Just this year, The Federal Reserve made the bold move of slashing interest rates by 150 basis points in two weeks to combat the impact of the pandemic to the economy. Even though lower rates are supposed to be beneficial to the economy, banks’ net interest margin have been pressured and resulted in cutting of interest rates in hopes of saving its own NIM. Savers are at the mercy of the banks when it comes to interest rates. Recently, several savings products popped up to meet the needs of high yield savers.
In this article, we will discuss the feasibility in using such products as an alternative to your usual savings account.
High Yield Savings Account
Be it DBS Multiplier, OCBC 360, UOB One or Standard Chartered’s Bonus$aver. You have chosen your high yield savings account because it meets your daily needs.
I would actually recommend you to stay on as the reduction in interest rate is across almost all accounts. As readers have different needs, it will be difficult for me to recommend the specific accounts. Therefore, you might use an online tool such as the savings account calculator by Seedly. You can use this tool to determine whether you would like to stay on with your current savings account or to try out another savings account that gives slightly higher interest based on your needs.
However, depending on how much more interest you can eek out from trying out another savings account, it is all about whether the change is worth and also whether it caused any additional inconvenience such as shortage of ATMs for withdrawal and deposits. So, it is not necessary for one to change for better savings but cause additional inconvenience.
Understand Cash Management
You might have heard of the saying “do not put all your eggs in one basket”, this saying is relevant in the context of where to keep your cash. Before Cash Management became popular among retail investors in Singapore, almost all will have their money in different banks.
A report explains the risk of depositing money in a bank. In the case of a bank were to fail, depositors will face credit risk from the insolvent bank when they are not able to get back their deposits. After the Global Financial Crisis, Singapore Deposit Insurance Corporation was introduced after the Global Financial Crisis to prevent future bank run. It insures up to $75,000 in the event a Deposit Insurance member fails. For an individual to be covered under SDIC for more than $75,000, it has to open many bank accounts with other DI members and spread the deposits into different DI members.
However, in this low interest rate environment, where many banks have already started reducing its interest rate on savings accounts, Cash Management comes into handy as an alternative for yield hungry savers.
Cash Management in Singapore got popular recently when Stashaway introduced its own called Stashaway Simple. Roboadvisors such as Stashaway, Endowus and Moneyowl invest in clients’ funds in Cash Fund, Money Market Fund and Short Duration Bond Fund.
The underlying asset of Cash Fund like the one being invested in Endowus Cash Smart and MoneyOwl invests in a diversified portfolio of institutional bank fixed deposits. It has the lowest risk among the funds mentioned above with a maximum drawdown of 0.01% using historical data.
Both Endowus Cash Smart and Stashaway Simple invest in Money Market Fund where its underlying assets consist of institutional bank fixed deposits, high quality investment-grade and very short duration government and corporate debt instruments. Money Market Fund carries slightly higher risk compared to Cash Fund where its maximum drawdown based on historical data is 0.05%.
With the arrival of EndowUs Cash Smart, it exposes retail investors to investing in Short Duration Bond Fund. As the name implies, Short Duration Bond Fund invests in a diversified portfolio of institutional bank fixed deposits, high quality and investment-grade short duration government and corporate debt instruments. Short Duration Bond Fund carries the highest risk among the three funds with a maximum drawdown of around 2% based on historical data.
Best Alternative Savings Product – Cash Management Solutions
#3 Endowus Cash Smart
Endowus recently joined Stashaway to introduce Cash Management service to retail investors. Endowus Cash Smart consists of two subproducts – Core and Enhanced.
Endowus Cash Smart Core
Endowus Cash Smart Core invests half of clients’ funds in Fullerton SGD Cash Fund and the remaining in Lion Global SGD Enhanced Liquidity.
Fullerton SGD Cash Fund provides investors with liquidity and return that is comparable to that of the Singpaore Dollar Banks Savings Deposits Rate. This fund’s objective is similar to LionGlobal SGD Money Market Fund. The fund will hold assets primarily in Singapore Dollar deposits with eligible financial institutions with varying terms of maturity of not more than a year. The fund may place deposits for at most 2 years, subject to a maximum of 10% of the Fund’s NAV. As of November 2020, about 68% of its funds are placed in Qatar National Bank Singapore, Sumitomo Mitsui Trust Bank and Bank of Tokyo-Mitsubishi UFJ, with 47.2% of its fund maturing in less than a month.
