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I received this email from a reader and provided my take on the situation:
Reader's email:
Dear AK,
I have only recently read your blogs and I must congratulate you for your passion and energy in keeping up such an engaging community going.
I have been in Singapore for a little over two years and am renting a condo with my family of four. I had applied for Singapore Permanent Residence but that hasn't come through. One of my intentions after becoming a PR was to buy a condo but obviously that has to wait (with all that one is reading about on prospects of property market in the next 2-3 years and the supply glut...I am just beginning to think may be that's a blessing in disguise :)
With the above intention, I've been keeping my money in rather safe but unattractive bank Fixed Deposit. Now that am not buying at least for another 12-18 months, would you have any advise for me to park my funds in options that can generate moderate returns? Of course i know i will have to forgo the perceived security of FD :)
Many thanks in advance!
A
AK's reply:
Hi A,
I will be very reluctant to take any risk with money that I will need within the next 2 or 3 years. I think fixed deposits are a good option if I were in your shoes.
I would also open an OCBC 360 account to get a higher interest income on the first $50K of deposit. I blogged about this not too long ago too.
If you like, I could publish your email in my blog, leaving out your name, to see if readers might have ideas that they could share with you. After all, I do not know everything.
Let me know if you would like me to do this. :)
Best wishes,
AK
The reader has agreed to have the email exchange published. So, if anyone has any good ideas, please feel free to share. Thank you.
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9 comments:
Ocbc 360 ftw!
Something that a person can sleep soundly and yet have something better than FD is corporate bonds and preference shares
My home purchase funds were in equities up to last year. Haha....
I had some gains and losses which kinda evens out overall. So, might as well hv put them in fixed d and save my time.
Hi Ian,
Of course, we would have to weigh the pros and cons of every option available.
With bonds, I would say to avoid long term bonds and bonds of junk status as these are riskier. We shouldn't be taking on too much risk with money we have specific needs for in the next 2 to 3 years.
Also, we might want to avoid perpetual bonds, bond funds and preference shares as they have no maturity dates which increases the risk of such instruments in an environment of rising interest rates.
There must be a great level of certainty that we won't suffer a capital loss when the time comes 2 or 3 years later to buy that home, in this instance.
AK,
I see you are reinventing yourself as "Dear AK"?
I'm in a good mood today so I play along:
http://www.sgs.gov.sg/Individual-Investors/Indv-FAQ.aspx#2.%20What%20Are
But somehow, I don't think A will be interested.
To overcome the inertia to write the email to you, I suspect A is looking for something more in the 4-5% ballpark ;)
Hi pf,
Your comment got me writing and I think I should share it as a blog post. ;p
Look out for it. :)
Hi SMOL,
I am spending more and more time writing emails, replying to readers. They take up as much time as blogging. In fact, they probably take up more time than blogging. ;p
Sharing the email exchanges in my blog is a good way of engaging more readers and also to show that lazy AK is still active. :)
My home purchase funds are fully in equities.
If you can call funds that I want to be growing well and intended to purchase a property but no idea when I will, a home purchase fund. I would rather call mine a property purchase fund.
typically the property cycle runs out of phase to the financial markets at least for the past 15 years of lowering interest rates.
we will need to look back further to see how people react in a rising interest rate environment. That said, rates are not going up any time soon. People say 2 or 3 years. I think longer than that due to geopolitical reasons. So in my personal opinion, the artificial cooling by the govt will not suppress the housing demand for too long. That said, the main measure will be the openness of singapore economy and the people's acceptance of Singapore being a more ASEAN and more global singapore. This would place the key turnings around the general elections.
all that said, since housing is generally thought to trail financial markets (without legislation to mess with it) I have kept it in equities (ah but WHERE is the question).
All that said, I don't need another property. And property investment as individual, as opposed to REITs, underperform businesses without the supplement of leverage.
Corporate bonds of blue chips with staggered maturities. You can reinvest when the staggered maturities come up. That way, you won't be forced to liquidate and take losses if you need money in a pinch.
Oh, also agree with AK to not buy bond funds or perpetual bonds or preferred shares. You will suffer capital losses when interest rates go up.
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