Tuesday, September 1, 2015

Singapore Savings Bond just raped the GE 2% "Guaranteed Saver"

Guaranteed to make all those GE agents happy, you mean.

Check out the current yield of this month's SSB (from here):

As I mentioned in my previous comparison between the SSB and the GE Guaranteed Saver, there is a very real likelihood that the actual yield of the SSB will be over 2% since it is a moving target.

Returns for the GE promo is 2%, nice and easy number. The SSB is a moving target and based on this reference table from FSM, we are looking at yields between 1.94 and 1.98% as of now. Of course the finalized yield will only be known when the bond is issued and it could definitely be higher than 2%. But for now, it is under 2%.

For whatever reasons and factors that have come into play, the SSB for 5 years is now 2.01%, beating the GE product by a mere 0.01%, ahaha!

But, it is actually just simple average returns. The true compounded yield is actually 1.954%, which is eerily close to the rate that I predicted a month ago with my comparison post. However, this does not make it inferior to the GE product. GE's number of 2% uses simple average returns. This was a huge basic fundamental mathematical error that I did not take into consideration in my last post, so sorry. Using the same formula, the GE's product has compounded returns of 1.924%.

Without taking into consideration reinvestment of the payout or coupons, $20,000 in the GE product yields $2,000 interest, while $20,000 in the SSB will yield $2,032 interest. The SSB has a marginal beat of $32 dollar, but a beat nonetheless.

Looking at these numbers, the previous table that the GE agent made and shared is very very very wrong, since their projected interested of the SSB was a mere $1,654 compared to the actual $2,032. This is a huge error of 23% over the forecasted interest received. What kind of anyhow accuracy is that sia.... And of course, they also conveniently did not "reinvest" the coupons, like they did for their own product. The agent that made the table is very tricksy indeed.

However, before you jump out of your chairs and go after that agent with pitchforks, it is noted in the infographic that it is "illustrative only". You are also asked to "do your own research". So her backside is safe. Anyway, we are all humans and humans can make mistakes, right?

If you didn't do your own research and trusted whatever your GE agent said and are now a proud owner of that GE "policy", congrats to you for helping them hit their KPI this year!

As summarized before, the SSB is the clearly superior product as it has:
- Higher interest rates

- Flexibility of early termination with no penalty
- Free option to extend the investment period
- Low capital required of only $500
- Zero default risk

For all those fixed deposit lovers, now is the time for you to get your hard-on about the Singapore Savings Bond :)

I will be throwing my spare cash into the SSB as and when I have spare cash. For this month, I plan to bid for placement. I have not decided the amount yet, but at the very least, it is going to be $1,000 just so I am familiar with the process and own some of it, which grants me the right to talk shit about this investment. Felix wrote a step by step guide on how to apply for the SSB with POSB, and I will definitely be using it to guide me along when I apply!

I've said this before, but I guess there is no harm repeating myself:

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.

MAS has also created a very useful calculator to view the interest payments. I am in the midst of creating my own spreadsheet so I can know if it is worthwhile for me to rollover my SSB into a higher yielding SSB in the future. It's not easy, my brain hurts.


  1. Excellent blog sir. You are serving society even if you don't realise it.

    1. Thanks Anon, you're too kind. I'm just sharing what I found out. I hope my info is not wrong and is useful to other people.


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