Treasury Bills vs Singapore Savings Bonds vs Fixed Deposits vs Endowment Schemes: Which Is Right For You? (2023)

In investing, risk and return are closely related; when you seek higher returns, you must also take more risk. The same is true at the other end of the spectrum. Returns on low-risk investments tend to be relatively low.

Low risk, low return investing or conservative investing has its place and purpose in the life cycle of a portfolio. Conservative investing is ideal for wealth preservation, possibly sacrificing higher returns for greater stability.

A practical example is during retirement. A conservative strategy ensures your savings are still available to meet your retirement needs while helping your purchasing power keep pace with inflation.

Additionally, conservative investments can also be used to balance out more aggressive investments for better overall portfolio diversification.

Let’s take a closer look at four popular conservative investments in Singapore.

Treasury Bills vs Singapore Savings Bonds vs Fixed Deposits vs Endowment Schemes: Which Is Right For You? (1)

4 Popular Conservative Investments in Singapore
Treasury Bills (Treasury Bills)
  • Term: six months or one year
  • Yield: 3.69% to 3.7% (March 17, 2023)
  • Minute investment: $1,000 (multiples of $1,000)
  • Negotiable: Yes
  • How to buy: Cash, CPF, Supplementary Retirement System (SRS)
Singapore Savings Bond (SSB)
  • Term: up to 10 years
  • Yield: 3.15% (March 23)
  • Minute investment: $500 (multiples of $500, up to $200,000)
  • Tradeable: No
  • Buy and use: Effective, SRS
Fixed Deposit (FD)
  • Ages: 6 to 24 months
  • Yield: up to four percent
  • Deposit in Minutes: Varies by Bank
donation plan
  • Term: Five to twenty years and months
  • Yield: up to 4.25% (estimated)
  • Investing in Minutes: Varies by Insurance Company
  • Negotiable: No, there are severe penalties for early delivery
  • Premium Payment Method: Cash

treasure letters

Treasury Bills vs Singapore Savings Bonds vs Fixed Deposits vs Endowment Schemes: Which Is Right For You? (2)

Treasury bills, referred to as treasury bills, are short-term debt securities issued by the Singapore government. They have a AAA credit rating (the highest level possible) and are considered one of the safest investments.

Treasury bonds are issued to investors at a price below par. At maturity, investors will receive the full face value. Investors can choose six-month and one-year treasury bonds according to the investment period.

A notable feature of Treasury bills is that the rate of return is not disclosed in advance. Instead, you will only know the yield at maturity to call.

How to Invest in Treasury Bills

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Treasury bills are issued through auctions, where investors can choose between competitive and noncompetitive bids.

There is no specific return for a non-competitive offer, you simply state the amount you want to invest. Your offer will be withdrawn regardless of the Treasury yield.

Up to 40% of total issuance is reserved for non-competitive bidding, with indirect impact distributed pro rata. The remainder of the offering is earmarked for competitive bidding at specified yields, up to a cut-off yield.

Competitive offers, on the other hand, have a specified rate of return and your money will only be invested if the specified rate of return is below the rate limit. Therefore, if the specified throughput is too high, competing offers may not be allocated, and offers close to the throughput limit may only be partially allocated.

You can bid for cash, CPF or SRSfunds treasury bills. T-bills are also traded in the secondary debt market, which means you can choose to sell your T-bills early rather than hold them to maturity.

Keep in mind that Treasury bill prices fluctuate before maturity, which means you could sell for a loss.

Are Treasury Bills Right for You?

Treasury bonds are ideal for those looking for a safe investment that provides a fixed payment at the end of the investment holding. They are also suitable for short-term investments of six months to a year.

Also, there is no upper limit to how much treasury bills you can invest, although this will be affected by the total limit per issue.

Singapore Savings Bond (SSB)

Treasury Bills vs Singapore Savings Bonds vs Fixed Deposits vs Endowment Schemes: Which Is Right For You? (3)

Singapore Savings Bonds (SSBs) are government-issued bonds with coupons that increase each year. This means the longer you hold your SSB, the more you will earn.

SSBs are issued with maturities of up to 10 years, making them suitable for long-term investors. However, this doesn't mean you have to hold your bond for the entire term: you can redeem your bond in any month for the principal and accrued interest.

