Should you buy S-Bonds?

Thoughts of diversifying your money // Bonds is the safest instrument

What you should know before making this decision?

  1. Does it beat inflation rate? (5 Yrs average – 3.12%)

  2. The best/safest bond (3 Options)
    • Singapore Savings Bond
      • Average return per year is 2.32% / Doesn’t beat inflation
    • Index
      • Average return per year is 2.65% (Not including growth rate) / 3.65% is its actual return (Including growth rate) / Beat inflation
    • Open Market (SGX)
      • Higher chance to default / Beat inflation
  3. Your opportunity cost

Average yearly return is at 11.48%  // Alternative is SPDR (another ETF of STI) – 7.28% 

 

ConCRUsion

You should invest into an instrument that beats the inflation rate (3.12%) or else it makes no sense to even invest. Why? because your money still depreciates and you lack financial knowledge, hence making you act stupidly irrationally.  The idea of putting STI as an opportunity cost is for people my age( 20’s/30’s) who has a stable stream of income and are willing to take the risk (even thou is low).

My point-of-view on bond is that its growth rate is so slow that is actually smarter for u to put the money into CPF (5% interest). Why? because by the time your bond investment grows to a large sum, you would probably be at the age where ur CPF money can be withdrawn.

Rich = making financially sound decision one at a time

“+1 Knowledge point”

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4 thoughts on “Should you buy S-Bonds?

  1. Hi FV,

    How about thinking of bonds from a portfolio management point of view? No doubt it does not beat inflation on its own for most of them, but at least it provides stability in times of economic downturn across your asset classes.

    CPF has its advantages but due to the regulatory nature and restricted liquidity, it is a bit far off to compare with bonds that is bought with disposable income, which are much easier to rotate to other investments.

    Bedokian

    Like

    • Hey Bedokian!

      I couldn’t agree with you more but I’d feel that Singapore bond is not worth investing (Compared to the US bond index). What I’ve notice on the ABF etf price chart is that it is only worth investing during market downturn and not before.

      You’re right but my perception for an individual who is looking to purchase bond would hold it for a really long time(retirement age), especially when rate is so low.

      FV

      Like

    • Hey Cory,

      It could either be debt default/raise in stock price/ strong sellers in the bond market, or, it could be something internal.

      The 5 year is low as majority of their fund allocation is into local government bonds/debts. If the government is paying its citizen 2.32% annually, it is highly possible the fund is getting the same rate or Slightly higher. They probably have to restructure their fund portfolio to achieve more than just the mere 2-3%

      Like

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