My brother recently asked me when he goes overseas to study should he put his money (roughly around a very low 5 figure) which he have saved up from his jobs and NS into Singapore Savings Bonds (SSB) or the STI ETF. This is because he would receive allowance for his time overseas so he would not use the SGD that he has been saving up.
I told him the advantages and disadvantages of both and told him that he should think about it and maybe read up more but I could see that he was leaning more towards SSB as he knew that he would not be actively looking at the prices of the STI ETF and that he was also unsure if the market conditions would be good when he ends his studies and get back to work. Of course, I told him that he would also receive some dividends from STI ETF and that it would offer him a better amount than SSB however his capital is not guaranteed by the Singapore government and he does not need to worry that after his studies, the amount would have any fluctuations. He mentioned too that the interest he would earn from the bonds is lower than he expected since his capital is low.
Right now, he is in a dilemma but is leaning towards SSB. But I am also thinking of maybe putting 40% into STI ETF and 60% into SSB. If you do have any suggestions or feedback, do comment and let me know:)
this very much depends on his primary ivestment goal. if he needs money in couple years to buy house etc... he should invest in SSB. but if he is saving for long term goal like retirement he should invest in STI. I am sorry , but there is no one correct generic strategy.
ReplyDelete2 to 3 years ago, with the bond rate at one year being around 1%, nobody will talk about this issue. The fact that we even bother to discuss about this is that bonds are worth comparable to equities. when this happens, equities will find it harder to climb higher. just be careful guys, the bull run is tired and on its last legs.
ReplyDeleteIf we are expecting an impending recession, a Bond ETF could be better than a bond. The ABF Singapore Bond ETF. Heard that you can draw it out to invest in Equity when the economy recovers again. I learn from this article.
ReplyDeletehttps://www.drwealth.com/abf-singapore-bond-index-fund/
Hi,
ReplyDeleteSince the returns generated is to use on studies then better fall back on safe returns from the SSB. Nobody can predict tge future but at least there is some definite subsidies on the tuition and loving expenses.
We save our money for the next few years but invest our money for the next decade and more. Clearly understand our needs for money and not to be mislead by calculated return on investment as it can be negative.
ReplyDeleteIt depends on your brother's risk appetite and tolerance, as well as his investment horizon. If it is long term (10 years and beyond), I would suggest to start off an equity/bond portfolio, using both STI ETF and the SSB since I presume he is familiar with them.
ReplyDeleteAnother way would be to look at CPF contribution, but that would really be saving for retirement.
I agree with those who suggest making a decision based on investment horizon and objectives. Each instrument has its effective duration (more than 10 years for equities and anywhere between 1 month to 10 years for SSB) and you should invest such that the instrument's effective duration is aligned with your investment horizon. I like this article written by Cullen Roche that talks about this issue: https://www.pragcap.com/how-to-avoid-the-problem-of-short-termism/
ReplyDeleteThank you all for the comments and suggestions. I have noted the difference between saving and investing. Also that I need to know what my brother would like the money t be used for in order to know what suits him best. I will review and put these all into consideration. Thank you once again!
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