It is an uncertain world we live in. That is why you need to increase your investment portfolio as much as possible. As a Singapore resident or non-resident, bonds are a lucrative way to risk your money. It is less risky as compared to other investment opportunities, and that means lesser but guaranteed returns.
One question most Singapore residents and individuals with interest there ask themselves is; how can I invest in Singapore bonds? Today, we have an answer to your question.
There are three primary options for you. Depending on your circumstances, you will choose yourself the most convenient path for you to take. Below are the options:
Singapore Government Securities (SGS) Agent
Singapore Exchange (SGX)
Singapore Government Securities (SGS) Agent
SGS can be classified into two. The first is treasury bills while the other is government bonds. One may wonder where the difference is. In terms of risk, there exists no difference. These government-issued assets are risk-free, although they have varying maturity periods.
While a treasury bill will mature within twelve months or less, a bond’s maturity takes longer after two years or more. Treasury bills also have discounted interest rates while relationships generate fixed coupons. There’s another difference when it comes to returns. Bonds offer semiannual coupon payments. On the other hand, treasury bills do not provide such.
The difference is now clear. For an investor, the only significant difference worth noting is the maturity time and absence/presence of coupon payments. That said, you decide to choose which one to go for.
Now, an SGS agent should guide you through the investment process. There are certified SGS agents you can work with. Before you put your money anywhere, ensure you verify the agent you are dealing with is legit. This will save you from the pangs of conmen out to exploit ignorant investors who don’t understand what they are doing.
Buying government bonds can be done in either primary or secondary markets. A primary dealer is a prime market. This is where you buy from certified dealer banks like Standard Chartered, Bank of America, Citi, and many others. The buying process is usually done as an auction. You already know how auctions work. The bonds are put up for sale, and the best buyer takes the day. Well, there’s more to the selection criteria than meets the eye. One assurance you can have is the zero risks associated with the buying and selling process.
Usually, willing buyers offer their submissions through dealer banks. This can be done even though the ATMs. Now, when it comes to bonds, you need more than a bank account. An additional Central Depository (CDP) account is required.
In a layman’s language, a CDP account is your safe for assets like bonds, stocks, etc. Opening a CDP account can be done through your dealer, or you can do it yourself. Once you have a CDP account ready and bond purchase bid submitted, you are set to acquire your bonds.
Being an auction, your CDP account balance will reflect additional units in case your bid is successful. Once your balance increases, it is clear you would have purchased the bonds. It would be time now to enjoy and see your value grow.
The beauty of using a dealer is most of the things are done for you. That saves you the stress of having to do something which can sometimes be inconveniencing. This lets you achieve much more without much struggle as compared to doing it yourself.
When it comes to exchanges, it becomes a little more technical. Although, you retain the power to control your assets all the time. Besides, you save yourself from paying brokerage or dealer fees. Both paths have their pros and cons, but let’s first learn how to invest in Singapore bonds through the Singapore exchange.
July 8 2011, saw SGX start listing SGS bonds. Before anything else, you must ensure you have a CDP account. With your CDP account ready, you can now engage in the trading of these bonds. There are different types of SGS bonds on sale and up for grabs at the SGX. This gives you the option to choose which one you like and would be pleased to invest in.
Trading on the SGX also comes with its costs. Transaction fees apply as you transfer these assets when selling. As a buyer, you’ll rarely incur transaction fees, but brokerage fees may apply.
There are many available options when it comes to the purchase of bonds. The first and most common option is the use of fiat, popularly known as cash, to pay for in exchange for the Singapore bonds. Well, the good news is that’s not the only option. There’s another alternative of utilizing the Central Provident Fund to pay for bonds. Both can work well.
The Better Option?
You might wonder which of the options is better for you. Well, you should go for the SGX option if you have enough time to monitor the trade yourself. With a dealer, it is safe to say most of the analysis will be done for you. With exchange, you have to be involved more. Both options have their advantages whose level of impact varies depending on circumstance. It is up to you to analyze your opportunities and compare them with your situation. Besides, the final decision is yours to make. If you need an instant loan to save and invest, look for a legit lender and borrow.
The Bottom Line
Singapore has been rated as a highly reputable bonds’ dealer by most credit rating institutions worldwide. It is for this reason that most people would want to invest in their bonds. Once you are ready for the investment, you may opt to buy the bonds through the primary or secondary market. The former option means using an authorized dealer to bid for purchase. The latter means using the Singapore exchange. In both cases, you must have a central depository account created by yourself or through a broker.