include purchasing high-quality short-term bonds since they have lower interest rate risks or going into a wide variety of sectors and markets to minimise potential losses.
Especially for those of you who are starting out, defensive investment vehicles will be a great choice since you probably do not have much capital to invest or lose.
Let’s take a look at some good defensive investment vehicles to consider:
1. Singapore Savings Bonds (SSBs)
One of the safest bonds you can consider investing in would be SSBs.
With interest rates comparable to bank fixed deposits and low barriers to start investing in them, SSBs are one of the safest ways to begin investing.
All you need is $500 to start, and you can exit your investment anytime with no penalties.
Best of all, you can get back any accrued interest you’ve earned when you exit!
Furthermore, SSBs are backed by the government, which has an “AAA” credit rating.
2. Endowment or Savings Plans
I’m sure you’ve probably come across this while you’re out on the street.
Someone shoves a power bank or a small voucher in your face, then tells you it can be yours for just listening to them for two minutes.
Most of the time, these insurance agents are selling you endowment plans.
These plans are suitable for those who wish to save your money for future usage, which is good if you want to start a habit of saving but lack the discipline to do so.
Nothing like a bit of “insurance” that your money won’t lose its value to inflation, right?
3. Treasury Bills (T-Bills)
Remember how we talked about short-term bonds facing less interest rate risk?
Well, what if they were backed by the government? That’s when you have Treasury bills (T-bills) issued by the government!
Like SSBs or Singapore Government Securities (SGS), T-bills are risk-free products that Singaporeans can invest in.
T-bills will be offered at a discounted price of their face value, and upon their maturity, we will get the full face value of the T-bills.
Unlike most investments, T-bills only require you to invest in them for short periods of either six months or one year.
4. Blue-chip Stocks
While we’re on the topic of high-quality investments, the first thing you think of will be reputable companies.
And that’s where blue-chip stocks come in!
You see, blue-chip stocks come from companies that have operated for many years, and these are usually from large companies with an excellent reputation.
Since these companies are large and dependable, you’ll most likely earn dividends from them constantly.
Because these companies are large and well-established, you don’t need to worry too much during a market crash.
5. Real Estate Investment Trusts (REITs)
Thinking of investing in properties but can’t afford them due to how expensive they are in Singapore?
You can consider investing in Real estate investment trusts (REITs) instead!
REITs are companies that either own or operate in properties that generate income.
Investments in REITs are considered safe since these companies can generate a stable income from renting out their properties.
Furthermore, unlike investing in properties, investing in REITs also means you don’t have to maintain the properties you own!
Important Thing to Note Before Making Any Investment
Just a quick reminder:
As with all investments, all of them come with a risk.
Even those investment bonds which are backed by the government carry a risk. It’s just that the government has made it such that you will get the total amount you invested back when there is a loss.
Therefore, even as we tell you that these are the safer choices to invest in, it is important to do your due diligence so that you make the right decisions.
That said, good luck on your investing journey!