Thursday, April 2, 2015
Meg Jay: Why 30 is not the new 20
For all of us out there who are 20 plus, this video is for you. Be motivated and take action today for a better life tomorrow.
2-3% Principal Guaranteed Investment
I know many of us have been trying to find places where we can put our money in-order to get better returns. At the same time, we don't want to take on too much risk and still get to grow our money. Good news! Just a few days ago, it was announced by the government and MAS that they are going to introduce something called the Singapore Savings Bonds programme to provide individual investors with a long-term savings option that offers safe returns. You might ask, how safe is safe? Are the returns high?Details of the Singapore Savings Bonds Revealed
Bonds are normally considered safe investments especially when we talk about Singapore government bonds. They are almost risk free if you keep the bond all the way to maturity. You will get back the face value of the bond during maturity. In a way, as long as government bonds do not default (where the government goes bankrupt), we'll always somehow get our principle investment back.
However, the problem with normal government bonds is that it is still subjected to day to day price fluctuations. Yes, bond price can go up and down and if we sell it early, we could make a loss.
Now, this new savings bond is different from the normal government bonds which we often see. In my opinion, it is the safest investment which we can get while still earning decent returns. Here's why:
1. Principal Guaranteed
For this Singapore Savings Bonds, it is principle guaranteed. We can redeem the bond any time and we'll always get our investment amount back in full.
2. Monthly Issuance and flexible redemption
The bonds are issued monthly so we can buy the bonds monthly or redeem it monthly. It is so flexible that in case you really need the money, you can redeem it and still get back your capital without suffering any capital loss or penalty.
Best of all, any interest you get will be yours to keep.
3. Small investment amount
The minimum investment amount is $500 and thereafter in multiples of $500. There will be a maximum investment limit which will be announced later.
4. Step up Interest and term of 10 years
The interest rates paid are linked to the long term Singapore Government Securities (SGS) rates. Interest will be lower for the first year and will subsequently be higher for the next few years until year 10.
If we base on the prevailing SGS bond yield, on the first year, we should expect to get around 0.9%, on the second year around 1.5% and on the third year 2.4% and so forth. The actual rates will be given by MAS at a later date when the bonds are issued.
On average, you'll get around 2-3% (base on the current rate) if you hold the bond for 10 years. Interest rates can be lower or higher.
When will it be launched and How do I invest in it?
The Singapore Savings Bonds will likely be launched in the second half of 2015. MAS will provide more information on how to apply for the bonds at a later date.
I suppose applying for the bonds won't be that difficult. Probably we can do it through most of the major banks in Singapore or even apply it online.
In any case, this would be a good investment for those who want to get better returns for their money. It is principle guaranteed so there is practically no risks involved. I would definitely consider putting any of my spare cash into these bonds.
Enjoyed my articles?
or follow me on my Facebook page and get notified about new posts.
Related Posts:
1. 4 things you should know before investing into bonds
Wednesday, April 1, 2015
How The Weaker Singapore Dollar Affects Our Life?
By now, most of us would have realised that the Singapore dollar is weakening especially against the US dollar. 2 years ago, the exchange rate for USD/SGD is $1 US dollar to $1.22 Singapore dollar. Today, it is close to S$1.40 per US dollar. In laymen terms, this means we who are in Singapore, would require more money to buy the same US goods 2 years ago.
It was reported last week in the news that the Singapore dollar outlook is worst since the Asian Financial Crisis. The Asian financial crisis in 1997 was one which many people in Asia would remember. Stock markets plunged, currencies devalued to extremely low levels and jobs were lost. So how will the weaker Singapore dollar affect us this time? Will we see another Asian financial crisis?
When I was in University taking my degree in Economics, I had to research and write on how MAS conducts its monetary policy in Singapore. Currency movements certainly have impacts in our economy and it will surely affect our lives as we use money every single say. The depreciating of the Singapore dollar definitely signifies that something is happening. How bad and how long is still unknown.
An Asian Financial Crisis all over again?
The Asian financial crisis was triggered by the depreciation of the Thai Bhat and it quickly affected other major currencies in Asia including Korea, Indonesia, Malaysia and also Singapore. In the chart below, it shows the USD to SGD exchange rate. As we can see, the Singapore dollar depreciates against the US dollar during all major financial crisis. The 1997 Asian financial crisis was the worst as seen by the spike followed by the 2008 global financial crisis and also the recently sovereign debt crisis which saw the European region having trouble.
Fast forward to now, it seems like the Singapore dollar is depreciating at a much faster rate than the 2012 sovereign debt crisis and almost similar to the 2008 global financial crisis now. The depreciating of the Singapore dollar just means that more people are selling the currency than buying it. This was partly driven by the data showing the slowdown in China, Singapore's largest trading partner. Investors confidence in the Asian region is shaken.
Why the Singapore dollar is depreciating?
The Singapore dollar has been strong for the past few years in an effort to combat inflation. Singapore adopts an exchange rate policy instead of an interest rate policy. This has been the case since 1981. The primarily objective of this policy is to maintain price stability and sustainable economic growth. The appreciation of the S$ dollar in the past has made it more expensive for foreigners to buy Singapore’s assets and at the same time increase export prices thus slowing down the economy and bringing down inflation.
Inflation has slowed down significantly and MAS said in January that it will slow down the appreciation of the Singapore dollar too. This has led to the Singapore dollar depreciating to what we see now. However, we have to note that our neighbours currencies are depreciating at a faster rate than us. Malaysia and Indonesia both have their currencies weakening for the past few months. If our currency stays strong, we'll lose our export competitiveness as goods in neighbouring becomes cheaper for international buyers.
