Thursday, April 9, 2015

My Thoughts on the Singapore Savings Bond

I'm not going to explain the product much, because I think many many many many other bloggers, as well as news sites have done a great job with that. It has been done to death. I'm not the kind of blogger to hold your hand and read things together with you, sorry for the let down.

My personal favourite is from Elf on a Shelf at Epsilon Luxe, with his attached infographics from BT and MAS. It's a great article with good sources, so I'm all up to speed with my knowledge on the SSB now. Greatly advise you to check it out!

Personally, I strongly agree with Wilfred Ling, the IFA on Duty that the SBB is a free lunch. Unless banks can offer consumers fixed deposit with much more attractive rates, of flexible terms, their entire fixed deposit division can just close shop right now.

I think the wild card that has yet the seal the fate on all these people is the fact that the maximum limit on investing in the SBB has yet to be announced.

I wonder how much this will be, but I have very strong gut feelings that this amount would not be over $100,000. In fact, I would guess that it would be closer to be between $20,000 to $50,000.

Anything over $100,000 would be a very big shock to me. Not only would it put silly bank agents who call up people to ask them to roll over fixed deposits out of a job, but it would also make things very unequal since only people in the upper class would be able to fully maximize the utility of this product. Don't mind me, that's just the diabolical social engineer in my mind talking.

I see this SSB as something similar to what the government has done with CPF Life. It is designed and aimed to help people, which is why there is a limit to it. A lot of people don't think about it, but I have thought about it before. CPF Life is without a doubt the best retirement product that anyone can get, I've done my research. There have been newspaper articles about it as well. Anyone that that tells you otherwise (especially an insurance agent) can shove a cucumber up their butt. Yeah, it's not going to give you 8% pa like investing in stocks, but obviously if you are comparing this to stocks, you haven't a clue what these sort of retirement products are for.

For the savvy individual, the government has come up tons and tons of ways of helping us. We have plenty of choices so that we aren't restricted to make better decisions of our financial future.

The CPF accounts (OA/MA/SA/RA), CPFIS, CPF Life, SRS, Medishield, Dependent Protection Scheme, ElderShield.... and now the Direct insurance products and this Singapore Savings Bond.

If you think the government is not doing enough for you, clearly you haven't been looking at the right places.

I think that the government has done a fantastic, fantastic job laying out the foundation and giving us all these tools and products to help us satisfy our most basic needs, as well as allow us to improve beyond the basics if we know how to take advantage of them.

You can bring a horse to water, but you can't make it drink.


  1. Hi GMGH,

    Loved the pic in the end. Same sentiments regarding hand-holding.

    Let's see what the cap is. Anyway, I wrote about an arbitrage opportunity regarding the SSBs at the end of the post. Care to take a look to see if there's anything I interpreted wrongly?


    1. Hi Mr 15HWW,

      Hehe, it took me a while to find such an appropriate picture!

      I think you are right in theory.

      If the 10Y is going down, then it makes sense to hold onto your already purchased bonds until maturity.
      If the 10Y is going up, then it would be better to sell out and roll over into the higher yields.

      However, I do imagine that the yield has to go up more than a certain threshold to make sense to roll over. If yields go up by 1bps, I am sure it is not worth it to roll over into the higher yielding bond. We need some smart person to come up with a calculator to calculate that threshold!

      I am very eager to learn more details about the SSB, especially regarding the purchase and divestment process! I think once we know that, we will know the boundaries of our playing field so that we can think of the best strategy!

    2. Hi GMGH,

      Glad to hear from you.

      Was wondering if there was some thing that I missed.

      Let's wait and see then. Half a year to go!

  2. Hi GMGH,

    Looks like you are going to buy in to this? I am thinking if I should use my war chest for this or continue stock investing which should give higher returns. Perhaps using emergency funds for this... hmmm.

    1. Hi Jes,

      Yup, I am quite sold on this product, especially for my cash that might not be giving me as returns as good as I would like.

      I'm not sure until more details are released, but I would assume that they would be rather liquid, though perhaps not immediate. I am curious about how redemption process would be like though.

      I guess it depends if you think the broad market will continue to do well, or if tough times might be lurking ahead. This SSB only makes holding onto cash less painful, but I feel it doesn't really affect the main issue at hand, which is to be invested in stocks or not.

  3. If you can take money out within a month and your type of investing is value investing (as opposed to trading), then can dump the whole war chest in (subject to the cap).
    In an event of a Great Spore Sale courtesy of a major economic shock, the share prices are not going to jump back up within a month. Hence, plenty of time to en-cash the SSB war chest and start buying.

    1. Hi Anon,

      Thanks, your strategy sounds very much like what I am intending to use the SSB for!

  4. This is really a wonderful post.


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