HOW TO INVEST
So how should one go about approaching the Singapore Savings Bonds?
Mr Chan said bonds and lower-risk investment products largely act as “stabilisers” in an investment portfolio. While different instruments offer varying degrees of safety and returns, they typically help to moderate overall risks by providing stable returns for a portion of the portfolio.
Hence, the Singapore Savings Bonds can be a place to park funds that must be kept safe in the short term given but do not need to be used that urgently given the wait time of at least 30 days, he added.
As for how much to invest, experts said that depends on factors such as one’s risk appetite and overall portfolio size.
For those with a large investment portfolio and are looking for lower-risk alternatives, “going as far as the limit of S$200,000 is not unreasonable, especially if that represents a relatively small part of the portfolio”, said Mr Chan.
“If they require a higher return, have a long-time horizon and are willing to take on more risk, then they may want to prioritise allocating their investment funds to other things such as equities,” he added.
Age could also be a consideration when it comes to deciding on asset allocations, although Mrs Weber stressed that the ability to take risks is “not age per se” but one’s time horizon.
“The longer the period of time you have between now to when you need the money, the larger the proportion of equities you can have in your portfolio because you have the ability to stay through short-term downturns without having to liquidate it,” she explained.
“If you are looking to use a bucket of funds in the next one to five years – and this can be income for living expenses for retirees or saving for a property for young persons – you do not want to take big risks with this sum of money.
“The Singapore Savings Bonds can be suitable for you, alongside other low-risk instruments like fixed deposits, short duration, high-quality bond funds or annuities.”
One might also wonder if a lump-sum or “laddering” approach would work better for the Singapore Savings Bonds.
Again, experts said there is no one-size-fits-all strategy given the smaller allotments in recent issues due to strong demand. Also, as interest rates trend higher, other more attractive options might emerge.
For example, banks in Singapore have been raising their rates for fixed deposits, while some robo-advisers like StashAway are also starting to increase interest rates for their cash-management accounts.
Mr Wong said: “My view is that we could be near the peak of the current interest rate cycle, provided inflation does not stay elevated for a prolonged period. Hence, lump sum investments could be preferred to lock in the current yield.
“But again, your investments could be hampered by reduced allocation … so you may have to subscribe to many subsequent issues if you want to employ a meaningful amount in the Singapore Savings Bonds.”
But ultimately, with returns from lower-risk options unlikely to keep pace with inflation, investors may need to take some risk in their portfolios such as by having a comfortable mix of equities and bonds, Mrs Weber said.
“Staying invested in a suitable portfolio is the best way to reach your goals in your time frame. You need to ride out the volatility to capture the recovery and reap the long-term returns.”