Best Safe and Low Risk Investments in Singapore [Dec 2024]

In early 2023, Singapore saw an impressive surge in fixed deposit rates, hitting a remarkable 4%. This was a significant leap, considering the last time 12-month deposit rates surpassed 3% was back in November 1998!. However, as with many good things, this spike was short-lived. By mid-2023, fixed deposit rates had started their descent, with some banks offering rates below 3%. 

As these rates decline, the quest for equally safe yet more rewarding investment options becomes critical. Investors are now driven by the need to combat rising inflation and protect their savings from losing value in low-interest accounts. While cash alternative investments offer slightly higher returns than traditional savings accounts, they remain relatively low-risk compared to equities and funds.

For those looking to transition their spare cash into these alternatives, it's essential to consider two main factors: liquidity and risk. Ensuring the investment's liquidity aligns with your financial needs is crucial, especially for short-term accessibility. Typically, these low-risk investments yield returns between 2% to 3% per annum, providing a safe haven without sacrificing immediate access to funds.

Whether you're new to investing or seeking stability amid a volatile market, exploring safe, low-risk investments in Singapore can help you grow your savings effectively. Here are some of the best low-risk options to consider for maximizing your returns while maintaining financial security.

Summary of low-risk investment

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#1 Fixed Deposits: A classic low-risk investment

If you're not keen on dealing with investment limits and fluctuating interest rates, traditional fixed deposits (FDs) are a reliable and safe choice. Recently, banks in Singapore have been offering higher interest rates, making FDs more appealing.

Fixed deposits offer guaranteed returns, providing predictable earnings with a fixed interest rate known upfront. They are relatively liquid, allowing withdrawals at any time, although early withdrawals incur penalties ranging from 0.5% to 1.0% per annum. However, many banks require a higher minimum investment, typically starting at $500 and up to $50,000.

The key benefits of FDs include low risk, as the principal amount is secure, and predictable returns due to the fixed interest rates. They are also simple and passive investments, requiring no active market monitoring.

What are the typical fixed deposit interest rates?

Based on our best fixed deposits in Singapore tracker, these are some of the best fixed deposits in Singapore offered in Dec 2024:

• The best 12-month fixed deposit rate was 3.20% p.a. offered by DBS/POSB, with a minimum deposit requirement of S$1,000.  

• The best 6-month fixed deposit rate was 2.90% p.a. from DBS/POSB & Maybank, requiring a minimum deposit of S$1,000 and S$20,000 respectively.

• The best 3-month fixed deposit rate was 3.00% p.a. from Bank of China, requiring a minimum deposit of S$500.

Fixed deposits are ideal for conservative investors looking for safety and predictability. They offer a secure way to grow your savings without the need for active management. If this sounds like a suitable option for you, read on to explore other low-risk investment alternatives.

StashAway Simple™ Guaranteed: A Flexible Alternative 

In addition to traditional fixed deposits from banks, investors in Singapore can opt for innovative cash management products like StashAway Simple™ Guaranteed. This product offers a blend of liquidity, competitive returns, and ease of management. 

Unlike fixed deposits, it does not impose minimum or maximum deposit amounts, providing flexibility for investors with varying financial goals and capacities.

#2 Singapore Savings Bond (SSB)

Launched in October 2015, SSB have become increasingly attractive to Singaporeans, especially with rising interest rates. These bonds are issued by the Singapore government, making them a safe and stable investment choice. Some of the key features of SSB include:

• Ultra-Low Risk: As a government-issued bond, SSBs are among the safest investment options available. Singapore’s AAA credit rating further assures the security of your investment.
• Long Investment Period: SSBs have a tenure of up to 10 years. The bonds pay a step-up interest rate each year, meaning the longer you hold onto your investment, the higher the return.
• Guaranteed Principal: Investors are guaranteed to receive their full principal back at any time, without any capital loss or penalty, even if they redeem their bonds before the 10-year maturity period.

What are the SSB interest rates?

Singapore Savings Bond (SSB) have interest rates anchored to the yields of Singapore Government Securities (SGS). The rates are based on the average daily SGS benchmark yields for one, two, five, and ten-year terms from the preceding month.

This ensures that the coupon rates for each SSB issuance are aligned with the corresponding SGS yields. For example, the average annual compounded return from holding an SSB for five years is closely linked to the yield of a five-year SGS bond.

