Investment Strategy: Singapore Savings Bonds
Welcome to Singapore Savings Bonds blogspot site.
In today's 2015 post on Investment Strategy: Singapore Savings Bonds, we share insight into bond investment strategy.
Passive Bond Investment Strategy
Of the various Singapore savings bonds investment strategies, passive bond investment strategy is the commonest and simplest plan for most men and women in the retail streets of Singapore.
In a nutshell, passive bond investment strategy means to buy and hold. If you adopt this passive bond investment strategy, you are a long-term bond investor.
You put in a fixed sum of money to buy Singapore Savings Bonds. You park your money there for ten years, ignore it and carry on with other aspects of your life. Your earn interest every 6 months. Upon maturity, you get back your principal. Sweet and simple, right?
To execute this passive bond investment strategy, you first must decide how much money to invest in Singapore Savings Bonds. You must also agree to hold the Singapore Savings bonds until maturity of ten years.
All these decisions are made after you consider your personal financial circumstances.
To do that, you should perform a personal financial needs analysis. If you are unsure, please consult a qualified personal financial advisor.
What are benefits of this passive investment strategy Singapore Savings Bonds?
You get dependable cashflow for ten years.
- Interest payments are made every 6 months. On time, every time. Tax-free.
You get back your principal.
- You get back 100% of your capital investment at maturity. No early termination of bond investment by issuer.
Your investment is guaranteed.
- Your principal investment in Singapore Savings Bonds is guaranteed by the Singapore government. Transfer money under your pillow to Singapore Savings Bonds. Worry less and sleep better.
You reduce transaction costs.
- Buy once, pay transaction cost once only.
You eliminate the hassle of frequent transactions.
- Buy and forget. Go on with your life.
You eliminate reinvestment risk during tenure of bond investment.
What are risks of this passive investment strategy Singapore Savings Bonds?
Interest Rate Risk
- You cannot capitalize on future rise of interest rate within the ten years of your bond investment. Because at issuance, rates are fixed based on the prevailing SGS yields and locked in for each issue.
- Example: You buy Singapore savings bonds this year at Y% p.a. Should interest rate rise to Y+1% p.a. in the following year, you lose out on the potential earned interest income.
Inflation Risk
- Your interest income earned may not beat inflation over the ten-year bond investment term.
