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Are You Risk-Averse? Here Are 5 Safer Investment Options

Investing is an essential component of financial planning, and while some individuals are comfortable with taking on higher risks in pursuit of potentially greater returns, there are also risk-averse investors who prioritise capital preservation and are hesitant to expose their funds to market volatility. 

If you fall into the latter category and are looking for safe investment options in Singapore, you’ve come to the right place. In this article, we will discuss five risk-free investments that are ideal for risk-averse investors in Singapore.

1. Singapore Government Bonds

Singapore Government Bonds are among the safest investment options available to Singaporean investors. These bonds are issued and backed by the Singapore government, which means there is minimal credit risk associated with them. The interest rates on these bonds are relatively stable, making them an attractive choice for risk-averse individuals. They come in various tenures, so you can select one that aligns with your financial goals.

If you have a long-time horizon for investing, you could consider longer-term bonds under Singapore Government Securities (SGS) that range from 2 to 50 years. These bonds adhere to a fixed semi-annual coupon payment schedule, disbursing interest every six months from the month of issuance. Throughout the tenure of SGS bonds, they consistently yield regular interest payments, known as coupons, based on the amount you’ve invested.

2. Singapore Savings Bonds (SSB)

The Singapore Savings Bonds (SSB) programme is designed to be a low-risk investment vehicle for Singaporeans. SSBs are backed by the Singapore government and are specifically crafted to be accessible and secure for retail investors. They offer a variable interest rate that increases over time, making them a great option for those looking for a low-risk investment with a little more flexibility.

One of the standout features of SSBs is that they can be redeemed at any time with just a one-month notice. This means that if you need to access your money in an emergency or want to take advantage of better investment opportunities, you can do so without incurring any penalties.

Here’s All You Need To Know About Singapore Savings Bonds.

3. T-Bills

Singapore Treasury Bills, or T-Bills, are another excellent choice for risk-averse investors. They are considered one of the most secure options out there, since they are backed by the Singapore government. 

These short-term government securities come with maturities ranging from one month to a year. 

T-Bills are often referred to as zero coupon bonds due to the absence of coupon payments. Instead, T-Bills are initially sold at a price below their face value and provide a fixed interest rate, and when they mature, you receive the full face value, which results in a guaranteed return. The ease of purchase and low risk associated with T-Bills make them a preferred choice for conservative investors.

Find out how to buy T-Bills: All You Need To Know About Treasury Bills

4. CPF top-ups

The Central Provident Fund (CPF) in Singapore is a mandatory savings scheme that is designed to help Singaporeans save for retirement. For risk-averse investors, one option is to make voluntary CPF top-ups. These contributions can be invested in a variety of instruments, including the CPF Special Account, which offers a risk-free return that is generally higher than the ordinary account.

For members below age 55For members age 55 and above
OA interest rate2.5% per annum2.5% per annum
MA interest rate4% per annum4% per annum
SA interest rate4% per annum4% per annum
RA interest rateNot applicable4% per annum
Interest rates your savings could earn across your CPF accountsUp to 5% on the first S$60,000 of combined CPF balance (capped at S$20,000 for OA)Up to 6% on the first S$30,000 of combined CPF balance (capped at S$20,000 for OA)
Up to 5% on the first S$30,000 of combined CPF balance (capped at S$20,000 for OA)

CPF top-ups also offer tax benefits, making them a tax-efficient option for those looking to boost their retirement savings while keeping risk to a minimum.

Need more reasons to top up your CPF? Here are 5 Reasons To Top Up Your CPF.

5. Fixed deposits

Fixed deposits are a classic choice for risk-averse investors in Singapore. They involve depositing a specific amount of money with a bank for a fixed tenure at a predetermined interest rate. Fixed deposits typically offer a higher interest rate compared to regular savings accounts and are known for their stability and safety.

Investors can choose the tenure that suits their financial goals, ranging from a few months to several years. The longer the tenure, the higher the interest rate you can usually secure. Keep in mind that if you withdraw your funds before the maturity date, you may incur penalties, so it’s important to plan accordingly.

Fixed deposits are intended to be maintained until they reach maturity. Nevertheless, situations might emerge where you require access to your funds before the agreed-upon tenure is reached. In such instances, early withdrawal is an option, but it generally entails penalties. Typically, the bank will subtract a portion of the interest that has been accrued, ultimately leading to a diminished return compared to the originally anticipated amount.

Read more: Getting Started with Fixed Deposits in Singapore: A Guide for Beginners 

Build your wealth safely 

In summary, there is a range of risk-free investment options for those who prioritise capital preservation and are not willing to take on market risk. These investments are backed by the Singapore government or regulated financial institutions, making them safer and more suitable for conservative investors. 

It’s essential to align your investment choices with your financial goals and risk tolerance, and you may want to consult a financial advisor to create a well-rounded investment strategy that meets your needs. 

If you need more financial advice, drop us an email at ask@plannerbee.co

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