SSB rates feature a "step up" mechanism, meaning the return increases the longer the bond is held, promoting long-term savings and investment. Our deep dive into the SSB interest rates,  shows a gradual increase, with the latest Dec 2024 allotment offering a 1-year return of 2.73% and an average 10-year annual return of 2.86%.

How does the SSB interest payment schedule work?

Interest on SSB is paid every six months and is credited directly to the bondholder's bank account on the first business day of the month. For cash purchases, interest is credited to the bank account linked to the individual's CDP Securities account. For investments through the Supplementary Retirement Scheme (SRS), the interest is credited directly to the SRS account.

How flexible are SSB?

One of the advantages of SSB is their flexibility. If you need to redeem your bonds early, the process is straightforward, though it can take up to a month as redemptions are processed by the second business day of the following month. 

While there are limits to how much you can invest—minimum of $500 and a maximum holding limit of $200,000—SSB provides a flexible and accessible investment option for a wide range of investors.

There is a small transaction fee of $2 for both purchasing and redeeming the bonds.

How safe are SSB?

SSB is backed by the Singapore government, making them an exceptionally safe investment. Singapore is one of the few countries with a AAA credit rating, indicating a very low risk of default. This ensures that your principal and interest payments are secure, providing peace of mind to cautious investors.

To know more about Singapore Savings Bond, check out our guide: A Complete Guide to Singapore Savings Bonds (SSB)

#3 Singapore Treasury Bills (T-Bills)

Treasury Bills (T-Bills) are often considered a "hidden gem" among low-risk investments in Singapore. Historically overlooked, these short-term government securities have recently gained attention due to their attractive yields. T-Bills are extremely safe investments, backed by the Singapore government's AAA credit rating, indicating a high level of creditworthiness and a strong capacity to repay investors. Some of the key features to take note:

• Ultra-Low Risk: Backed by the government’s AAA credit rating.
• Short Tenor: Available in 6-month and 1-year durations.
• Attractive Yields: Recent rates include 3.76% p.a. for 6-month T-Bills and 3.58% p.a. for 1-year T-Bills.

What are the T-Bills interest rates?

T-Bills provide an excellent option for those looking to invest for the short term without taking on significant risk. The short tenors of 6 months and 1 year make them ideal for investors who want to keep their investment horizon short. 

Recent auctions have shown attractive yields, with the latest 6-month T-Bill yielding 3% per annum and the 1-year T-Bill yielding 2.71% per annum. These outstanding returns have outperformed some of the best fixed deposits in the market.

What are the investment requirements of T-Bills?

Investing in T-Bills requires a minimum amount of $1,000, with a small administrative fee of $2. One unique aspect of T-Bills is that their interest rates are not announced until the auction date, meaning the exact yield is only known once the auction is complete. Despite this variability, T-Bills typically offer competitive returns.

What are the risks of T-Bills?

While T-Bills can be sold in the secondary market, they are considered somewhat illiquid because their price may fluctuate before maturity, potentially affecting the return if sold early. However, for those who can hold until maturity, T-Bills provide a secure and predictable investment option.

To find out more about the latest T-Bills information, check out our guide: The Complete Guide to Singapore Treasury Bills (T-Bills)

#4 Singapore Government Securities (SGS) Bonds

Singapore Government Securities (SGS) bonds are another safe and stable investment option backed by the Singapore government. These bonds are available in various tenors, ranging from 2 to 50 years, providing a wide range of options for long-term investors.

What exactly are SGS Bonds?

SGS bonds, like Singapore Savings Bonds (SSBs), are fully backed by the Singapore government. They are designed to raise funds for market or infrastructure development within the country. Investors lend money to the government and, in return, receive fixed interest payments, known as coupons, every six months. Some of the key features of SGS Bonds include:

• Varying Tenors: Available in terms of 2, 5, 10, 15, 20, 30, and 50 years.
• Semi-Annual Coupons: Pay fixed interest rates every six months.
• Government-Backed: Fully backed by the Singapore government, ensuring high safety.

How do SGS Bonds work?

SGS Bonds pay interest through fixed coupon payments every six months. For example, a recent SGS bond issued on Aug 22, 2024, had a coupon rate of 2.875% per annum. This means that if you invested $1,000, you would receive $28.75 annually in two payments of $14.375 each. The interest rates for SGS bonds are determined during the auction date, similar to T-Bills.