Lion Global SGD Enhanced Liquidity, which is used by Core and Portfolio, invests in high quality portfolio of debt instruments across various issuers in different sectors and tenures while maintaining a weighted average portfolio credit rating of A- and a weighted average duration of around 12 months.
Endowus Cash Smart Enhanced
Endowus Cash Smart Enhanced invests half of clients’ funds in UOB United SGD Fund and the remaining in LionGlobal SGD Enhanced Liquidity.
UOB United SGD Fund invests in money market and short term bearing debt instruments and bank deposits with a Weighted Average Maturity and Weighted Average Yield of Maturity of 1.61 years and 4.16% respectively.
The only fee that is charged by Endowus will be the Access Fee of 0.05% per annum, which I believe is reasonable. Like Stashaway, Endowus rebates the entire trailer it receives thus lowering the fund expense ratio it invests with clients’ funds. The projected return for Core and Enhanced after setting aside all the fees are 0.8% to 1.0% and 1.4% to 1.6% per annum respectively.
We should not be choosing Endowus Cash Smart Enhanced just because it has a higher projected returns but we should instead question how needy we need to utilise those funds.
Endowus disclosed the performance during the “Capitulation” stage in March 2020. It highlighted how the Endowus Enhanced lost 0.92% and took 50 days to recover from that slight drop. This shows that it is important to identify the amount of funds needed for short term such as for your daily expenses. It is not recommended to invest in your fund for daily expenses in Enhanced but instead look at Core to satisfy our need for higher yield returns on our cash.
My thoughts: I feel that Endowus Cash Smart as a product is as good as the one offered by Stashaway Simple. However, the dealbreaker in my opinion will be that the minimum sum to invest in this product is $10,000. I feel that this amount may be out of reach for some, especially teenagers.
It takes about 3 business days for the funds to be credited into a bank account after a withdrawal request has been submitted. With this in mind, I will not recommend putting their day to day expenses fund into any Cash Management but I would suggest investing their emergency fund into Cash Management instead.
Therefore, I decided to rank Endowus Cash Smart as the third best cash management solutions product in the market.
#2 Stashaway Simple
Introduced late last year, Stashaway is the first robo-advisor that introduces Cash Management to retail investors. Stashaway Simple invests half of clients’ funds to LionGlobal SGD Money Market Fund and the remaining in LionGlobal SGD Enhanced Liquidity Fund. The only similarity between Endowus Cash Smart and Stashaway Simple is that both of which invest in LionGlobal SGD Enhanced Liquidity Fund.
LionGlobal SGD Money Market Fund invests in short-term SGD deposits, high quality short-term market instruments and debt securities. These investments may include government and corporate bonds, commercial bills and deposits with financial institutions.
The projected rate of 1.2% is nett after net fee charged of about 0.217% after including the trailer fee rebates.
My thoughts: As mentioned earlier, both Endowus Cash Smart and Stashaway Simple are equally good. The only difference will just be the minimum sum to invest in Endowus Cash Smart but Stashaway Simple does not have any minimum balance. Upon withdrawal request, it takes about 2-3 business days for it to be credited into a bank account so it is not advisable for day to day expenses fund to be parked in cash management. For individual who does not have $10k for emergency fund, it is recommended to consider Stashaway Simple instead.
Therefore, I decided to rank Stashaway Simple as the second best cash management solutions product in the market.
#1 Syfe Cash+
Lately, Syfe joins its other Robo-Advisors competitors to introduce its own cash management portfolio called Syfe Cash+.
Features about Syfe Cash+
- Projected returns: 1.5%
- Provides daily accrual of returns – you will be able to see your savings grow every day.
- No lock up periods, you can withdraw anytime and get to keep all returns accumulated during the period you invest in Cash+. Withdrawal takes about 2-3 working days to process.
- No Syfe management fees
Syfe uses funds from LionGlobal, the largest asset managers in Southeast Asia, owned by OCBC to construct its Syfe Cash+ portfolio. It allocates 30% of its portfolio into LionGlobal SGD Money Market Fund, 35% into LionGlobal SGD Enhanced Liquidity Fund and the remaining 35% into LionGlobal Short Duration Bond Fund.
