Best Investments In Singapore That Caters To Every Risk Profile, For Short, Medium and Long-Term Investors

If you are not a crazy shopaholic, there should be a point where you accumulate a good amount of savings with no idea of what to do.

TL;DR- “Given X years to invest, what is the best investment product?”

Splitting up the investment horizon into 5 years, 10 years and more than 10 years, here are some of the investment product one can look at.

Further Reading: Pros And Cons Of Each Product

Point to note: Taking inflation to be 1.9%, we aim to have our investment returns exceed that percentage.

Investment products for 5 years or less: 

Short-term Endowment Plan

Pros

• Relatively low risk given that they are products of reputable insurance companies
• No worry about losing principal sum upon maturity
• Beats inflation with as little as $1,000

Cons

• Locks up your cash, illiquid

Example:

• FWD Insurance Endowment Plan – 2.02% per annum for 3 years

Peer-to-peer lending platforms (P2P lending)

Pros

• Good returns
• Investor gets back a portion of his investment back every month, offsetting his risk
• Quick process and everything can be done online
• Some of the platforms are regulated by Monetary Authority of Singapore (MAS)

Cons

• Lending to small business which is a high-risk activity
• Investors are not able to invest as and when they like. Opportunities arise only when there are borrowers.

Returns

• Depending on the loan, usually 6% to 18% (according to Funding Societies)

Investment products for mid-term (10 years): 

Singapore Savings Bond (SSB)

Pros:

• No penalty for early redemption
• Safe (backed by Singapore government)
• Invest as little as $500

Cons:

• Rates of return are fixed at time of investment

Returns

• 2.06% – 2.44% based on interest rates for the year 2017

Investment products for long-term (more than 10 years):

Central Provident Fund Special Account (CPF SA)

Pros

• Relatively good returns on interest rate
• Very safe
• Low effort
• If you are in a bad financial situation, creditors can never touch your money that is locked in the CPF. (Not saying it is a good thing!)
• Tax relief you top up your CPF

Cons

• Very illiquid as monies remain in SA until age 55 and any withdrawal of monies would be subject to CPF withdrawal rules.

Returns

• At least 4% per annum

Investment products for all time frames:

Savings Account

Pros

• Low risk
• Very liquid, able to draw out your money anytime
• Low effort

Cons

• Interest may be below inflation

Returns

• 1.5% – 3% depending on the bank and amount of money you deposit with them

Bonds

Pros

• Relatively good returns. Corporate bonds usually pay out higher interest rates than government bonds
• Investors get regular coupon payment for their investment
• Possibility of selling bonds at higher price

Cons

• Investors may face default risk or credit risk from bond issuer
• Price of bonds fluctuates
• Moderate amount of effort required
• High fees and charges

Returns

• Depends on the bond investors invest in

Robo-Advisors

Pros

• Low-cost (0.5% to 1% fees)
• Diversified portfolio
• Opportunity to be exposed to the global economy
• No minimum balance
• Quick process and everything can be done online
• Some of the platforms are regulated by Monetary Authority of Singapore (MAS)

Cons

• Relatively new with little track record
• Considered relatively high risk
• Lacks flexibility for investors to make changes to his own portfolio

Returns

• Depends on the risk appetite of investors, robo-advisor will tailor made an investment strategy for each individual.

Stocks

Pros

• Good returns (if you know what you are doing)
• Allows full flexibility for investors to create his own portfolio
• Rather liquid, able to sell shares as long as there’s volume
• Allows a combination of growth investing and dividend investing according to investor’s needs and age profile
• Instruments on the exchange catered to all risk level: REITs and STI ETF catered to mid to long-term investors, growth stocks for those with higher risk appetite

Cons

• Risky due to volatility
• Rather high fees and charges
• High level of effort, complicated and takes time to research

Returns

• STI ETF – 9.2% total returns year to date
• Stocks return varies according to investor’s decision (here are some advice from seasoned investors)

Cryptocurrencies

Pros

• Possible Good returns

Cons

• Very risky
• Complicated to understand for now

Returns

• Depends on market forces and currently unclear on the potential
• You can find out more here on what moves the price of Bitcoin (a type of cryptocurrency)

Seedly’s Community: “10 Years To Invest, What Is The Best Investment?”

A member of ours opened up this question to the community and here are some of the advice from our very supportive members! Thanks, everyone! 🙂

Yappilee, LM Lim and Zhen Hong

• Invest in the Singapore Savings Bond

Kelvin Soh and Jan 

• CPF SA: If you are 45 years old and you are able at least hit $86K, top up your SA for 4% yield.

Jiahui:

• Try out the robo advisor calculators for your level of proposed risk

screenshot of Autowealth’s calculator

Alisa Kuan

• Conservative approach will be to stick to Fixed Deposits/Bonds/Endowment insurance
• Manage your expectations as low risk = low return

Matt Lim and Khuan Yew Cheah:

Our decision when selecting any investment products should depend heavily on 3 factors:

• How long you plan to invest
• How much you plan to invest
• Amount of risk you are willing to take

With these factors in mind, do add the cost of investment into consideration

source: Picture Quotes 

When deciding on a product, the personality of the investor plays a huge part. I guess, in a way you are the hero of your own investment story.

Summary – Choosing Your Investments Based On Liquidity, Risk, Returns And Length Of Investment