how to invest $10k in singapore

5 Best Investment Options to Invest $10k in Singapore

If you earn a monthly income from your job or business, you need to allocate your money to different expenses. Experts advise that you should diligently allocate 50% to your expenses, 30% for wealth growth and investments, and 10% for your savings. Once you follow this rule, you are on the right track. 

Based on the median household income per member, at $2,792, if you stick to allocating 30% of the budgeting percentage for wealth growing, you will have saved a dollar cost averaging $10,000 after 13 months. Now that you have the $10k saved up, you need to look for an investment option. Where will you invest your money? Here’s how to invest in Singapore.

Why Invest? Things To Consider

Investing is a smart way to grow your investment. However, before committing your cash, you need to do your due diligence and consider several factors to keep your cash safe.

The Benefits Of Investing

Investing your $10k comes with the following benefits.

1. Long-Term Returns

Compared to cash, investments are good for long-term investments. You can earn money even after retirement if you put your cash in government bonds and treasury bills. In addition, they are also risk free and safer than stocks; therefore, you can generate a steady stream of income via interest payments.

2. Predictable Returns

When the global economy and the stock market is volatile, bonds and treasury bills are known to remain relatively stable for more extended periods.

3. Outperform Inflation

When you save your cash in your own portfolio, they will likely outperform inflation. This way, you can protect your cash and avoid losing it.

4. Reduced Risk

If you put your cash in government treasury bills and bonds, you’ll experience no value loss. These investments are considered risk free assets; therefore, you will not lose your principal. The government backs your principal amount to ensure you don’t lose any value.

5. Regular Income

If you are retired or almost retiring, you might be looking for a risk free way to earn a regular income to cater to your daily expenses. Consider investing in options such as bonds and equities that can earn you a steady income without being affected by the rate of inflation.

Factors To Consider When Choosing An Investment

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Investing your cash can be a risky affair if you are not careful. Therefore, to avoid losing your it, here are some of the key things to consider when choosing an investment option.

1. Financial Conditions And Goals

Before selecting an investment, you need to know your financial goals and conditions. Once you have your $10k ready, you’ll need to have a financial roadmap that ensures you are on the right track. 

Financial literacy is essential because if you have financial goals and objectives, you’ll avoid making mistakes and know how much cash you need to commit to your investment. In addition, you also need to consider the financial conditions and performance. Analyze the global economy and the economic reports from the past years to determine whether it is worth it.

2. Risk Appetite

In financial investment, risk is the possibility of losing cash due to unforeseen circumstances. Every investor has a different risk appetite; therefore, you should consider yours. Not all investors are comfortable taking high risks. 

You should ensure your level of risk aligns with the financial goals or ask your financial advisor or fund manager. If you don’t have a high risk appetency consider going for risk free investments. 

The higher your potential return, the higher the potential risk of losing cash. For this reason, you should not make your decisions in haste before fully understanding the degree of risk. If you spend within your risk profile, you are more likely to achieve your financial goals.

3. Potential Returns

To grow your wealth, you should know the return on investment (ROI) to expect. The ROI is the benefit the investor gets after deducting the initial cost of investment. The returns can be in the form of dividends, interest, or capital appreciation. As the net after-tax income, the returns should be higher than the inflation rate.

4. Costs And Fees

When investing, there are several costs and fees you have to incur. As an investor, you need to have a budget which is the amount of capital you’ll invest. Apart from these initial costs, you need to budget for unexpected expenses, emergencies, and savings. If you have $10k to invest, you can choose to put half into bonds and the other half into government treasury bills.

You also need to confirm whether you need to pay any management costs and fees during the investing period. If these costs are passed on to you, you’ll have to budget more cash. However, it would help to keep the costs and brokerage fees as low as possible as lower fees helps you avoid losing too much cash.

5. Liquidity

When you start investing, it’s good to remember that you might need to sell your investments at some point to cater to emergency needs. Therefore, you need to choose an option that’s easy to liquidate and use the funds. In case of emergencies, you need to allocate some cash that can easily be converted to cash.

Investments such as shares, treasury bills, and bonds are considered relatively liquid because they can be easily sold. Ensure that you go for such options to avoid tying your finances down.

6. Portfolio Diversification

When investing, always remember not to put your eggs in one basket. To get maximum returns and manage your risks, avoid putting all your cash in one investment. Spread out your cash in multiple asset classes such as stocks, treasury bills, real estate investment trusts, and bonds to minimize the risk of losing all your cash.