LionGlobal SGD Money Market Fund invests in high quality short-term money market instruments and debt securities. Some of the assets owned by this fund include government and corporate bonds, commercial bills and deposits with financial institutions. The fund’s weighted Yield to Maturity and weighted duration stand at 0.99 % (from 1.18% 3 months ago) and 0.38 years respectively. The weighted credit rating of the fund is A where 100% of its assets are Investment Grade rating (BBB- or Baa3 or better). Among the top 10 holdings, the fund holds medium term notes from Mapletree Treasury, Ascendas Reit, MAS Bill and Singapore Airlines. These 3 local MTNs constitute about 11.9% of the fund.
LionGlobal SGD Enhanced Liquidity Fund invests in a broadly diversified portfolio of high quality debt instruments diversified across varying issuers and tenures while maintaining a weighted average portfolio credit rating of A- and a weighted average duration of around 12 months. The fund’s weighted Yield to Maturity and weighted duration stand at 1.60% (from 1.94% 3 months ago) and 0.87 years respectively. The fund’s weighted credit rating is A. Among the top 10 holdings, the fund holds Capitaland 2.95% convertible bond maturing next year June and a couple of MAS Bill maturing this year. These notable mentions constitute 18.4% of the fund.
LionGlobal Short Duration Bond Fund invests in a portfolio of Singapore and international bonds, high quality interest rate securities and other related securities. The fund generally invests in bonds with investment grade quality, though the fund might be exposed to sub-investment grade securities. The fund’s weighted Yield to Maturity and weighted duration stand at 1.95% (from 2.41% 3 months ago) and 2.15 years respectively. The fund’s weighted credit rating is BBB (investment grade). Among the top 10 holdings, it holds bonds and perpetual from Capitaland, Singapore Tech Telemedia, Ascendas Reit and Keppel Land. These notable mentions constitute 6.1% of the fund.
My thoughts: If comparing among cash management solutions, I believe that Syfe Cash+ is the best cash management solutions available in the market. There is no minimum sum in both Stashaway Simple and Syfe Cash+ as opposed to $10000 for Endowus Csah Smart. The projected returns currently stands at 1.5%, the highest for cash management solutions. However, there is no guarantee that Syfe will be able to maintain the projected returns as seen on Endowus Cash Smart and Stashaway Simple. Upon withdrawal request, it takes about 2-3 business days for it to be credited into a bank account so it is not advisable for day to day expenses fund to be parked in cash management. For individual who does not have $10k for emergency fund, it is recommended to consider Syfe Cash+ instead of Stashaway Simple.
Therefore, I decided to rank Syfe Cash+ as the best cash management solutions product in the market.
Best Alternative Savings Product – Insurance Savings Plan
#2 Singlife (on waitlist)
Singlife Account is an insurance savings plan that credits interest and offers flexibility to make top ups and withdrawals with no lock-in and charges. The Singlife Account also provides insurance coverage to policyholders in the event of death and terminal illness. You will also receive a Singlife Visa Debit Card for any contactless payment where you can use it overseas too.
Singlife is the only insurance savings plan where its returns aren’t guaranteed. For the first $10000, you will get 1.5% per annum (from 29 January 2021) and for the next $90000, you will get 1% per annum. You will not receive any returns for the next $100000. The effective rate of return for $100k is 1.05%. Returns are calculated daily and credited to your account on the first day of the following policy month. The initial sum to activate the policy is $500 via FAST transfer. Thereafter the activation, you can start earning so long your account balance is above the minimum account value of $100.
Out of all insurance savings plans discussed in this post, Singlife is the most flexible in terms of withdrawal. It does not have any lock up period like the ones from Elastiq. Singlife accepts a minimum withdrawal of $1 to your designated bank account without any fees like the ones from Dash EasyEarn. Withdrawal is done using FAST and funds are credited almost instantly.
In addition, you get a complimentary Singlife Visa Debit Card where you can make contactless payment and even overseas transactions. For overseas transactions, you can choose to pay in foreign currencies, in which Singlife Visa Debit Card offers Visa’s competitive exchange rate with no FX fees or charges. You can also choose to pay in SGD for overseas transactions. Transactions will be converted to SGD via dynamic currency conversion, offered at selected merchants or websites.
