Types of fixed income investment products in Singapore and how to buy them
Here are some fixed income investments you can purchase in Singapore, particularly if you’re looking to DIY your portfolio.
- Singapore Savings Bonds (SSBs)
The most well-known bond in Singapore, SSBs are a type of Singapore Government Securities that is issued and backed by the government of Singapore. The minimum investment amount is S$500 and you can only hold a maximum of S$200,000 in SSBs at any one time.
The interest returns of SSBs vary every month, typically ranging between 0.8% p.a. to 2% p.a. It is best that you hold your SSBs for the full ten years in order to enjoy the full interest returns, though you are still allowed to withdraw anytime.
You can purchase SSBs through DBS/POSB, OCBC and UOB ATMs or via internet banking. Check out this month’s SSBs bond here.
- Singapore Government Bonds (SGBs)
SGBs are bonds issued by the government of Singapore with AAA credit rating. The minimum investment amount required is S$1,000, with bond maturities ranging from two to 30 years. SGBs pay a fixed rate of interest, with interest payments given every six months, starting from the month of issue.
Check out the latest SGBs on the MAS website.
Government bonds aside, there are also other corporate bonds that could be issued throughout the year. For example, Azalea Asset Management released the Astrea VI Private Equity Bonds in March this year, where keen investors had just six days to submit their applications.
Besides directly applying for these bond issuances, you can also purchase bonds on the SGX.
- Purchase bond exchange traded funds (ETFs)
ETFs are funds that consist of a basket of securities, typically looking to replicate the performance of an index. A bond ETF, such as the ABF Singapore Bond Index Fund or the Nikko AM SGD Investment Grade Corporate Bond ETF, would contain numerous different investment grade bonds.
ETFs are listed on the stock exchange and hence can be purchased and sold just like a stock. They are also highly affordable with a low minimum investment amount. You can even use your CPF money to purchase approved bond ETFs.
- Purchase a unit trust/mutual fund
Just like how you can purchase ETFs for exposure to a basket of bonds, you can also purchase a unit trust that invests in bonds. Unit trusts (also known as mutual funds), are funds made up of money pooled together by fellow investors and managed by a fund manager.
These unit trusts can be purchased on your own or via a regular savings plan.
Finally, you can even get exposure to fixed income funds via insurers and their investment-linked policies (ILPs). However, if you’re looking for an insurance plan that offers low risk and modest returns, you can instead consider endowment plans, which come at a lower cost.
How much of your portfolio should you allocate to fixed-income products?
The answer to this depends on various factors, including your risk appetite, investment goals, investment capital and age.
When to allocate more? If you’re risk-averse, you’ll want to allocate a greater portion of your portfolio towards fixed income investments. The same applies if you’re older as risk appetite correlates to age. For example, if you’re approaching retirement age, time is no longer on your side and you might not be able to afford losing your investment capital.
When to allocate less? On the flipside, if you’re young, you have a long investment time horizon. This allows you to take on higher risk as your portfolio has the time to tide over market volatility in the long term, particularly as stock markets have shown to go up over time.
Taking on some risk when you’re young gives your portfolio the opportunity to earn higher returns over time. This means investing in asset classes such as stocks, exchange traded funds (ETFs), unit trusts and perhaps even putting a tiny portion into more speculative assets such as cryptocurrency or collectibles.
If you need help deciding how much of your portfolio to allocate to fixed income, consider robo-advisors.
Robo-advisors offer a diversified portfolio that consists of asset classes allocated based on your risk appetite. They suggest and tailor a portfolio for you based on your risk profile and investment goals. These portfolios are well-diversified, typically investing in a mix of both equities and fixed-income products.
For example, an investor with lower risk appetite might be offered a portfolio with 60% fixed income and 40% equities, while an investor that’s willing to take on more risk could go with a portfolio with 80% equities and 20% fixed income.
Instead of sitting on the fence, start growing your investment capital with a robo-advisor today.
Read these next:
Money Confessions: 9 Singaporeans Share Their Portfolio Asset Allocation
Guide To Singapore Savings Bond (SSB): Is This The Right Investment For You?
Best Robo Advisors To Auto-Pilot Your Investments In Singapore
Best Fixed Deposits To Lock In Your Savings In Singapore (2021)
Best Cash Management Accounts In Singapore To Soup Up Your Savings
6 Alternative Investments To Diversify Your Portfolio
How To Build The Best Passive Income Portfolio For Your Future Self
Money Mysteries: Why do Bond Values Fluctuate if They are Supposed to be “Fixed Income”?
Best Bond Market Index Funds To Buy in 2022 On The Singapore Stock Exchange
Astrea VI Private Equity Bonds: 8 Facts Investors Need To Know About This Hot Bond
The MAS Just Made Saving for Retirement a LOT Easier
3 Best Places to Keep Your Emergency Fund in Singapore
Column: Why Are So Many Singaporeans Buying Bonds That Never Mature?