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

12 Jun 2018 
SOURCE: Seedly

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.
Best Investments In Singapore That Caters To Every Risk Profile

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:

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


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

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 adv​ice from seasoned investors)

Cryptocurrencies


Pros
  • Possible Good returns

Cons
  • Very risky
  • Complicated to understand for now

Returns

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
Best Investments In Singapore That Caters To Every Risk Profile
screenshot of A​utowealth’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

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
LiquidityRiskReturnsLength
Short-term Endowment
​(FWD Endowment, Great205)
LowLowLowShort
(3 years)
CPF SALowLowModerateLong
Peer-to-peer lending Platforms
(Moolahsense, Funding Societies)
ModerateHighHighShort
(Depends on term)
BondsModerateModerateModerateShort/ Moderate
(Depends on maturity)
Singapore Savings Bonds (SSB)HighLowModerateModerate
(10 years)
StocksHighHighHighDepends on investor
Robo-advisor

(Stashaway, Autowealth)
HighHighHighDepends on investor
STI ETFHighHighHighModerate/ Long
CryptocurrencyHighHighHighDepends on investor
REITsHighHighHighModerate/ Long

This article was first published on Seedly.​​

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