Maximising Value from Your SSB Portfolio

If you have spare cash today, I won’t hesitate to recommend SG Saving Bond (SSB) to you. It’s the best investment product for Singaporeans out there now! The first year interest rate of the Dec’18 issue is 1.89%. Solid, right?

I believe most of you are familiar with it. If not, you can click hereto find out more.

For many people, buying bonds is a “buy and forget” experience. Unless the issuer goes bust, we will definitely receive the interests at the coupon rate that we bought the bond and at fixed interval regardless of the market condition. And at the end of the bond life, we will get back 100% of our capital investment. Hence, bond is normally said to be a safer investment than equities.

Same for SSB … and better still, you can sleep even more comfortably as it’s backed by our financially strong government.

However, the unique feature of SSB, i,e. the fact that you can redeem it anytime with no penalty and receive 100% of your capital and interest paid to that month, means there is value to optimise your SSB portfolio to get more return out of it, especially when you have already max-ed out your quantum.

In other words, you can redeem the low interest rate SSB and buy high interest rate SSB with little cost.

Let me illustrate this with a chart below. As can be seen below, the first year interest rate of Dec’18 SSB issue is higher than the current interest rate offered by SSBs after Dec 2015.  This is even considering that some of the SSBs are already giving out the 2nd or 3rd year interest rates already. Hence, if you holding on to 2016 and 2017 SSBs, you should consider making the swap.

You may say that the subsequent interest rates of the 2016/2017 SSB will be higher than the Dec’18 first year rate. Maybe …. but if you look at the table below, you will find that it may not necessarily be true. There is an opportunity cost for holding low interest rate SSB as there is a maximum amount of $100,000 value of SSB that a Singaporean can buy.

Money is on the table for you … it just a bit more efforts on your part.

Good luck and regards,

Warriortan