If you put all your cash in stocks, which is prone to volatility, you might incur significant losses when the economy changes or earn the same returns every year, which does not grow your wealth. On the other hand, you might also not receive any returns, which is not a smart way to invest. You can also seek investment advice to guide you.

7. Investment Period

This period is the length of time the financial commitment takes to bring back returns. If you choose the long-term or fixed period option, it will be held for more than a year, while short-term ones are held for a year or less. Long-term fixed period options yield higher returns. 

You can choose the duration depending on your needs. Before committing to a portfolio, confirm the period it will take to get your returns. This information is vital because it helps you know whether it is worth your time or you need to choose something else with faster returns. The time should align with your financial objectives.

8. Tax Implications

Every government has a compulsory fee that they charge citizens as a tax. Different investments have different rates. Therefore, you must consider the tax implications to ensure you get a high net after-tax return when considering an investment.

Your returns are ideal if they have a reasonable after-tax income. If you are looking for such investments, you can go for government treasury bills and bonds that are usually tax exempt.

9. Market Volatility

Volatility is measured by how prices fall and rise. If the market you are investing in goes through lots of fluctuations, it’s considered highly volatile. If there are less frequent changes, the economy is deemed to be stable. Therefore, before investing, consider these fluctuations and the economic trends. 

Keep in mind that the level of volatility will also impact the returns. If an industry is too volatile, the risk is high. In the long run, this will also affect your earnings. Take time to research and analyze the results from the past years before committing your cash.

10. Inflation Rate

Every year, the inflation rate rises, influencing the price of goods and services. This also affects the value of money as well as your investment. An ideal investment should have a higher ROI than the inflation rate. Therefore, you need to analyze economic trends and the inflation rate each year to determine whether the option is a good choice.

Best Investment Options For Under $10k

With enough cash, you can grow your wealth. Fortunately, some options don’t need heavy investment, while others require substantial capital. If you have saved $10k for wealth growth, here are some of the investments you can put your cash in.

1. Singapore Government Treasury Bills

Treasury Bills or T-Bills are Singapore Government Securities (SGS) issued on a short-term basis at a discount from their face value. If you put your cash in these bills, you’ll receive the full face value at maturity.

  • Term

Typically, the government will issue 6 month or 1-year T-Bills. They also have an AAA rating and are not charged any capital gains tax in Singapore.

  • Tax

Individuals who purchase T-Bills earn an interest income that is tax-exempt. Non-residents without permanent residence in Singapore also don’t have to pay any taxes on the interest income.

  • Minimum Investment

To invest in these government T-Bills, the minimum capital is $1,000. Therefore, if you have $10k saved, you can allocate some cash to this portfolio and the rest on something else. You can buy them either with cash, SRS, or CPF funds. The government provides an issuance calendar for upcoming auctions that you can use to plan your investments.

2. Singapore Savings Bond

investing in bonds

These safe and flexible bonds enable investors to enjoy returns that increase over time, and they can redeem any month without getting a penalty. Bonds are open to individuals aged 18 and above, and one needs a bank account in one of the local banks and an individual CDP securities account.

  • Term

The Singapore government fully backs these savings bonds, and investors get the initial amount back in full without capital loss. If you choose this option, you can commit your cash for up to 10 years and earn interest that increases with time. In addition, you can choose to exit at any time without incurring any penalties.

  • How To Buy

To buy, apply via the DBS, POSB, UOB, and OCBC ATMs or use internet banking. If you are an SRS investor, you can use your internet banking portal for the application. You can redeem your savings bond anytime before it matures. Savings Bonds are a safe alternative if you want to save long-term.

  • Minimum Investment

You can start with a small amount of S$500 and grow your wealth. The maximum individual holding for these bonds is S$200,000. Interest payments are issued every 6 months. 

If you make a cash investment, the interest will be automatically paid into your bank account linked to the individual CDP securities account. The government issues a new Savings Bond every month; therefore, you should look out for the issuance calendar.

  • Tax

Savings bonds are tax-exempt and non-transferrable. If you are a retiree, Savings Bonds can be a safe way to keep your cash. It acts as a rainy-day fund that earns interest and allows you to access it within the month. Therefore, you can diversify your investments and allocate some cash to Singapore Savings Bonds if you are riskier.

3. Singapore Government Bonds

Singapore Government Securities (SGS) bonds are long-term investments that pay a fixed interest rate. They also mature within 2 to 30 years.

