All around the world, investors want something to put money into to get returns. Some go to the extent of taking a loan to start investing. Some invest in real estates, stocks, assets, and other bonds. For bond investors, this is a much better course to take than those alternatives. If you know about this investment alternative, don’t you think it’s time to add it to that investment portfolio? Singapore Savings Bonds (SSBs) are an ideal solution to your investment desire.
In this blog, we’ll see the reasons why you should invest in SSBs. What are the key benefits? Let’s discuss.
What Are Singapore Savings Bonds?
You’ve probably heard about the term “bonds.” In some scenarios, it can be used to mean something different from an investment type. But, that’s not what we’re discussing here. What is a bond? Think of bonds as loans that you give to companies or governments; they borrow these monies from you to finance projects, perform other operations, or even repay other debts like what Instant Loan mentioned.
The borrower (company or government) becomes the bond issuer while the lender (you) becomes the bondholder. Bonds include; – the loan terms, the maturity date (when you’ll get the principal amount repaid), and coupon rate (the interest rate to be paid).
These loans are a form of a fixed-income investment since the lender receives returns on a stable, fixed schedule. What about SSBs? Are they different? Let’s see.
Singapore Savings Bonds are specially structured government securities offering accessibility and suitability to investors. They were introduced in 2015 by the Singaporean government, and their features include; – monthly issuance, non-tradability, individual eligibility, and flexible redemption. The benefits accruing from these features are numerous, and no investor would want to miss out.
The Key Benefits of Singapore Savings Bonds
Have you ever been curious about investing in bonds? What was the stimulant? SSBs are the best way to kick off that dream. Unlike many bonds, you get more advantages with the SSBs. Nothing thrills like dealing with one of the most economically stable governments in the world. Here are the significant benefits of SSBs:
- They’re A Safe Investment. Every business has risks, and none is immune to them. Bonds are always considered safer than stocks, but with SSBs, you’ll be dealing with the safest form of bonds. Company bonds are riskier than these special types of bonds. SSBs are backed by the Singapore government, which has a strong “triple-A credit rating.” That means the government has zero net debt making the bonds practically risk-free. You cannot lose money or fail in this Investment; the default chance is close to zero.
- They’re Long-term and Highly Liquid. While other bonds have restrictions about the duration they take, the SSBs are long-term and allow for up to ten years term for Investment during which the interest increases with time. The longer someone holds to the bonds, the higher the returns will be. SSBs are also more liquid than long-term fixed deposits, and with only a one-month notice period, you can have high liquidity.
- Flexible Redemption. You’re not locked into how long the Investment should be; it’s upon you to determine the investment period. Investors can choose to exit at any time they wish without any penalties. If you feel like terminating the Investment even after a year, there’s the freedom to do that. You get the full money back, including any interest earned.
- Better Interest Rates with Regular Payouts. While the interest rates might be low, they’re higher than what the local banks. Further, investors get regular interest payments every six months. This offers a more regular income than bank savings accounts/ deposits which provides limited and less frequent interest withdrawal.
- Low Starting Cost. You don’t need to be rich to invest in SSBs. With only $500, you can start buying the bonds. This applies to all Singaporeans who are 18 years and above. The transaction fee for buying or selling a bond is only $2. The bonds are also tax-exempted unless stated otherwise.
- Investment Portfolio Diversification. SSBs are an excellent way to diversify a portfolio and reduce the investment-related risks of putting all eggs in one basket. The Singaporean dollar in which SSBs are denominated is a stable and safe currency worth adding to your portfolio, especially if you’re a foreigner. Through them, you can save for retirement as they’re secure and flexible.
How To Buy Singapore Savings Bonds
Purchasing the Singaporean government bonds is relatively easy and involves a few legal requirements. First, you need to have a Singapore bank account and CDP securities account with direct credit services activated. That will enable the interest earned from your SSB to be credited into your account. Once you have them, you’re ready.
All SSBs at any time have a minimum starting cost of $500 and a maximum of $200,0000.
New bond issues are released at the beginning of each month after which investors have three weeks to apply for the bond numbers they wish to buy. You can either place your bid through the online banking account or by using smart ATMs.
To apply through the bank account, log into the online account and then select Investment>Singapore Government Securities>SSBs>Cash.
Finally, enter the CDP account details and confirm the application. The same procedure applies for using an ATM also except that you’ll use the card and input password as the login details.
If the application is successful, you’ll get a mail notification of the SSBs amount allocated to you. A limited amount of bonds is issued monthly, and not all bond orders are filled. You may or may not be given the full amount you applied for depending on the demand. Once you get officially issued with a bond, interest payments will begin every six months after that.
The Bottom Line
Investing in bonds has never been made efficient and reliable, like doing so with SSBs does. The Singaporean government assures all investors of credibility and safety of all their investments with it. By creating a low-risk, extremely conservative, flexible, and high-liquid SSBs, it guarantees worthwhile bond investment deals. Why not grab the benefits accruing from SSBs and increase your portfolio?