How flexible are SGS Bonds?

While SGS bonds are more liquid than SSBs, selling them on the secondary market can be cumbersome and may not be suitable for beginners. The bond prices can fluctuate before maturity, affecting the return if sold early. Unlike SSBs, SGS bonds cannot be redeemed before maturity without selling on the secondary market, making them less flexible.

Example;

For instance, if you purchased $10,000 worth of a 50-year Green SGS bond with a 3% coupon rate, you would receive $300 annually, split into two payments of $150 each. These payments continue every six months until the bond matures. If you decide to sell the bond before maturity, the price may vary, affecting your final return.

SGS bonds are an excellent option for long-term investors seeking a safe and stable investment. While they offer lower liquidity compared to SSBs, their guaranteed semi-annual interest payments and government backing make them a reliable choice for securing your financial future.

#5 Regular Savings Plans

Regular Savings Plans (RSPs) are akin to a modern, magical piggy bank for your investments. You regularly contribute a fixed sum of money, which a financial institution invests on your behalf using a strategy called dollar-cost averaging (DCA).

This means buying stocks consistently, regardless of market conditions, allowing you to benefit from the market's long-term growth trend. RSPs are designed for medium- to long-term commitments, offering flexibility and liquidity. You can adjust or stop your contributions at any time.

How Much Can You Earn from Regular Savings Plans (RSPs)?

Earnings from RSPs vary, as these plans typically invest in blue-chip stocks, Real Estate Investment Trusts (REITs), and Exchange-Traded Funds (ETFs). Your returns depend on the performance of these investments. It's essential to focus on transaction fees, which can be significant, rather than trying to pin down exact earnings.

Safety of Regular Savings Plans (RSPs)

Unlike fixed deposits, RSPs don't offer guaranteed returns within a fixed period. They rely on the principle of DCA, which leverages the long-term growth potential of stocks and funds. Your confidence in the market's long-term upward trend will reflect your confidence in profiting from RSPs.

Why Choose Regular Savings Plans (RSPs)?

1. Dollar-Cost Averaging (DCA): This strategy involves investing a fixed amount regularly, regardless of market conditions. It mitigates the impact of market volatility and averages the purchase price of investments over time.
2. Market Exposure: Consistent investments allow you to benefit from the market's long-term growth while weathering short-term fluctuations.
3. Accessibility: RSPs are suitable for beginners and those who prefer not to actively monitor the stock market. With a minimum investment as low as S$100, they provide an accessible entry point for new investors.
4. Medium- to Long-Term Horizon: RSPs are designed for building a substantial investment portfolio over time, rather than for quick gains.
5. Effortless Investment: The process is automated, ensuring you invest regularly without needing to time the market.

How Much to Invest Each Month

Determine your monthly investment amount based on your financial goals, risk tolerance, and overall financial health. Start small, especially if you're new to investing, and gradually increase your contributions as you become more comfortable and your financial situation improves.

Consistency and a clear understanding of your financial capacity and goals are key to successful investing through RSPs.

For more information on regular savings plans, check out our guide: Singapore's Best Regular Savings Plans.

#6 Endowment Plans

Endowment plans offer a hybrid of savings and insurance, making them a versatile option for those seeking both financial growth and protection. These plans are particularly useful for saving towards significant milestones such as a child's education or retirement. Recently, short-term endowment plans have gained popularity, maturing in just two to six years compared to the traditional ten years or more.

What are Endowment Plans?

Endowment plans are savings plans provided by insurers that help you achieve a target amount at a later date. You pay a premium, either as a lump sum or in installments, and upon maturity, you receive your initial investment plus returns. Short-term endowment plans are an attractive alternative to savings accounts or fixed deposits due to their decent returns and shorter commitment periods.

Should You Get a Short-Term Endowment Plan?

Short-term endowment plans can be a good alternative to traditional savings accounts, fixed deposits, and even Singapore Savings Bonds (SSBs), offering capital guarantee and competitive returns along with some insurance coverage. However, they require a commitment, as early termination can lead to financial loss. Some of the short-term endowment plans include:

#7 Cash Management Accounts

Cash management accounts (CMAs) have become an increasingly popular low-risk investment option for those looking to grow their savings with higher returns compared to traditional savings accounts. These accounts are typically offered by digital financial platforms and robo-advisors, providing a blend of liquidity, competitive interest rates, and ease of management.

