In the world of stock investing, knowing when to buy can be just as important as knowing what stock to buy. Unless you’re employing a dollar-cost averaging strategy for a broad-based index fund, seasoned investors know that patience is key when it comes to picking individual stocks for your portfolio.
“The stock market is a device for transferring money from the impatient to the patient.” – Warren Buffett
A great example is the COVID-19 crash. When the S&P 500 market plunged over 30% in March 2020, investors who were waiting patiently with a cash hoard took the opportunity to buy high-quality stocks at bargain prices.
However, waiting by the sidelines also means that your cash is sitting idle in your bank account earning next to nothing in interest. Is there a better place to park your cash while you wait for a market opportunity to present itself?
2 key factors when choosing cash investments
Before we dive into the options available, there are two key considerations when it comes to your holding investible funds somewhere.
The first is liquidity – you want to be able to access your cash immediately to take advantage of a potential stock opportunity when it presents itself. You don’t want your cash to be locked up because that window of opportunity could go by very quickly.
For example, from its bottom in March 2020, the S&P quickly rose 19% in just two weeks. By August, the market had already fully recovered. If you didn’t have access to liquidity, you would have missed the ride upward.
The second is risk – you want to park your money where it is extremely secure and the risk of losing your funds is miniscule. There is no need to risk these funds as it is already earmarked for investment when the opportunity comes.
Low risk cash investments in Singapore comparison
With that, let’s explore the typical options alongside one money market fund.
|Instrument||Return p.a.||Min. Investment||Max. limit||Fees||Tenure||Liquidity||Risks|
|Savings account||0.05%||S$0||No limit||S$2 per month if below minimum balance||Indefinite||Immediate||Risk-free|
|Fixed deposit||0.05% to 1.3%||S$1,000||No limit||None||1 month to 5 years||Immediate but penalty for early withdrawal||Risk-free|
|Singapore Savings Bonds (SSB)||2.8%||S$500||S$200,000||S$2 per transaction||10 years||7-30 days. No penalty for early withdrawal||Risk-free|
|Singapore Government Securities (SGS) Bonds||2.77% to 3.09%||S$1,000||No limit||S$2 per transaction||2, 5, 10, 15, 20, 30 years||Sell on open market if before maturity||Price volatility if you sell before maturity|
|Singapore Treasury Bills||2.88%||S$1,000||No limit||S$2 per transaction||6 months, 1 year||Sell on open market if before maturity||Price volatility if you sell before maturity|
|moomoo Cash Plus||2.14%^||$1.098 (NAV price)||No limit||0.15% p.a.||Indefinite||Same-day withdrawal||Price volatility|
Here are some quick conclusions from the table above along with some additional information:
1. Savings accounts are the most flexible, but they earn almost no interest.
2. Fixed deposits earn a higher interest than savings accounts, but penalties for early withdrawal usually mean you forgo almost all your earned interest. And for higher investment amounts, the interest rates are as low as the savings account.
3. SSB is risk-free and earns an even higher interest than fixed deposits. There is no penalty for early withdrawal, but there is a fixed window every month for withdrawal and you receive your funds the following month. If you want your funds immediately, this could be an issue. There is also a maximum investment limit of S$200,000.
4. SGS bonds offer comparable rates to the SSB. However, if you want to redeem early you need to sell on the open market which is subject to price volatility.
5. Singapore treasury bills are essentially short-term SGS bonds which you purchase at discount from face value. Similarly, if you want to redeem early you need to sell on the open market which is subject to price volatility.
6. moomoo Cash Plus generates a potentially higher return than fixed deposits while offering the flexibility to redeem your money anytime with no penalty.
There are two money market funds available under moomoo Cash Plus: Fullerton SGD Cash Fund and CSOP USD Money Market Fund. We will highlight the Fullerton SGD Cash Fund since this article compares Singapore dollar cash investments.
The Fullerton SGD Cash Fund is the largest domestic cash fund in Singapore and aims to generate a return that matches the Singapore Dollar Banks Saving Deposits Rate. In fact, the fund has a track record of consistently beating its benchmark. While there is still the risk of price volatility, the fund has not had a negative monthly return since its inception in 2009.
While the Fullerton SGD Cash Fund’s relatively stable returns are impressive, it’s good to understand how a fund invests and generates its returns. If you have a look at its annual report, the Fullerton SGD Cash Fund primarily invests in short-term Singapore-dollar deposits with eligible financial institutions with a minimum short-term rating of F-2 by Fitch, P-2 by Moody’s or A-2 by Standard and Poor’s. The fund does not use derivatives.
Here are the funds top 10 holdings (as of 31 March 2022):
The Fullerton SGD Cash Fund is considered a relatively low risk fund that has a track record of providing stable, conservative returns while meeting the short-term liquidity needs of investors.
How to purchase moomoo Cash Plus
You can purchase money market funds in three easy steps via moomoo Cash Plus on your moomoo app. Here are the steps:
From now till 31 August 2022, moomoo SG is giving S$2* cashback every day for 30 days if you make a one-time deposit of just S$100 in Cash Plus. That’s literally S$60 cashback! moomoo SG charges ZERO fees when you subscribe to or redeem from moomoo Cash Plus.
So if you’re looking for flexible options to park your cash that earn a higher interest while waiting for potential stock market opportunities, you can consider subscribing to money market funds through Cash Plus.
moomoo SG via moomoo trading app has announced a lifetime $0 commission on US market for eligible clients. They are offering one of the most competitive trading fees across US, HK, SG & China A Shares with live market data.
When you successfully register for your moomoo SG universal account via the moomoo app, you will get to enjoy $0 commission-free* trading for the U.S. stock markets, platform fees will be waived for the first year. You would also gain free access to Level 2 market data for the U.S. stock market; Level 1 market data for the Singapore stock market; Level 1 market data for China A Shares.
Investment products available through the moomoo app are offered by Moomoo Financial Singapore Pte. Ltd (moomoo SG), a capital markets services licence holder regulated by the Monetary Authority of Singapore. moomoo SG’s parent company, Futu Holdings Limited, is backed by world-class investors which include venture capital affiliates of Tencent, Sequoia Capital and Matrix Partners.
Open your moomoo SG universal account today with the moomoo app here. *Terms and conditions apply.
This article was written in collaboration with Moomoo Technologies Inc. Securities. All views expressed in the article are based solely on The Fifth Person’s independent opinion.
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