Last week we asked you if you will open a supplementary retirement account. The consensus is about 50% either way.
Fixed deposits are a favorite alternative of many consumers who dislike saving money in a savings account. A fixed deposit offers you a fixed interest rate for investing in it for a period of time, called the lock-in period, and are capital-guaranteed by the government. Typically, even short-term fixed deposit can beat savings account interest rates by about 10 times or so. The only downside is the lock-in period, during which no amount invested can be regained for any reason until maturity. As the lock-in period for fixed deposits can range from weeks to years, and interest you earn is easily calculable before investing in the deposit, it offers remarkable flexibility for those of us looking to park our money somewhere for a relatively short period of time without the hassle of monitoring it.
To begin with, here are some basic facts about local fixed deposits. Fixed deposit interest rates are largely determined by 2 factors - Lock-in period and investment amount. Looking at the local fixed deposit table on Qotion, for local SGD fixed deposits, the minimum amount required to get an interest of 1% for 1 year lock-in period is $1,000. A typical savings account yields an annual interest of 0.1 to 0.15% at this amount, though it allows you to withdraw money at will. In addition, SGS treasury bonds currently provide a yield rate of 0.39% for 1.18 years, which is about a third lower than that of fixed deposits. Looking at the numbers, it should be easy to conclude that fixed deposits are still the better choice for no-risk short-term investments.
How about mid to long-term investments? Currently, the best local fixed deposit interest rate is 1.85% for minimum sum of $250,000 with 3 years lock-in. The nearest comparable SGS bond yield is 0.9% for 3.34 years. However, keep in mind that SGS bonds also have a yield of 3.1% for 17.26 years, while no such rate exists for SGD fixed deposits. Strictly speaking, while such returns may pale in comparison to other investments such as equities or funds, remember that fixed deposits and bonds are more for savings than investments, and contain nearly no risk.
If you are willing to bear some risk for higher returns, you can try investing in a foreign fixed deposit. For foreign currency fixed deposits (FCFD), the highest interest rates can go up to 4.575% for Australian fixed deposits at AUD $250,000 for 1 year. However, keep in mind that any deposit made must be in the currency of the deposit being invested in e.g. You must convert SGD to AUD if you wish to buy Australian Dollar Fixed deposits, and the returns on maturity have to be converted back to SGD, and an unfavorable exchange rate might hurt your returns.
Below are some resources found on Qotion.com that may help you find the best and latest fixed deposit rates:
Have a good weekend!
