By investing, you have a great source of income. Like the famous quote by the investor Warren Buffet goes, “Never depend on a single income. Make an investment to create a second source.” With a second source of income, you can supplement your main income, avoid unpredicted financial troubles, and grow wealth. A smart investment plan is to put your money in such a way to get good returns in the future.
If you have just begun investing and don’t want to take a risk of not seeing any returns, consider investing in SGS bonds. They help you earn regular interest and diversify your portfolio.
What are SGS Bonds?
Singapore Government Securities or SGS Bonds are tradable debt securities issued by the Singapore government. They help you earn fixed interest every six months until their maturity when you receive your initial investment or principal amount back. SGS Bonds are issued at maturity from 2 to 30 years, and they come in three categories:
- SGS (Infrastructure): They are issued to raise funds for long-term infrastructure and are governed by the Significant Infrastructure Government Loan Act (SINGA).
- SGS (Market Development): These bonds are issued to grow the domestic debt market, and they come under the Government Securities Act.
- Green SGS (Infrastructure): They are meant to finance important green infrastructure projects and they are governed by the Significant Infrastructure Government Loan Act (SINGA)
Individuals who are at least 18 years of age can buy SGS Bonds, which are issued every month at a uniform price auction. SGS Bonds, unlike other bonds, are a long-term investment and safe. The Monetary Authority of Singapore (MAS) issues them on behalf of the government of Singapore.
How do SGS Bonds work?
Being a long-term investment, SGS Bonds are issued with maturity periods starting from 2 years to a maximum period of 30 years. You get a regular income, which is fixed interest, as a coupon payment every 6 months.
For instance, if you invest 1000 SGD in SGS Bonds at the interest rate of 1 percent, you will receive 10 SGD as interest in two 5 SGD coupons until the time the bond matures. However, the interest rate varies depending on the type of SGS Bonds and maturity period.
Various benefits of investing in SGS Bonds
Before deciding on investing in SGS Bonds, you should better know how it benefits you.
- Backed by the Singapore Government
SGS Bonds are fully backed by the Singapore government, and therefore, they are more reliable than typical bonds issued by companies. With lower risk, you can have them diversify your investment portfolio. SGS Bonds help grow your investment capital and also get it back after maturity.
1. Capital gains
You have a chance to purchase these bonds in the secondary market at DBS branches below their par value. Upon maturity, you will earn a profit on your investment apart from the interest received every 6 months. When compared to SSBs, SSGs offer better stability in the market, which gives you a chance to earn more.
2. Have a regular income
With SGS Bonds, you can earn fixed interest regularly. You will start getting the returns from the time you have purchased the bonds and until the time they reach maturity. The interest is paid twice a year, and it is guaranteed. Moreover, you get an opportunity to earn a higher rate of interest if you source the bonds with higher maturity periods.
3. Need low investment
As far as SGS is concerned, it asks for a minimum investment of 1000 SGD. With other stocks, it is not the same. Moreover, investing in bonds will help you earn higher interest than what you earn with your savings account.
4. Use cash, SRS, or CPFIS to apply
You can apply for SGS Bonds using your Supplementary Retirement Scheme (SRS), Central Provident Fund Investment Scheme (CPFIS), or cash. It helps you have a peaceful retirement life.
5. Tax exemptions
Investing in these bonds will help you get exemptions on capital gains. Individuals can save tax on the interest earned on SGS.
To conclude, if you want to begin your investment journey safely and with some returns, you can choose SGS Bonds. Nevertheless, it is always advisable to talk to a financial advisor about your investment goals and determine your investments.