How the depreciating of the Singapore dollar affects us?
A strong local currency indicates a strong economy with high productivity growth and high savings rate. A weaker local currency indicates the opposite. The US economy is recovering and money is definitely flowing back into the US now. Apart from all the economic theory, let us take a look at how a weaker Singapore dollar will affect us directly?
Higher prices of import goods
With a weaker currency, importing goods from other countries especially the US would become more expensive. Singapore's top few largest trading partners includes China, Malaysia and United States. While our currency has depreciated against the Yuan and the US dollar, Malaysian Ringgit has depreciated at a much faster rate than the Singapore dollar.
A lot of us in Singapore also like to go online to buy stuff and some are businesses based overseas. A lot of these online shopping websites which are based overseas use the US dollar as their base currency. It'll be more expensive for us to do online shopping now.
Property Price Drop
Interest rates have been rising but still at a low currently. As seen below, the increase in interest rates has always been accompanied by a drop in prices of properties. Interest rates (3 month SIBOR) have risen above 1% as at 24th March 2015.
It was reported last week in the news that the Singapore dollar outlook is worst since the Asian Financial Crisis. The Asian financial crisis in 1997 was one which many people in Asia would remember. Stock markets plunged, currencies devalued to extremely low levels and jobs were lost. So how will the weaker Singapore dollar affect us this time? Will we see another Asian financial crisis?
When I was in University taking my degree in Economics, I had to research and write on how MAS conducts its monetary policy in Singapore. Currency movements certainly have impacts in our economy and it will surely affect our lives as we use money every single say. The depreciating of the Singapore dollar definitely signifies that something is happening. How bad and how long is still unknown.
An Asian Financial Crisis all over again?
The Asian financial crisis was triggered by the depreciation of the Thai Bhat and it quickly affected other major currencies in Asia including Korea, Indonesia, Malaysia and also Singapore. In the chart below, it shows the USD to SGD exchange rate. As we can see, the Singapore dollar depreciates against the US dollar during all major financial crisis. The 1997 Asian financial crisis was the worst as seen by the spike followed by the 2008 global financial crisis and also the recently sovereign debt crisis which saw the European region having trouble.
Chart of USD/SGD from tradingeconomics.com
Fast forward to now, it seems like the Singapore dollar is depreciating at a much faster rate than the 2012 sovereign debt crisis and almost similar to the 2008 global financial crisis now. The depreciating of the Singapore dollar just means that more people are selling the currency than buying it. This was partly driven by the data showing the slowdown in China, Singapore's largest trading partner. Investors confidence in the Asian region is shaken.
Why the Singapore dollar is depreciating?
The Singapore dollar has been strong for the past few years in an effort to combat inflation. Singapore adopts an exchange rate policy instead of an interest rate policy. This has been the case since 1981. The primarily objective of this policy is to maintain price stability and sustainable economic growth. The appreciation of the S$ dollar in the past has made it more expensive for foreigners to buy Singapore’s assets and at the same time increase export prices thus slowing down the economy and bringing down inflation.
Inflation has slowed down significantly and MAS said in January that it will slow down the appreciation of the Singapore dollar too. This has led to the Singapore dollar depreciating to what we see now. However, we have to note that our neighbours currencies are depreciating at a faster rate than us. Malaysia and Indonesia both have their currencies weakening for the past few months. If our currency stays strong, we'll lose our export competitiveness as goods in neighbouring becomes cheaper for international buyers.
How the depreciating of the Singapore dollar affects us?
A strong local currency indicates a strong economy with high productivity growth and high savings rate. A weaker local currency indicates the opposite. The US economy is recovering and money is definitely flowing back into the US now. Apart from all the economic theory, let us take a look at how a weaker Singapore dollar will affect us directly?
Higher prices of import goods
With a weaker currency, importing goods from other countries especially the US would become more expensive. Singapore's top few largest trading partners includes China, Malaysia and United States. While our currency has depreciated against the Yuan and the US dollar, Malaysian Ringgit has depreciated at a much faster rate than the Singapore dollar.
A lot of us in Singapore also like to go online to buy stuff and some are businesses based overseas. A lot of these online shopping websites which are based overseas use the US dollar as their base currency. It'll be more expensive for us to do online shopping now.
Property Price Drop
Property prices in most Asian countries have been rising over the past few years. Singapore too was one of the hot property market places. When the market was bullish on Asia and bearish the U.S. dollar, the Singapore dollar did exceptionally well. Now, its the opposite.
Property prices will drop mainly due to the increase in interest rates. The spike in interest rates is attributed to expectations of further currency weakness. Think of it this way, when Singapore's currency is expected to weaken, it reduces the attractiveness for people to buy Singapore government bonds. Interest rates need to be pushed higher since investors need more incentive to hold onto the local currency.
During the Asian financial crisis in 1998, property prices dropped about 40% over a one year period. The government of Singapore also took drastic measures to cool the property market in May 1996. If those cooling measures were not implemented prior to the crisis, it could have been worse. Currently, the Singapore government has also implemented cooling measures to cool the hot property market. I would be expecting property prices to drop further as its only the beginning now.
No matter what happens, we can always be prepared for any situation which is to come. Being prudent in our finances, having emergency funds set aside and not taking on too much debt would ensure that we do not get into serious financial problems.
Enjoyed my articles?
or follow me on my Facebook page and get notified about new posts.
Related Posts:
Subscribe to:
Posts (Atom)