What is the safest investment option in Singapore? Is it opening a fixed deposit account with a bank? If that is your preferred, don’t just walk-in to any banks. First check out moneysmart.sg, with their excellent Fixed Deposit Interest Rates comparison. A quick glance and you will notice the banks pay you peanuts in interest for your money. Why is that so (because you’re a monkey)? Well, there are fees (profit) to be made, and commission for salesmen etc. Your interest (literally) ain’t part of their priority). You should stop being a sucker and go buy the Singapore Government Bonds.
Singapore Government Bonds
Simply put, its an investment vehicle for common people to invest in government issued bonds. In this case, the return is pegged to the 10-year Singapore Bond Yield.
Chart. 1 – Historical Yield (%) of Singapore 10-Yr Bond
Based on past data, it rather safe to say the annual rate of return will be close to 2% and above. If you can’t do your math, thats at least double what you would have gotten from the fixed deposit with any banks in the Singapore.
But wait, I heard this most stupid thing before. “I don’t trust government with my money“. There is a saying, if you don’t open your mouth, people might think you’re smart. Anyone who trusts a bank more than a government, in this case the Monetary Authority of Singapore (MAS) to repay your deposit must be @#$%.
Not that I doubt your intelligence, but I will just explain that the MAS prints the SG dollar, and provides the liquidity to the banks. In the event of any crisis or bank runs (which is the reason why potentially your fixed deposit can’t be redemed) the MAS steps in to provide the capital to ensure the smooth running of the banking system (as to why government should bail the banks out, sorry, that’s already a norm. No questions need to be asked).
So will there come a day whereby the banks can pay you back, while the Singapore government bonds can’t? Well, its a straight no for me. However, if that’s your worry, go for a fixed deposit in a foreign currency with a non Singapore based bank. But that’s another risk altogether.
So please do yourself a favor. “Be a man, buy Singapore Government Bonds“.