Mr Thum also pointed to products offered by digital banks and financial institutions such as Stashaway, GXS, Singlife and Syfe, where interest rates are close to 3 per cent.
“The biggest positive is that these are all extremely low risk investments,” he said, adding that the minimum amount is as low as S$100 for some products.
Mr Ray Zheng, a client adviser at Providend, said that the returns on products offered by financial institutions may be attractive, but investors should find out where their money is actually going – be it fixed deposits or various funds.
CEO of SingCapital Alfred Chia added that some companies may offer higher returns as a marketing tactic. Investors need to be aware of what the actual returns will be over the long term.
ALTERNATIVES WITH HIGHER LIQUIDITY
For investors looking for products without lock-in periods, fixed income funds and money market funds are two possible alternatives, according to Mr Zheng of Providend.
The former is a basket of investment-grade bonds and the latter is a basket of short-term fixed deposits managed by a fund manager.
Both are highly liquid, so investors can usually withdraw their funds whenever needed.
Investment grade bonds have a minimum rating of BBB, which indicates that the bond issuer is in a good financial position to pay interest to investors.
“Bonds and fixed income are generally considered to be low-risk instruments,” said Mr Zheng, noting that they are less volatile than other asset classes like stocks.
“When markets are down, bonds or fixed income drop less than equities,” he said.
Both fixed income funds and money market funds typically have lower minimum investment amounts compared with direct bonds or fixed deposits.
However, Mr Zheng noted that these funds may be less transparent and more difficult to understand compared with buying a