By Richard Hartung

If you have extra money saved in your Singapore bank account it would be easy just to leave it there. Interest rates on savings accounts are low, though, and even time deposit rates of around 1.8 percent barely keep you ahead of last year’s core inflation rate of 1.7 percent. With the Monetary Authority of Singapore (MAS) expecting inflation to be 1.5-2.5 percent this year, it may be beneficial to look at easy ways of investing so your money can work harder for you.

Exchange-Traded Funds
While inexperienced or busy individuals have plenty of options for investing, some of them are expensive. Unit trusts, similar to mutual funds where investors’ money is pooled, or life insurance can cost up to 5 percent initially and, on top of that, fund managers charge a fee of between 1 and 2 percent of your assets every year.

An easy alternative is to invest in lower cost exchange-traded funds (ETFs) through a bank or securities company. At POSB, for instance, consumers can invest S$100 or more a month in either Singapore bonds via the ABF Singapore Bond Index Fund ETF or in blue-chip stocks via the Nikko AM Singapore STI ETF. POSB charges fees of 0.5-1.0 percent of your investment and fund management fees are
relatively low.

The STI ETF, which largely replicates the performance of the Straits Times Index (STI), earned an average of 5.33 percent annually over the past three years. For investors who want lower risk, the Bond ETF earned an average of 2.85 percent over the past three years. Other banks offer similar opportunities, with options including OCBC’s Blue Chip Investment Plan and Maybank Kim Eng’s Monthly Investment Plan.

For those in need of some help with selecting investments, digital investment platforms known as ‘robo-advisors’, such as AutoWealth or Stashaway, take investors preferences into account and create customised investment portfolios. You’ll start by answering questions to provide details about your goals and risk tolerance, then receive a proposed investment portfolio. Your assets are usually allocated to low-cost ETFs and the robo-advisor adjusts the portfolio automatically based on changes in market conditions.

Fees can be as low as 0.2 per cent per year, the minimum investment is low and can yield healthy returns, too. AutoWealth reported returns were 7 percent in 2016 and 7.6 percent in 2017. Last year, when the Straits Times Index lost 7.5 percent, it lost 5 percent.

Brokerage Accounts
If you are comfortable with the investment market and want more options, you can set up a brokerage account and select shares or ETFs directly. There are more than a dozen local brokerage firms, all regulated by the MAS. Many have been around for decades, with Lim & Tan Securities and Phillip Securities both having been established in the 1970s.

Along with stocks, brokerages may offer access to ETFs, unit trusts, bonds or options. When selecting a brokerage firm, they’ll help you to open a central depository (CDP) account where your shares will be held. You can then open a brokerage account to buy or sell shares or bonds, often online. Most firms charge similar fees of about 0.275 percent of your purchase price or a minimum of $25 per trade, however, which is higher than in the US.

Unit Trusts (Mutual Funds)
Unit trusts are also an option, but may be expensive and there are more than 1,000 in Singapore, so selecting the right one for you can be complex. A bank or a brokerage firm can help you to set up an account for your investments and may provide ideas about which funds to select. Apps such as OCBC’s OneWealth give you insights into the market and let you invest in unit trusts. Other local banks also have apps or online services, too.

Another alternative is to use a non-bank platform for investments such as FundSupermart, an investing ‘supermarket’ with a huge variety of unit trusts, ETFs, bonds and stocks. FundSupermart investment advisors can help you sort through the plethora of choices.

A more risky but potentially higher yielding investment is peer-to-peer debt crowdfunding, which is essentially lending to small businesses. Investors collectively provide a loan and earn interest from a small business that agrees to pay back the principal plus interest.

This type of investment can usually be arranged by signing up online; Funding Societies, for instance, facilitates lending for SMEs and interest rates are of approximately 8-14 percent per year. This and other sites such as MoolahSense also offer auto-invest tools which investors can use to loan funds automatically on a regular basis.

While the returns are good, however, the risk is that the borrower may not pay investors back and the loan amount will be lost. Investing in a larger number of smaller loans can help mitigate the risk.

Investing is Easy
While there are plenty more alternatives for investing in Singapore, options such as these provide easy ways to earn more than you would on money in a bank account. Simply by doing a little online research and asking questions from a few institutions can improve your investment returns and give you an opportunity to beat inflation.