An active investor, Mr Sam Phoen, 49, belongs to a small group of investors who have maxed out their individual entitlement for the Singapore Savings Bonds (SSB). The cap per SSB tranche is $50,000 for an individual and one can hold up to $100,000 of the bonds in total. Mr Phoen is an ex-banker and was a fund manager at Singapore sovereign wealth fund GIC.
Calling the SSB a "fantastic product", he parked $50,000 each in the first two tranches last year, which offered average interest rates of 2.63 per cent and 2.78 per cent. This translates to total investment and interest amounts of $63,455 (tranche 1) and $64,205 (tranche 2) at maturity. SSB investors receive interest every six months, and the principal plus last interest payment are payable at maturity.
Mr Phoen said: "I purchased the Savings Bonds for diversification purposes. I'm very keen to diversify my portfolio for the long term."
He manages his own portfolio of assets which includes equities, bonds, structured products, private equity and property. He explained that given the SSB's flexibility, he can easily redeem the bonds partially or fully if the need arises, without any penalty.
LOW MEI JUAN
Since the early redemption of SSB attracts zero penalty, Ms Low Mei Juan, 53, chose to place some of her emergency funds into the bonds.
Last September, Ms Low - who works in the finance sector - successfully applied for $30,000 worth of SSB in the inaugural issue.
She said: "SSB serves as part of my emergency fund. It is flexible, as I do not need to decide how long I intend to hold it and I can redeem it any time I need it without penalty. Capital is also guaranteed. The yield gets higher the longer I hold the SSB."
Ms Low made a redemption for the full amount in January to pay for some medical expenses. The principal plus pro-rated interest amounting to $30,096.79 was credited to her bank account on Feb 1.
After deducting the transaction costs of $4 for the application and redemption, the effective yield over four months worked out to be 0.96 per cent a year, higher than if she had left her funds in a savings account. "It was hassle-free to apply and to redeem. I plan to invest in SSB again soon," Ms Low said.