What are Cash Management Accounts?

CMAs are designed to maximise the interest earned on your cash while maintaining high liquidity. They work by pooling your money with that of other investors and then investing it in a mix of low-risk instruments such as money market funds and short-term bonds. This approach helps generate higher returns while still keeping your money accessible.

Key Features of Cash Management Accounts:

• Competitive Interest Rates: CMAs often offer higher interest rates than regular savings accounts. These rates are variable and depend on the performance of the underlying investments.
• High Liquidity: One of the main benefits of CMAs is their high liquidity. You can usually withdraw your money at any time without penalties, making them suitable for both short-term savings and emergency funds.
• Ease of Management: These accounts are easy to set up and manage through digital platforms, providing a user-friendly experience with features such as automated deposits and withdrawals.
• Low Fees: CMAs typically have low fees compared to traditional investment accounts. Some platforms may even offer fee waivers or reduced fees based on account balance or investment duration.

Why Choose Cash Management Accounts?

CMAs are an excellent choice for those who want to earn higher returns on their cash without taking on significant risk. They are particularly suitable for individuals who need easy access to their funds or who are looking for a flexible, low-risk investment option. The combination of competitive interest rates, high liquidity, and ease of management makes CMAs a compelling alternative to traditional savings accounts and fixed deposits.

Notable Cash Management Accounts

Several cash management accounts are available in the market, each offering unique benefits. Among these, StashAway provides three distinct solutions under StashAway Simple Cash cash management solutions:

1. StashAway Simple: Earn a projected 3.40% p.a. at ultra-low risk with no minimum or maximum deposit amount, no lock-ins, no cap on earnings and low fees. Your cash is liquid—no limits on withdrawals or transfers.
2. StashAway Simple Plus: Earn 3.8% p.a. YTM on any amount with no lock-ins, no cap on earning, and low fees. Access your cash anytime —no limits on withdrawals or transfers.
3. StashAway Simple Guaranteed: Plan ahead confidently with guaranteed returns of up to 3% p.a. with no fees and no minimum or maximum deposits.

For more information on the best cash management accounts in Singapore, check out our guide: Complete Guide to the Best Cash Management Accounts in Singapore.

#8 High-Yield Savings Accounts

High-yield savings accounts offer a way to earn higher interest rates compared to regular savings accounts, albeit with specific requirements to unlock these rates. Typically, to benefit from these higher rates, you must meet criteria such as maintaining a minimum balance, making regular deposits, or using linked debit or credit cards.

For example, to maximize earnings with the Standard Chartered Bonus$aver Account, you need to fulfill criteria like crediting your salary, spending, paying bills, insuring, and investing. Similarly, the UOB One account requires you to credit your salary and spend a minimum amount monthly.

These accounts provide higher returns while ensuring your funds are secure and accessible, making them an attractive option for conservative investors seeking better yields.

For more information on the best high-yield savings accounts in Singapore, check out our guide: Best Singapore Savings Accounts with High Interest Rates.

Choosing the Right Low-Risk Investment

Selecting the best low-risk investment requires careful consideration of several factors to ensure it aligns with your financial goals and risk tolerance. Here are key aspects to consider:

1. Your Risk Profile: Understand your comfort level with risk. Low-risk investments are suitable for beginners but still carry some risk.
2. Rate of Returns: Low-risk investments yield lower returns. If slow growth frustrates you, consider higher-risk options or balanced alternatives like money market funds or robo-advisors.
3. Liquidity: Assess how easily you can access your funds. Fixed deposits, T-bills, and SGS bonds are less liquid compared to SSBs, savings accounts, and regular savings plans, which allow more flexible withdrawals.
4. Investment Goals: Determine your financial objectives and the duration you can commit your money. This helps in choosing between short-term and long-term investment products.
5. Professional Advice: Seek advice from financial consultants to better understand your risk profile and investment options.

Low-risk investments provide a steady and secure way to grow your money, especially in volatile markets. While they may not always outpace inflation, they offer a safer entry into investing.

Remember, even low-risk investments come with different levels of considerations. Always conduct thorough research or seek professional advice to ensure your investment decisions align with your financial goals and risk tolerance.