Fixed income is an investment strategy that prioritizes capital preservation and income. Typical examples include government and corporate bonds, certificates of deposit, and money market funds. Fixed income can provide a stable income stream with lower risk than equities.
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This is due to the perception that fixed-income investments entail less risk than stock investments. Generally speaking, fixed-income assets are less susceptible to macroeconomic risks, such as economic recessions and geopolitical events.
Fixed income investments can help preserve your existing stock portfolio and guarantee a nest egg for retirement.
Smart investors who wish to increase their wealth over time typically save for retirement or other long-term objectives. In general, they possess a substantial number of stocks with medium risk in their portfolio. By designating a portion of their portfolio to fixed income investments, they are able to mitigate losses caused by fluctuating stock markets.
Capital preservation entails safeguarding the absolute value of your investment through principal-return-focused assets. Closer to retirement, investors may rely on their investments to provide income. As fixed income typically entails less risk, these assets may be a prudent choice for investors with limited time to recover from losses. In the form of coupon payments, investors receive a fixed quantity of income at regular intervals from their bond holdings. Additionally, numerous fixed income instruments are tax-exempt. Compare these best fixed income investments in Singapore that can lead to a secure financial base for your future.
Savvy Investors Choose Singapore Saving Bonds That Can Yield Around 2% Per Annum
Singapore Savings Bonds or SSBs are a form of Singapore Government Securities that are issued and guaranteed by the government of Singapore. They are the most widely recognized bond in Singapore. The minimum investment quantity is S$500, and the highest amount of SSBs you can possess at any given time is S$200,000.
The monthly interest returns on SSBs typically range between 0.8% p.a. and 2% p.a. Although withdrawals are permitted at any point, it is advisable to hold SSBs for the complete ten years in order to receive the maximum interest returns. Investors can purchase SSBs through DBS/POSB, OCBC and UOB ATMs or through their internet banking platform.
Benefits of SSBs:
• Regular half year returns
• Low risk investment that helps preserve capital
• Tax free investment
Singapore Government Bonds Enjoy an AAA Credit Rating and Have a Maturity of Up to 30 Years
SGBs are bonds issued by the Singaporean government with a AAA credit rating. The minimum required investment is S$1,000, and bond maturities range from two to thirty years. SGBs accrue interest at a fixed rate, with interest payments made every six months beginning in the month of issuance.
Apart from government bonds, other corporate bonds may be issued throughout the year. In March of this year, for instance, Azalea Asset Management issued the Astrea VI Private Equity Bonds, and investors had only six days to submit their applications. In addition to applying directly for these bond offerings, investors can also purchase bonds on the SGX.
Benefits of SGBs:
• Regular half year returns
• Low risk investment that helps preserve capital
• Tax free investment
• Fixed rate of return
Purchasing Extremely Affordable Bond Exchange Traded Funds (ETFs) May Help Investors Save for Retirement
ETFs are funds comprised of a basket of securities, with the objective of replicating an index’s performance. A bond ETF, such as the ABF Singapore Bond Index Fund or the Nikko AM SGD Investment Grade Corporate Bond ETF, would hold a variety of investment-grade bonds. In general, they carry less risk than common stock and can offer a higher yield than SSBs or SGBs.
ETFs are listed on the stock exchange and can therefore be bought and sold similarly to stocks. In addition, they are very inexpensive and have a low minimum investment threshold. CPF funds can also be used to purchase approved bond ETFs.
Benefits of ETFs:
• Typically inexpensive to purchase
• Low minimum investment amount
• Can be bought and sold on the stock exchange
Many Investors Prefer to Purchase a Unit Trust or Mutual Fund When Building a Nest Egg for the Future
Similarly to how you can purchase ETFs for exposure to a portfolio of bonds, you can also purchase a bond-focused unit trust. Unit trusts (also referred to as mutual funds) are funds comprised of money aggregated by investors and managed by a fund manager. These unit trusts can be purchased independently or through a traditional savings plan.
You can also gain access to fixed income funds through insurers and their investment-linked policies (ILPs). However, when you’re searching for an insurance plan with minimal risk and modest returns, you should consider endowment plans, which are generally less expensive. Endowment plans may not make you rich, though they are solid fire wall for protecting losses against more riskier investment stocks.
Unit Trust and Mutual Fund benefits:
• May offer a higher yield than SSBs and SGBs
• Can be bought through investment linked insurance policies
• Risk is typically lower than individual common stock purchases