Not too keen
The Singapore government has you covered. You might want to consider Singapore Saving Bonds (SSB). If you’re looking at investing over a longer time horizon, like over 10 years and collecting half-yearly interests, SSBs are just the right thing for you. Fully backed by the Singapore government, the bonds are redeemable anytime and they have the potential to generate a risk-free return of 2% p.a. to 3% p.a. on average if you keep the money invested for the full term. Not the highest yielding investment, but definitely one of the safest and better than not investing at all.
Comfy with small
If you are looking for an investment that can reap a potentially higher return, and are willing to tolerate small fluctuations in value, you may consider investing in stocks. Depending on your goals and risk appetite, you can choose from a wide range of companies delivering a mix of higher but riskier returns, or blue chip stocks that offer a more stable outlook in exchange for potentially lower returns. Those of you who are looking to earn a regular dividend can consider income stocks, while those who prefer to invest in high-growth companies (such as in the technology sector) can consider growth stocks.
There are no free lunches in the world and this is especially true in the financial markets. Always consider the risk reward trade-off whenever you are expecting astronomical returns. Are you willing to take calculated risks for a potentially higher return? The stock market might require a bit more attention and monitoring as compared to other financial products, so do consider if you have the time and expertise to monitor your holdings.
Fancy a bit more
Exchange traded funds (ETFs) are investment funds listed and traded on an exchange like a stock. They usually track an index, a commodity, bonds, or a basket of assets and thus give investors the instant benefit of diversification without large amounts of cash needed to create individual portfolios.
There are 2 main types of ETFs you can consider.
Index tracking ETFs typically aim to generate a return that tracks or replicates a specific index such as a stock or commodity index. Such index tracking ETFs are passively managed by ETF managers and may offer a lower management cost compared to actively managed ETFs.
Actively managed funds may potentially offer a higher return. That is however, entirely dependent on the fund manager’s expertise. If your fund manager has the same foresight as the oracle of Omaha, why not?
Squeezed for time?
Leave it to the experts.
If you are seeking a constant source of passive income with less monitoring than the stock market, unit trusts might just be the thing for you. Unit trusts are managed by experienced fund managers who are able to provide support in research and other investment opportunities that would otherwise be less accessible to the personal investor.
In addition, you’ll find greater variety with unit trusts and diversify your risk across the many hundreds or thousands of companies that are within a unit trust, instead of just a handful of companies that you’ve invested shares in.
Tight on cash? Using your CPF or SRS funds might be a smart way to invest. This way, your cash position won’t be affected. Using SRS funds also makes you eligible for a lower sales charge.
Get your hands on some
property through REITs.
Singaporeans have a deep and enduring love affair with property investments, but owning one can seem far-fetched. With the advent of Real Estate Investment Trusts (REITs), investing is not as expensive as purchasing a property on your own.
So what exactly are REITs? They’re portfolios consisting mainly of commercial properties such as malls and hotels. Proceeds from the rental and sale income are then shared with the investors, including REIT shareholders potentially such as yourself. Like unit trusts, REITs allows you to spread the risk of investments, while having it professionally managed.
So there you have it. There are multiple ways to earn a passive income. Just like setting up a business, developing a steady stream of passive income involves patience and knowledge. Starting out early gives you the benefit of compounding interest which can grow into a real tidy sum with time. No matter which methods you prefer, review your portfolio from time to time to ensure that your money is working as hard as you are.