Most Popular Investments in SG 2022

We already know that simply relying on our monthly salary won’t put us on the fast track to retirement or keep up with inflation (last we checked, core inflation is 4.8%!).

Investing is more crucial than ever. When done wisely, it can help us increase our wealth, provide a steady stream of passive income, and protect us against the risk of inflation.

But with the plethora of investment products and schemes out there, it can be difficult to ensure you’re making the right decision with your hard-earned money. That’s okay, because sometimes market trends can point us in the right direction.

These are the most popular types of investments in Singapore and the best way to optimize your profits with them.

Table of Contents

1. CPF investment scheme

As the name suggests, the CPFIS allows you to use your CPF money to invest in various products, such as mutual funds, time deposits, insurance products, even bonds and shares.

There are two schemes you can take part in, and they differ in terms of the types of products you can invest in and where you can withdraw your funds from.

The following table shows the key differences.

Bill CPFIS-OA CPFIS-SA
source of funds OA Balance after the first S$20,000 SA balance after first S$40,000
what can you invest in Singapore Government Bonds, ETFs, Mutual Funds, ILPs, Treasury Bills, Fund Management Accounts Singapore Government Bonds, Mutual Funds, ILP, Treasury Bills
restrictions
  • You must first set aside S$20,000
  • 35% of the investable balance can be invested in stocks, corporate bonds and property funds.
  • 10% of the investable balance can be invested in gold and gold products.
  • You must first set aside S$40,000
  • Investing in stocks, corporate bonds, real estate funds, gold and gold products is not allowed.

Regardless of what you choose to invest when using your CPF funds, if you’re not seeing significantly higher returns than the default interest rates of 2.5% (OA) and 5% (SA), you’re better off leaving your CPF money alone for a constant and risk-free growth in your accounts.

Read our CPF and OA guides.

2. Supplementary Retirement Regime

The Supplemental Retirement Plan (SRS) is a voluntary contribution plan that allows you to save more money for retirement than your standard CPF contributions.

You can deposit up to S$15,300 a year into your SRS account to get personal income tax relief. However, the SRS account currently only earns a meager interest rate of 0.05% per year, so leaving your SRS funds idle will cause it to erode due to inflation.

For example, assuming you earn a monthly salary of S$6,700. This entitles you to significant tax relief benefits. To illustrate the tax relief for contributing to your SRS account, we assume the following: * CPF tax relief: S$14,400 * Earned income tax relief: S$1,000 * SRS contribution: S$10,000

without SRS with SRS
Annual income 80,400 Singapore dollars 80,400 Singapore dollars
tax reduction 15,400 Singapore dollars 15,400 Singapore dollars
SRS contribution $0 10,000 Singapore dollars
attributable income 65,000 Singapore dollars 55,000 Singapore dollars
Income Tax payable 2,300 Singapore dollars 1,600 Singapore dollars

*Please note that figures are for illustrative purposes only and other tax breaks may apply depending on your age and stage of lifestyle. To find out the amount of tax relief and income tax to which you are entitled, use the IRAS Tax Calculator instead.

By simply contributing S$10,000 into your SRS account each year, you will enjoy a tax savings of S$700 each year.

Please note, however, that the interest rate on the SRS account is 0.05%. To maximize the funds in your SRS account, you can use them to invest in a variety of products:

  • Captivity
  • Exchange Traded Funds (ETFs)
  • Fixed deposits
  • Real Estate Investment Trusts
  • Regular Stock Savings Plan (RSS)
  • Robo Advisors
  • Singapore Government Securities (eg SSB, SGS Bonds, Treasury Bills)
  • Single premium insurance products
  • investment funds
  • index funds
  • first class shares
  • SGD fixed deposits
  • Endowment Insurance Plans

3. Singapore Savings Bonds

Another popular investment product is Singapore Savings Bonds (SSBs), generally favored for their low but steady yields.

How do bonuses work? An entity (in this case, the Singapore government) issues a bond to raise money from the public. The entity agrees to repay the face value of the bond on a fixed date and disburses interest payments at regular intervals.

The stability of a bond therefore depends on the reliability of the issuer. If the issuer is a sketchy company, you may not feel safe lending your money to it.

For SSBs, with the Singapore government being the issuer (reliable as they come), they are considered to be a safe investment.

