Interest Rate
Fed has been increasing interest rate which results in the rate increasing for other countries in the world such as Singapore. We can see from the recent rush into Fixed Deposit, Singapore Saving Bonds, Treasury Bills etc. Saving accounts are also having war every now and then. During the early part of each month for the recent months, banks have been rising rates. There is no exception for today on 1 Dec 2022. Let’s see…
SCB Esaver
This is the account that quite a number has due to its high interest and liquidity nature but the incremental fresh fund is troublesome. From today onwards, until 31 January 2023, SCB is giving up to 3.80% p.a. interest on eligible deposit balance of S$2 million with no lock-in period when you bring in incremental fresh funds* (compared to November 2022 average daily balance).
Hence, many will ask: Why put in equities to earn dividend of 4-6% with higher risk of capital losses since bank account already given such high rates?

UOB One Account
UOB this month is really giving the highest interest ever, but you need to do some work.
Maximum effective interest rate (EIR) on the One Account is 3.00% p.a. for deposits of S$75,000, provided customers meet both criteria of S$500 eligible card spend AND 3 GIRO debit transactions in each calendar month.
Maximum effective interest rate (EIR) on the One Account is 5.00% p.a. for deposits of S$100,000, provided customers meet both criteria of S$500 eligible card spend AND a min. S$1,600 salary credit via GIRO/PAYNOW (with the transaction reference “SALA” / “PAYNOW SALA”) in each calendar month.
Hence, many will ask: Why put in equities to earn dividend of 4-6% with higher risk of capital losses since bank account already given such high rates?

OCBC 360
OCBC so far didn’t adjust the rate as of now. Most people can easily hit the save $500 and salary credit which means 4.05%. Wow, higher than SSB and the fixed deposit rates recent.
Hence, many will ask: Why put in equities to earn dividend of 4-6% with higher risk of capital losses since bank account already given such high rates?

CIMB Fastsaver and Starsaver
For Fastsaver, one can get 2.5% for doing nothing with 75K.

For Fastsaver, one can get 1.5% for doing nothing with 75K.

Hence, many will ask: Why put in equities to earn dividend of 4-6% with higher risk of capital losses since bank account already given such high rates?
Let’s answer this question: Hence, many will ask: Why put in equities to earn dividend of 4-6% with higher risk of capital losses since bank account already given such high rates?
Enough of the examples, let’s answer this question that I have brought up a few times earlier. Hence, many will ask: Why put in equities to earn dividend of 4-6% with higher risk of capital losses since bank account already given such high rates?
Most people prefer liquid cash as compared to the cash being locked up for a longer period. For the above saving accounts, you can take out the money anytime should you need it. Of course, there are alternatives money market fund such as FSM Autosweep, Money Owl Wisesaver, Moomoo cash fund etc. but the risk profile is different. Bank are secured up to 75K under SDIC insurance or 150K if you combine with your spouse (super safe). Good money market funds are generally safe but no one guarantee your 100% safety. On the other hand, equities are subjected to capital losses. Your dividend may not be able to cover the capital losses.
For safety of their hard-earned funds and for not wanting to lockup the money for an extended period due to capital losses in equities (for equities, you will not want to sell at loss during market crashes), most people naturally preferred saving accounts/money market funds than Equities at current high rate environment.
However, think harder…
If you think harder again, ask yourself the following questions?
How long will these high interest rate last?
If you only put your money in high interest account/money market funds/treasury bill etc, instead of the equities which are relatively much cheaper as compared to last year, what if the interest rate suddenly decreases next year or in 2024? By then the equities might have already recover, you have TO buy at more expensive price should you need somewhere to put your money. By then the saving accounts rate might not be so high anymore, maybe back to low interest, hence you will let your money rot and decay due to inflation?
Other Alternatives
For those who understand the above points but still worry about equities crashes, most likely you would have takes up Singapore Saving Bonds to lock the 3% plus interest for the next 10 years.
Of course, for those who feel equities are attractive now, you would have already bought for the past few weeks especially for those REITs/Dividend Stock lovers!
For those who feel equities may drop further, you would have hold cash and wait for better chance later. Taking a step further, you can hold some Singapore Saving Bonds (which you can at most take 1 month or shorter to take out) or simply put the rest into the high interest accounts/money market funds mentioned above.
(Disclaimer: For me, I belong a bit to 2nd category, but mostly in the 3rd category. I am waiting for the chance to strike big.)
Building Singapore Saving Bonds Ladder
I believe many of you would have heard of the term “Bond Ladder“, but what really is bond ladder? Bond Ladder simply means that you will get cashflow from bonds every month. However, many people like to see real data to fully understand how this work.
Below is a screenshot of from my Singapore Saving Bonds portal that I have been trying to build for the past 6 months. If you see below, I will get something every month next year (June SSB is not yet credited at the time of this post hence you can’t see it), the year after, and for 10 Years. If I need the money for anything emergency or want to buy equities when the market is very bad, I can redeem it within a month or less. Meanwhile earning decent interest while waiting. This is the beauty of Singapore Saving Bonds.
Using the above method would solve the issue that I have mentioned under the “However, think harder” above. Have cake and eat it at same time.

I hope everyone can think through and think longer term and plan according to their own plans and risk. Take care and cya!

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