Why Singapore Savings Bonds Are Safe and Flexible for Investors

Safe Bonds

Is there a risk-free investment? The answer to that depends on your view of what types of investments are there. Are you an investor looking for something safe and reliable? The Singapore Savings Bonds (SSBs) may be an ideal choice for you. With the increasing popularity of bonds and their preference overstocks, they can be a viable way to increase an investment portfolio. The beauty of SSBs lies in their reliability, accountability, and credibility. Let’s discuss why Singapore Savings Bonds are safe and flexible hence the perfect choice for investors.

What Are Singapore Savings Bonds?

Bonds are loans you give to a company or government. The bond issuer (company/government) borrows money from the bondholder (you). It promises to pay within a particular period at an interest rate. Singapore Savings Bonds are a particular type of Singapore Government Securities (SGS) offering a long-term, risk-free and flexible investment option for individuals. The government first issued them through the Monetary Authority of Singapore (MAS) in 2015.

The SSBs form a unique class of bonds combining the features of a fixed deposit and an ordinary government bond. Some of their features include; – redemption flexibility, long-term nature of up to 10 years, the step-up interest rate, and principal-guarantee. The least amount needed to invest in SSBs is $500, which is lower than that of conventional SGS ($1,000), retail bonds ($2,000), and corporate bonds ($250,000). You can get better returns at regular intervals.

Why Singapore Savings Bonds Are Ideal for Investors

With only five years since their inception, these bonds have proved to be an investors’ choice. While they’re not the perfect means to get wealthy fast, there are several reasons why the SSBs stand to win the hearts of many. Of course, safety and flexibility top the list among all others. Below are significant reasons why SSBs make a viable investment option:

  • It’s One of The Safest Investments. SSBs is a risk-free investment. The Singapore government backs it. International credit agencies have acknowledged Singapore’s creditworthiness and accorded her an “AAA credit rating.” As an investor, you don’t have to be anxious over losing capital or risking your money. That’s not going to happen soon unless the country goes bankrupt, which is an impossible dream.
  • There’s a High Degree of Flexibility. Unlike other bonds with much restrictions as to when someone can quit, SSBs offer a very flexible redemption meaning you can leave the investment at any time. You can withdraw funds at any time without any penalties.
  • It Doesn’t Have a Lock-In Period. While you can invest long-term for up to ten years, you’re not limited to that duration. You decide how long the investment will be. That’s not true with most bonds I know where you can only end the deal on the maturity date.
  • Regular Interest Payments. These bonds pay interests every six months allowing investors to have steady cashflows while they plan for their expenses. That’s better than bank deposits with limits at to when interests earned are released. Further, the SSBs interest rates are higher than those of banks.
  • The Minimum Investment Amount is $500. As mentioned above, this is the least amount required to invest in bonds. Others charge starting capital amounts more than this for SSBs. You don’t need to pull down all savings and reduce your budget to invest in SSBs.
  • Offers Investment Portfolio Diversification. If you would like to reduce some investment risks by diversifying your portfolio, then SSBs allows for that. Since it’s risk-free and offers “no loss” assurance, you can count on this venture even if others fail.
  • It’s a Good Way for Investing Supplementary Retirement Scheme. Even with a low-interest return, SSBs give us a way to invest using SRS (Supplementary Retirement Scheme). Doing so comes with tax relief on every dollar. Instead of letting the SRS funds earn only a 0.05% interest rate if not invested in, why not put them in SSBs?

How to Start the Singapore Savings Bonds’ Investment

Now that we’ve confirmed why the SSBs are safe and flexible for investors, how can you start investing in them? The process is simple and can occur via ATM or internet banking. First, you’ll need to create a bank account if you have none with any of the three local Singaporean banks (DBS, OCBC, or UOB). You also need a CDP account with direct credit services. This will be linked to the bank account and will facilitate bond purchases, application processing, and receiving of interests earned.

Next is the application. Once the above requirements are ready, you can either apply via ATMs or online bank accounts. The procedure to follow is quite similar for both methods. A $2 transaction fee will be charged on the application. Placing orders usually take place for three weeks after the government has released new bond issues (occurring on the first business day of every month).

After applying, MAS will allocate new SSBs to successful applicants. These will be notified via email. Keep in mind that you can either receive a partial bond or full bond applied for depending on the public demand in that month. The first interest returns will be credited to your CDP account automatically after six months. After that, you’ll continue getting interest payments every six months.

Cons of Investing in SSBs

Nothing is 100% perfect. So, even if SSBs prove to be a very reliable investment, there are some downfalls that investors should know. Let’s consider four cons.

  • The interest rates are relatively low. Yes, they’re safe, but the low returns can be discouraging.
  • Higher interest rates begin at the close of the 10-year term. To gain better average returns, you have to wait as the term’s end draws near.
  • They’re non-tradable. You can’t transfer their ownership to someone else even if circumstances dictate that you should.
  • The investment limit is $200,000, which is also rare to get if you apply. An investment like SSBs should allow for more starting amounts.

The Bottom Line

If you’re contemplating investing in savings bonds, SSBs are there for you. As discussed in this blog, there are valid and compelling reasons why Singapore Savings Bonds are safe and flexible for investors. While there are disadvantages, they don’t outweigh why you should invest in the bonds. Why not try and give it a shot! Start investing in Singapore saving bonds, even if it means taking an Bugis Credit┬áto get started.