Keep in mind, however, that bonds tend to have a relatively lower rate of return due to their low level of risk. SSBs may generate a constant average annual return of 2.75% over a 10-year period, but they will not boost your wealth accumulation process.

With its slow and steady nature, this low-risk, low-return investment vehicle can be used to store money that you’re trying to hedge against inflation. This makes it a good option for those closer to retirement and looking to preserve their wealth.

Read more: Rising interest rates and yields on Singapore Savings Bonds (SSBs): should you start investing in them?

4. Exchange Traded Funds

Exchange-traded funds (ETFs) allow investors to invest in a basket of assets without having to buy individual stocks and shares. Professional trading houses build these “baskets” into funds and then offer shares of the funds to individual investors.

ETFs typically track the performance of an index, so they are somewhat of a “shortcut” to investing in a particular industry or market, as you can save the time and energy required to track a particular stock or stocks in the market. .

For example, like the Strait Times Index (STI) tracks the performance of the top 30 companies listed in Singapore, investing in it allows you to invest in all 30 companies without having to individually buy their shares.

When you invest in an ETF, you essentially own shares of that fund. However, you do not own the underlying assets, such as stocks, shares, commodities or derivatives.

ETFs can be made up across various industries and comprise various assets. Therefore, they offer a high degree of diversification that can help reduce the risks that may arise from being overexposed to a certain market.

Also, as an added bonus, ETFs typically charge lower fees than other investments, such as mutual funds.

5. Real Estate Investment Trusts

Investment in Real Estate

Want to be a part of Singapore’s booming real estate industry? Then you may want to explore real estate investment trusts (REITs).

REITs are professionally managed funds that pool the money of many individual investors. That money is then used to invest in real estate. Some REITs may focus on developing commercial properties such as shopping malls or office space, while others may purchase properties that they rent out to tenants for rental income.

REITs have become popular with investors as they can provide stable income. For example, a popular shopping mall may appreciate in value as it continues to attract and/or retain high-profit tenants.

In general, REITs should have a place in your investment portfolio if you hope to increase your wealth. However, if you are looking for wealth preservation, then you are better off going for REITs that provide consistent dividends.

Read more: Everything you need to know about investing in REITs safely and efficiently

6. Robo-Advisors

A relatively new investment tool, robos help you invest under the guidance of algorithms rather than human professionals.

To make up their investment portfolio, Robs typically draw on a variety of ETFs that span multiple asset classes. How do a group of bots formulate their investment strategy? Based on your financial goals.

Simply tell the robo-advisor what you want to achieve and it will recommend and manage your investments accordingly.

Therefore, thefts are an easy way for those with little or no investment knowledge to start investing. They also have lower barriers to entry through low fees and an uncomplicated fee structure.

Therefore, this tool is more suitable for beginner or hands-off investors who prefer not to have to keep track of their investments excessively. You can also automate your transfer of funds from your bank account by setting up a recurring payment, and the heists will continue to work with regular injections of funds.

For people looking to start investing in robo-advisor services, you can read our specially selected guides for robo-advisors in Singapore here.

7. Actions

Stock market value on screen

In a nutshell, stocks or shares represent a stake in a particular company. They are traded on the stock market and investors make money when they sell their shares for a higher price than when they bought them (i.e. capital gains).

It sounds simple enough, but the hard part is predicting when stocks will go up and how high they will go. Attempting to follow this rollercoaster trajectory of a day-traded stock can be incredibly devastating.

Stocks are also typically traded in lots of 100, so investing in a high-yielding stock like Apple Inc ($163.43 per share at the time of writing) can yield a high initial investment sum.

Although it can be difficult to pick winning stocks, investing in stocks that provide dividend returns can help build a stream of passive income.

Depending on your financial goals, you may have different strategies for investing in stocks. For example, investing in a fast-growing startup can provide short-term gains, while investing in proven stocks can offset a portfolio that has a lot of commodities.

Read our basic guide to investing in stocks.

conclusion

For people who are just starting their investment journey and need a safe place with a smooth learning curve to store their funds, Singapore Savings Bonds can be a good option to get your feet wet.

You can try investing in bonds, enjoy slow and steady wealth accumulation/preservation, as well as gain more investment experience and confidence before moving on to other types of investments like ETFs, stocks, and more.

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