The Singapore Savings Bond (SSB) has officially been launched.
This investment product is a breath of fresh air for us Singaporeans. Especially in the recent tumultuous stock market, with spectacular highs and new 52 week lows. If you have a low to moderate risk appetite, this might just be the perfect investment tool for you.
As for myself, i would be applying for about S$50,000 of SSB.
The purpose is to allow a portion of my war chest to generate some income above the typical bank savings rates of 1.3-1.4%. One of the biggest draw for me, is the fact that there is absolutely no redemption penalty! This means that you can decide to call the bond and yet receive the interest payments on it without having any losses. The only drawback on an early redemption is a reduced EIR. (The longer you hold the bond to maturity, the more interest you will receive).
Key points about the 10 Year SSB:
1) No lock in or penalty
2) Max purchased amount S$100k
3) Effective Interest Rate (EIR) of about 2-3% (Tagged to SG govt. Bond)
4) Apply through ATM ($2 fee)
5) Bi-Annual interest payments (every 6 months)
5) Bi-Annual interest payments (every 6 months)
Important Dates:
Application Deadline: 25 Sept 2015
Results of Application: 28 Sept 2015
Issuance of Bond: 01 Oct 2015
Taking a look at this month's Singapore Savings Bond.
The interest rate schedule is as follows:
| Interest rates | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Year from issue date | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
| Interest, % | 0.96 | 1.09 | 1.93 | 2.93 | 3.25 | 3.25 | 3.25 | 3.25 | 3.3 | 3.7 |
| Average return per year, %* | 0.96 | 1.02 | 1.32 | 1.71 | 2.01 | 2.2 | 2.34 | 2.44 | 2.53 | 2.63 |
As a basis for comparison, a typical Fixed Deposit rate in SG would give an EIR of about 1.3-1.5%. After year 4, it would be an unbeatable rate of return for an investment instrument that is practically risk free.
Yay or Nay ?
Share your comments with me below.
Yours,
Dream Chaser
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