  • Types Of Government Bonds

You can choose to either invest in SGS (Infrastructure), SGS (Market Development), or Green SGS (Infrastructure). The market development bond is used to develop the country’s domestic debt market. SGS (infrastructure) finances major and long-term infrastructure, and Green SGS funds long-term green infrastructure projects.

  • Minimum Investment

With an AAA credit rating, these bonds require a minimum capital of $1,000. You can buy the bonds either with cash, CPF, or SRS funds.

  • Term

The available tenor for the bonds is 2, 5, 10, 15, 20, or 30 years. Anyone over 18 years, even foreigners, can buy SGS bonds. With this investment, there’s no tax charged for both residents and non-residents.

Unlike Treasury Bills and Savings Bonds, these government bonds don’t have early redemption; however, they can be sold in the secondary market. Investors receive the face value at maturity.

4. CPF Investment Schemes

If you have $10k to grow, you can put your cash into a CPF investment scheme (CPFIS). Investing your CPF savings into different products can enhance your retirement savings. 

However, before committing your finances, you should know that all these investments come with a risk. Therefore, if you are unsure about where to invest, you should keep your cash in your CPF accounts.

  • Types of CPFIS

The CPFIS products include unit trusts, annuities, investment-linked insurance products, endowment policies, Treasury bills, Singapore Government Bonds (SGBs), Exchange Traded Funds (ETFs), fixed deposits, fund management accounts, statutory board bonds, shares, property funds, corporate bonds, gold ETFs.

  • Minimum Investment

You can invest in your CPF ordinary account after setting aside $20,000 and your special account by setting aside $40,000. To find out how much of your CPF funds you can invest, you can login into the CPF digital services platform and access your CPF accounts.

5. Fixed Deposit Accounts

Fixed deposit accounts are also known as tine deposits. These are low-risk investments that earn interest over a specified time. With this investment, you just need to leave the cash in the bank. This is a good option if you have a substantial amount of money that you don’t want to risk investing.

  • Interest Rate

However, on the downside, a fixed deposit doesn’t have great returns. Before the pandemic, you could earn up to 2% per annum on a fixed deposit; however, these days, the interest is now much lower.

Highest Fixed Deposit Rates in Singapore in 2022

Here are the highest fixed deposit rates in Singapore as of January 2022.

Bank/Financial Institution Minimum deposit amount Tenure Interest rates
CIMB $10,000 18 months 0.75% p.a.
Hong Leong Finance $20,000 36 months 0.9% p.a.
DBS $1,000 8 months 0.6 % p.a.
ICBC $500 12 months 0.6% p.a.
Maybank $1,000 36 months 0.6% p.a.
UOB $20,000 12 months 0.5% p.a.
RHB $20,000 12 months 0.5% p.a.
OCBC $20,000 12 months 1.4% p.a.
Standard Chartered $25,000 8 months 0.4% p.a.
HSBC $30,000 9 months 0.5% p.a.

 

Keep in mind that the interest rates change monthly, and they vary depending on the bank. However, DBS’ interest rate is fixed and non-promotional. If you put your cash in fixed deposits, the tenure can be as low as three months and can go for 12 months.

You’ll get a better interest rate if you opt for a longer term. When making a deposit, the initial amount is usually at least $10,000. In addition, the currency used is SGD, but some banks offer a higher interest rate if you use foreign currency.

If you want to withdraw from your fixed deposit, you can, but you’ll lose interest. The interest payments are issued either quarterly or annually. Compared to Savings Bonds, the interest rates on your fixed deposit is much higher.

Conclusion

Setting aside some cash for investments is a good strategy. Ideally, you should use 30% of your income to grow your wealth. If you have saved $10k, you are on the right track and can choose among different options.

With this amount of money, you can choose to put your cash either in a fixed deposit, CPF investment schemes, Singapore government bonds, Singapore savings bonds, and Singapore government treasury bills. Your choice should align with your financial goals.

Key Takeaways

  • Investing is beneficial and a means to earn long-term steady income long-term even after retirement.
  • You need to take time and consider all the options, weigh the positives and negatives before choosing an investment, or talk to a financial advisor.
  • As an investor, you should spread out your cash by investing in different asset classes to avoid losing all your money.
  • All types of investments are risky; therefore, you should select one that aligns with your financial goals.
  • When investing, you need to keep your costs and fees as low as possible and avoid losing cash.

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