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There aren’t many investments that guarantee your principal as well as returns in Singapore. Of those that do, you need to further weed out the potential scams – i.e. those that sound too good to be true.

One other thing to understand is that when you get to enjoy such safety in your investments and visibility in your cashflows, you need to be prepared to accept a rate of return that is close to the risk-free rate.


Risk-free Returns

The risk-free return refers to a rate of return that you can expect to achieve even if you don’t take on any risk. Theoretically, there’s no such investment as there will always be some form of risk that we take on when making an investment.

Below, we look at six types of investments that you can put your money into which guarantees your principal and provides a guaranteed return. This can be a good way for those who are extremely risk averse or just unsure about investing.

#1 Singapore Government Treasury Bills

LQM 000066A good proxy for the risk-free rate can be the return that the government of Singapore, a triple A rated economy, pays on its 1-year treasury bills, the shortest-term government security available to us.

For us in Singapore, a good proxy for the risk-free rate can be the return that the government of Singapore, a triple A rated economy, pays on its 1-year treasury bills, the shortest-term government security available to us.

This is as close to the risk-free rate as we can get and it offers a rate of 1.32% per annum (p.a.) – which means that you will be able to grow your money by 1.32% p.a. even without taking on any investment risk.

#2 Singapore Government Bonds

The Singapore government also issues longer-termed bonds, between two and 30 years. These would typically pay higher returns than the 1-year bond, as it is deemed to carry slightly more risk being longer-termed. It is also regarded close to risk-free and hence offer a rate of return that is close to the risk-free rate as well.

Read Also: Different Types Of Bonds Available To Retail Investors In Singapore, And What You Should Be Looking At

Currently, the Singapore Government Bonds offer these rates on its most recent bond issues. As you can see, the 2-year bond yields lower than the 1-year treasury bill. This is likely because of the timing of the issue, and hence a slight difference in rates, rather than it actually being regarded as “safer” than the 1-year treasury bill.

Singapore Government Bond Term Median Yield (%) p.a.
2 1.3
5 1.7
10 2.28
15 2.36
20 2.37
30 2.48


#3 Singapore Savings Bonds (SSB)

By now, you’d likely see a common theme occurring. The investments that are most likely to guarantee your capital and your returns are fixed income investments issued by the government.

The SSB, launched in October 2015, pays a step-up interest each year, up to the 10th year. What this means is that the bonds pay a lower return in the beginning years, and if investors do not redeem the bond, it continues to pay a higher rate each year, until the 10th year. This is primarily to recognize the fact that investors are holding the bonds for a longer-term.

Read Also: How To Buy The Singapore Savings Bonds

Here’s the rate of each SSB issue, if you hold it for the full 10-year
timeframe since its first in October 2015.

Issue Average 10-year return p.a (%)
Oct 2015 2.63
Nov 2015 2.78
Dec 2015 2.44
Jan 2016 2.58
Feb 2016 2.5
Mar 2016 2.44
Apr 2016 2.19
May 2016 2.09
Jun 2016 1.94
Jul 2016 2.06
Aug 2016 2.03
Sep 2016 1.75
Oct 2016 1.79
Nov 2016 1.79
Dec 2016 1.87
Jan 2017 2.18
Feb 2017 2.44
Mar 2017 2.38
Apr 2017 2.27
May 2017 2.32
Jun 2017 2.16
Jul 2017 2.12
Aug 2017 2.06
Sep 2017 2.12
Oct 2017 2.13
Nov 2017 2.07
Dec 2017 2.16


Also, if you look at the most recent launch of the SSB, its 1-year interest rate returns 1.26% p.a, and its 10-year rate returns 2.16% p.a. This is similar but slightly lower than the most recent Singapore Government treasury bill launch, offering 1.32% p.a, and the most recent 10-year Singapore Government bond launch, offering 2.28% p.a. The reason for this is simple, you can redeem the SSB at any point – the superior liquidity offered by the SSB accounts for the slightly lower returns it offers.

#4 Fixed Deposits

Although not commonly referred to as an investment, fixed deposits offer us a way to earn better returns on our money than leaving it in a savings account or under our pillows. As a reference, we look at the three local banks in Singapore to check the rates they are currently offering on fixed deposits.

Bank/ Tenor 12 months p.a. (%) 24 months p.a. (%) 60 months p.a. (%)
DBS 0.35 1 1.2
Bank/ Tenor   10 months p.a. (%)  
UOB   1.15  
Bank/ Tenor   12 months p.a. (%)  
OCBC   1.1  


Of course, there are many other banks offering their own fixed deposit schemes and promotional rates. Many of them, including the three above, may come with certain conditions you have to fulfil to achieve the promotional rates.

In addition, deposits with all full banks and finance companies in Singapore are covered under the Deposit Insurance Scheme, insuring up to $50,000 of your deposits in each account. All full banks and finance companies in Singapore, a total of 36 are listed on the website, are members of the Deposit Insurance Scheme.

Read Also: Deposit Insurance In Singapore – 5 Little Known Facts About SDIC

#5 CPF Top-Ups

To earn a better interest on your funds, you can also consider making CPF top-ups into your Special Account (SA). These funds will be guaranteed by the Singapore government and offer a guaranteed return of a minimum of 4.0% p.a.

You should also note that the first $60,000 of your CPF monies, with up to $20,000 in your CPF Ordinary Account (OA), will earn an additional 1.0% in interest returns. This means you top-ups may earn up to 5.0% p.a. if you top-up your CPF SA in the early years.

You can receive up to $7,000 in tax reliefs when you make cash top-ups into your CPF SA, as well as an additional $7,000 in tax reliefs when you make cash-ups into a loved one’s CPF SA.

However, before you do this, you need to know that unlike the above investments, which can be sold or redeemed early (notwithstanding that you’ll likely lose some value when you do this), this is irreversible.

#6 Savings Plans

Savings plans, offered by insurance companies, especially those that are non-participating in nature, are able to guarantee your capital as well as returns. You should also note that savings plans that guarantee your capital but do not guarantee returns also exist.

Read Also: Buying A Whole Life Participating Policy For Investment Returns? Here’s What You Need To Understand About The Benefit Illustration

When investing in a saving plan, you are typically required to lock your money over a fixed time frame or continue contributing over a fixed time frame. Not doing so may see you losing a substantial amount of the returns you expected to receive.

These plans are also covered by the Deposit Insurance Scheme in Singapore and may also offer an insurance component that pays out in the event something unfortunate happens to you.

♦  Moving On To Investment With Greater Risks

Once you’ve built a foundation to take care of your basic retirement needs, you will have more courage to make riskier investments. Riskier investments, such as stocks, properties and other alternative investments such as cryptocurrencies or even wine may be able to deliver significantly higher returns.

This does not mean you stop being prudent with your investments. In fact, quite the contrary, as you need to be even more prudent when you’re embarking on riskier investments. Many of these riskier investments are volatile and require you to be able to stomach, and ride out, wild price swings at times to earn good returns over the long term.


This article is republished with permission from Dollars and Sense.

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