ARE THERE OTHER OPTIONS?
An alternative is Treasury bills (T-bills), which are short-term debt securities issued and backed by the Singapore government.
These government securities became a hit among retail investors over the past two years as yields shot up in line with the aggressive rate hikes pursued by central banks.
T-bill yields hit a more than 30-year high of 4.4 per cent in December 2022, but have since come down to mostly hover around the 3.7 to 3.8 per cent range amid a shift in interest rate directions. For example, the latest six-month T-bill auction on Jan 18 had a cut-off yield of 3.7 per cent.
Still, that is much higher than the fixed deposit offerings by banks. T-bills also have a lower minimum investment sum of S$1,000.
But some investors may prefer fixed deposits over T-bills given the certainty of returns, said Mr Wong.
T-bill yields are determined by an auction process. While interest rate trends help to chart a general trajectory, yields can also be affected by demand and supply dynamics, he added.
This is because in a T-bill auction, up to 40 per cent of the total issuance amount will first be allotted to non-competitive bids. The rest of the issuance amount will be awarded to competitive bids, starting from the lowest to the highest yields submitted.
The highest accepted yield among the successful competitive bids determines the cut-off yield for that auction.
Mr Aizat said T-bills remain a favourable option but with yields likely to trend lower, it may be time for investors to reduce the weightage of these government securities in their portfolios.
Beyond fixed deposits and government securities like T-bills, CPF members can also invest in unit trusts, investment-linked insurance products, funds and shares approved under the CPF investment scheme.
There are limits on the amount investors can put into stocks and gold – at 35 per cent of one’s investible savings in stocks and 10 per cent in gold.
Given that these are more risky assets, investors should know their own financial goals and risk appetites. Investing in a diversified manner is another good rule of thumb, said Mr Aizat.
Investors should also understand macroeconomic trends and study the impact on individual sectors or companies to make a sound decision, he added.