How to get higher yields when interest rates are low
Which of these describe you?
▢ I’m planning to get married in 2-3 years
▢ My BTO will be ready soon
▢ I need to get started on my vacation wishlist
All of these need money, so you’d probably want to grow your cash while you wait.
Thing is, in many parts of the world, yields on cash is only a bit above zero. That’s because of ultra-low interest rates. (If you hold on to cash, inflation will just whittle down its value and make it harder for you to earn it back with each passing day.)
Singapore is no exception. Here, the basic current and savings accounts have interest rates that are barely above zero. (Besides special bank-as-you-earn accounts such as the Multiplier Account.) Term deposits do a little better. But there is still a zero in front of most term deposit rates, except during special “promotions”.
And the pursuit of significantly higher returns will take you into riskier territory. How then can you get higher returns on your cash?
There are 3 things you can do.
1. Take up Short-Term Endowment Policies
If you're setting your financial goals and need the cash in, two or three years because you're planning a family, buying a house or saving for that bucket list dream vacation, you really want your cash to grow in the meantime.
Short-term endowment policies, such as SavvyEndowment 3 and Manulife Goal 5, are a way of getting nearer your financial goal.
A single premium insurance endowment plan that boosts your financial well-being. Get returns of up to 2.00%1 p.a.
A single premium insurance endowment plan that boosts your financial well-being. Receive fixed yearly income of 2.09%2 of single premium payable for the first 3 policy years, with potential maturity bonus of 2.09%3.
2. Invest in Singapore Savings Bonds (SSBs)
A safer alternative is the Singapore Savings Bond, where returns generally match those of Singapore Government Securities that have an equivalent tenor. And they are guaranteed by the Singapore Government.
And because the interest paid increases each year, the longer you hold SSBs, the higher the return.
This can work well if you are diversifying your investments, saving for retirement – you can buy SSBs with your Supplementary Retirement Scheme (SRS) monies – or saving for a rainy day.
3. Invest in Dividend-Paying Stocks>
This extends your options to shares, REITs, exchange-traded funds (ETFs) and unit trusts. It enters riskier territory, which means there is potential for loss of capital. But generally, the longer you hold good quality stocks, the lower the risk of a loss. And stocks that consistently pay dividends may provide some insulation, because you are paid income while you wait out market volatility.
You can start investing with DBS Vickers Online or DBS Online Funds Investment Platform.
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This advertisement has not been reviewed by the Monetary Authority of Singapore.
1 The illustrated total yield upon maturity of 2.00% p.a. is based on the higher illustrated investment rate of return of 2.44% p.a.. Based on the lower illustrated investment rate of return of 0.88% p.a., the illustrated total yield upon maturity will be 0.66% p.a..
3 Based on the higher illustrated investment rate of return of 2.51% p.a., this figure consists of fixed yearly income of 2.09% of the single premium at end of policy years 1 to 3 accumulated with Manulife (Singapore) Pte. Ltd. ("Manulife") at a non-guaranteed interest rate of 1.50% and potential maturity bonus of 2.09% of the single premium.
3 The potential maturity bonus of 2.09% of the single premium is based on the higher illustrated investment rate of return of 2.51% p.a. Based on the lower illustrated investment rate of return of 1.89% p.a., the potential maturity bonus will be 0%. The bonus rate and the illustrated investment rate of return are not guaranteed and will depend on the future performance of the Participating Fund of the policy.