Note that SSBs cannot be traded on the secondary market, which means their rates are not affected by market movements.

How to invest in SSB

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SSB is issued monthly and you can subscribe to any part that is available for that month. You can start investing with as little as $500, although each increment must be a multiple of $500. The maximum amount an individual can invest in SSB is capped at $200,000.

SSB is very flexible. You can invest a lump sum or invest small amounts in several tranches. Note that coupon rates vary between each SSB, but the difference is likely to be small.

After purchasing SSB, simply sit back and wait for returns, paid every six months from the month of issue.

You can buy SSB with cash or with funds from your SRS.

Is SSB right for you?

The key to maximizing returns when investing in SSBs is to hold them for the full 10 years, or as close as possible. This will ensure you get the highest return possible.

To illustrate this, consider the SSB yield in March 2023. This portion pays 3.01% in year 1, rising to 3.53% in year 10. Over the full 10 years, the average annual rate of return is 3.15%.

time deposit

Treasury Bills vs Singapore Savings Bonds vs Fixed Deposits vs Endowment Schemes: Which Is Right For You? (4)

Fixed bank deposit (FD) is another option to increase returns. These accounts offer higher interest on your deposits, usually much higher than the basic savings rate.

However, in return, you must keep your deposit for a specified period. There may also be other requirements to be met, such as a minimum deposit or having a pre-existing banking relationship.

How to use fixed deposit

As mentioned above, you only need to deposit the required amount of funds and keep the deposit for the duration of the FD.

Any eligible interest will be added directly to your account, so no redemption is required.

Is a fixed deposit right for you?

If you have some cash on hand, depositing it in FDs can be a great way to grow your money without exposing you to investment risk.

Bear in mind that early withdrawal of FDs may incur penalties and the interest you earn will be prorated. These will have a big impact on your returns.

donation plan

Treasury Bills vs Singapore Savings Bonds vs Fixed Deposits vs Endowment Schemes: Which Is Right For You? (5)

An endowment plan is an insurance policy that helps you save to meet financial goals or future needs.

They are often described as similar to bank savings plans, but in reality, giving plans are very different. After purchase, an endowment plan requires regular and consistent premium payments throughout the term. (Unless you choose a single premium plan, which requires a lump sum up front.)

You also cannot withdraw money at will, and submitting your plan early will incur severe penalties; this can be serious enough to cost you money, especially in the first few years of the plan.

As long as you keep paying your premiums, your savings plan will accumulate value over time, (hopefully) more than the total premium you end up paying. This is not guaranteed.

Another benefit is that you will receive life insurance equal to the face value of the savings plan throughout your lifetime. You can even add riders to your savings plan for extra coverage, such as critical illness or personal accident.

How to use the donation program

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If you're looking for a disciplined way to save money where you can commit to paying your premiums over the long term and have some coverage you can use in the future, a savings plan might fit your needs.

Keep in mind that while a giving plan can help you achieve your financial goals, it's not as liquid as other types of investments.

Also, returns are not guaranteed and your return may be lower than the projection shown in the policy document. In extreme cases, you may end up paying even less than the full premium you paid (in other words, loss of principal).

Is the Giving Program Right for You?

Staffing plans are made for extremely long time horizons, so perseverance and discipline are key. Once signed up, the terms of the donation plan cannot be changed, so you need to make sure you can afford the premium no matter what.

Make sure you thoroughly understand how the giving program works, especially its limits and penalties, before jumping into it. You should also take any expected rewards in front of you with a grain of salt.

If you're not sure if you can afford to keep up with your payments, try a short-term plan or lower your monthly premium.

The sooner you start investing, the better.

Treasury Bills vs Singapore Savings Bonds vs Fixed Deposits vs Endowment Schemes: Which Is Right For You? (6)

When building a portfolio, the earlier you start the better. This is due to the power of compound interest, which allows your money to grow at a faster rate the longer you invest it.

Even conservative investment strategies will see significant increases in total returns, just a few years in advance.

Start building your portfolio with Singapore's best online brokerage. Find out which brokerage firm offers the lowest fees, the most markets to trade, or the widest range of investment products.

Also read:30 Zero Savings: 5 Money Habits I Wish I Had When I was Young

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