Building your future often means converting your hard-earned savings into assets that grow and create more value. We share a few time-tested options that will help you work towards a more secure financial future.
Bonds are a classic choice if you’re keen on capital preservation and a steady stream of income. With a bond, you basically “lend” money to a company (CB) or the government (SSB) for a fixed period of time, at a guaranteed interest rate. Interest is paid out at regular intervals and your capital is generally returned at the end of the contract period. Bonds usually offer better yields than bank deposits and you can potentially benefit from capital gains if you sell them at a higher price than you bought them at.
Structured deposits, like the ones offered by Standard Chartered, offer higher returns and lower risk than equities and bonds. SD is the combination of a bank deposit and an investment product; returns depend on the performance of the underlying financial instruments, which could be bonds, market indices (e.g. SGX), equities (investment in traded companies), foreign exchange or a combination of these. Upon maturity, you get back your entire principal, in addition to the regular interest income you have already been receiving.
If you are keen to invest your funds in a diverse range of products, such as stocks, bonds and other financial instruments, unit trusts or collective investment schemes are a great option. Unit trusts provide access to assets or markets that may be difficult to invest in directly. Also, with a smaller investment outlay, you will be able to invest in a diverse portfolio of assets, which, if you invested in individually, may cost you more. While unit trusts do carry a higher level of risk than bonds and structured deposits, they offer much more flexibility, liquidity and diversity.
Unit trusts like those distributed by Standard Chartered are managed by highly qualified and experienced fund managers, and you can also manage your investment using the online unit trusts platform.
The simplest way to benefit from a steadily growing real estate market without a huge capital outlay or actually buying a property is to invest in units of an REIT. With REITs, you are investing in a professionally managed real estate portfolio that yields regular dividends based on rental income. However, units of REITs are traded on the stock market and thereby riskier as they are subject to market conditions. Plus, there is no capital guarantee.
A popular investment option is the stock market. Active investments can take the form of day trading (where an investor buys stocks and sells them at a comparatively higher price within a single trading day) or long-term investing (where an investor buys a stock and holds on to it for an extended period). On Standard Chartered’s SC Online Trading platform, you can carry out both day and long-term trading across 15 major stock exchanges.
ETFs offer a passive way of investing in shares, where an investor can track a particular index such as a stock or commodity index (e.g. Straits Times Index). An index is, quite simply, a set of stocks that acts as a sample of the universe of stocks in a market or portfolio. It statistically measures the changes in the stocks it represents and can be used to track the performance of the market or portfolio.
By investing in ETFs, you can gain exposure to the components of the index without directly buying individual stocks or bonds. This type of investment is highly diversified and tends to have lower fees than actively managed funds. However, ETFs are not principal-guaranteed and you may lose all or a portion of your investment in certain situations.
Did you know that you can maximise the savings in your Central Provident Fund (CPF) account to suit your investment goals? Building and topping up your Special Account (SA) earns you risk-free interest and significant tax benefits. The SA currently yields an interest rate of up to 5%, making it a strong retirement savings strategy.
Essentially, building your financial assets through investment is a matter of understanding your financial goals, being aware of your investment options and finding a match between your financial goals and options. A diversified investment portfolio can reduce the risks that impact your investment.
Want to know more? Get in touch with us or log onto Mobile Banking or Online Banking to chat with us, and we will help to connect you to a financial advisor.