Besides being functioned as an alternative to high yield savings accounts, Singlife provides life insurance coverage of up to 105% of Singlife Account Value and retrenchment benefits. One is eligible for retrenchment benefits for a period of three months, up to a total payout of S$10,000, provided you have been retrenched and remain unemployed for at least four months following the date of retrenchment.
My thoughts: Singlife will not be the top best savings product from 29 January 2021 after it slashed its rate of return. However, there is no withdrawal fee which can still be an option for savers who prefers to use it as liquid savings account. Unfortunately, application for Singlife is closed for the time being. If interested, please leave your contacts with them so that you can be notified when the app reopens for new customers in 2021.
#1 Singtel Dash PET
Singtel’s Dash PET is an insurance savings plan by Etiqa Insurance that is open to eligible Dash users to earn higher returns while enjoying the flexibility of anytime top-ups, withdrawals with no lock-in period of penalty. Dash PET also offers insurance coverage in the event of death.
With Singtel Dash PET, you can earn as high as 1.7% per annum on your savings. Interest is calculated based on the daily Account value and credited into the Account value at the end of each calendar month. If the average daily Account value for the month falls below S$50, no interest will be credited for the month.
The 1.7% per annum returns is applicable for the first $10k while the minimum initial sum to open Dash PET is $50, in multiples of $1. The maximum aggregate amount for all Top-up(s) per policy is S$30,000 less the single premium paid, plus all partial withdrawal(s) and transaction fee(s). All top up can be done using Dash Wallet, Bank Account via PayNow or Bank Account via eNets (minimum $50 required).
Dash PET like its predecessor Dash EasyEarn does not have lock-up period. One can partial withdrawal any amount from their plan anytime. They can either withdraw to their Dash wallet account with no charges or to their bank account via PayNow at a fee of $0.70 per transaction, deducted from Dash PET plan. The minimum amount to withdraw is $1, and in multiples of $1 per withdrawal. It is important to note that one has to maintain at least $50 average daily account value to enjoy the returns and benefits of the plan and the entitlement of interest crediting at the end of the policy month.
Besides being functioned as an alternative to high yield savings accounts, Dash PET has a death benefit of 105% of Account Value. Once this payment has been made, the policy ends.
My thoughts: First of all, Dasy PET like its predecessor Dash EasyEarn is capital guaranteed as it is protected under the Policy Owners’ Protection Scheme, administered by the SDIC. There is no lock-in period which I really like about it.
$0.70 per withdrawal to a bank account via PayNow might be a turn off for everyone, considering the fact that Singlife is only offering 1.5% p.a for the first $10k with no withdrawal fees, paying $0.70 per withdrawal on a 1.7% guaranteed rate might be a better deal. This is if only you park your emergency fund in Dash PET.
Furthermore, I do not mind mixing some of my day-to-day-expenses fund with my emergency fund in Dash PET as I can withdraw a minimum $1, in multiples of $1 every month to my virtual Dash Visa Card for contactless payment.
Therefore, I decided to rank Singtel Dash PET as the second best savings product to consider as an alternative to bank savings accounts, on the fact that it has guaranteed rate of return for the year.
How do I stash my cash?
Singlife continues to be undefeated in terms of liquidity even with the introduction of Syfe Cash+. I will move some money to GIGANTIQ (the amount that I will not touch) and keep some in Singlife.
Even though Standard Chartered’s Jumpstart has cut its interest rate for the second time, I am still keeping some money in the account as this is where I keep my capital for investments. This is because I still require the liquidity of what a bank can offer which other alternative products (even for Singlife) cannot replicate yet. If all my capital for investment has been fully deployed, then I will consider GIGANTIQ or Singtel’s Dash PET.
I will prioritise cash management solutions last as the time taken to receive the payout is longer than the ones offered by insurance savings plans. If you were to let me choose between Cash Management Solutions, I will definitely put some money in Syfe Cash+. The money you should put in cash management solutions should not be used for everyday’s life as its purpose is not to replace your ordinary bank account. Therefore, I recommend putting money you are not going to use for the short term in it and that you will not need to use it urgently when needed (in view of the time taken to receive the payout).
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