As many of you find your fixed deposits and treasury bills nearing maturity, you may be wondering what to do with the cash in hand. While investment decisions depend on individual objectives and market perspectives, I will present several options worth considering.
In this article, we will explore the options of continuing with treasury bills, locking in interest rates with Singapore Savings Bonds, and seizing investment opportunities in the stock market, particularly in REITs (Real Estate Investment Trusts).
Where to park your money now?
1) Continue with Treasury Bills and Fixed Deposits
While waiting for better opportunities.
The first and most straightforward option is to recycle your maturing funds into the next tranche of treasury bills.
Although yields have been declining since late 2022, the current yield range of 3.7% to 3.9% still offers a decent short-term cash-holding opportunity. This approach suits those who don’t require immediate access to their funds and are cautious about the current state of the stock market or potential volatility in the market.
At the time of writing, the auction for a 6-month T-bill is open until 8 June 2023.
Based on the current market prices, we can expect the yield to remain within a similar range. However, to avoid any surprises due to high demand, especially since many other investors’ treasury bills will be maturing around the same time, it’s advisable to set a competitive bid.
Similarly, fixed deposits can be considered and interchanged with T-bills, as both options have similar mechanisms. However, looking at the current market, where local banks like DBS offer a 2.9% yield for a 6-month tenure and foreign bank RHB offers 3.5%, T-bills seem to be a better choice in terms of yields and asset safety.
Ultimately, the decision depends on your personal preferences and any additional rewards or benefits you may receive from your bank.
2) Lock in Interest Rates with Singapore Savings Bonds
Next, if you anticipate further drops in interest rates and wish to secure the current rates, Singapore Savings Bonds could be an option for you. Although the interest rates may not be as high as short-term rates from T-bills, these bonds lock in your interest rate for 10 years, ensuring a steady stream of interest payments even if rates decline in the future.
An additional advantage is the flexibility to withdraw the funds within a month without penalties allowing you to pounce on any opportunities that come.
If you are interested, the application for July insurance is now open and will close on 26 June.
3) Pounce on Current Investment Opportunities
Last but not least, with cash in hand, this may be an excellent opportunity to get back into the stock market.
The global markets are brimming with excitement.
US equities, led by a few technology and AI-related stocks, continue to defy expectations. Of course, please be cautious when chasing this trend, as many companies are becoming overvalued.
Another upcoming opportunity lies in real estate investment trusts (REITs). In recent years, this sector has struggled due to rising interest rates, impacting the profitability of many REITs.
However, with interest rates peaking and potentially declining soon, investors might have a chance to ride the uptrend when it emerges.
⚠️Note: Some REITs may not survive until the interest rate drop. Others may continue to face challenges related to changing cultural and preference trends, such as the rise of remote work, so it is crucial to conduct thorough due diligence.
Personally, I am constantly monitoring this situation, waiting for the right moment to enter the market.
In the meantime, some options for these funds include short-term deposits like Singlife or Money Market Funds offered by brokers. These options would allow the idle cash to earn some interest while waiting for the opportune time to invest in the short term.
Where to put your cash next?
In conclusion, there are several options to consider for your maturing funds:
- Continue with Treasury Bills or Fixed Deposits, which provide a safe and reliable short-term cash-holding opportunity.
- Lock in the interest rate by investing in Singapore Savings Bonds (SSB) or,
- Take on more risk, seize current investment opportunities.
In my own strategy, I plan to reinvest most of my maturing T-bills into another round of T-bills as I believe it’s not yet the ideal time for other investment opportunities. However, I will allocate a portion of the funds to purchase select Real Estate Investment Trusts (REITs) as the interest rate environment improves.
Remember, each option carries its own benefits and risks, so consider your own investment objectives and preferences before making a decision.
p.s. if you’re holding onto USD, we’ve also compiled the best USD Fixed Deposit Rates in Singapore.
