Jun 20, 2021

Cory Diary : Interest rates - Saver Alert

I remember many years ago, accidentally decided to put $10k into a fixed deposits for 5% annually. Think nothing much of it then. Financial Literacy is non-existence especially from a family of below average where investing in stock market is equate to Gambling. If we think 5% will happen again, is highly unlikely, and we will probably be in trouble if indeed it happens.

Interest rates on average has been coming down for the past 40 years. Savers are thoroughly burned. Long term wise, chances are interest rates won't be high even in between there maybe rate fluctuations that confuse investors for a tiny moment in time.

Therefore, any bet of interest rates impacting Reits long term or benefitting banks are likely hallucinations in the long run. Bottom line is how each of this businesses are run. So for opportunists, any news of rate hikes one could benefits from trading due to market sentiment driving respective business sector.

A simple arithmetic on Saving in Fixed Deposit vs Stock in reliable Reit. We don't even want to talk about growth stock.

From table above, a saver takes more than 8 years what a stock investor can do with just a single year to achieve. Yes the later has Risk but what doesn't in life ? The Risk in fixed deposit will be much higher due to inflation is definite. Saver anchoring to mental fixed number in bank account could be detrimental to their financial well being.

However, a saver who has no interests in Fundamental of Business could be a tall order able to choose the right Unit Trust or Stock Picking. Even Insurance Investment and Bank Products could be even worst for them as they have significant vested interests to profits from the sales. Many Bonds are mediocre and not easy to understand and assess by Savers with potential to even risk away their coffin money.

What else can a saver person do if they have no interest to pick up on stock investment ? Personally I feel that's left with CPF and Broad Market index such as STI and S&P500 with preference to the later due to Wider Market. I would probably fill all three if I am them. 

Just reminder this is Not replacement for insurance which I feel is critical. And all above is just my personal view and not advise as I am not qualified. But who else can they seek advise from that is whole heartedly helping them  ? Maybe we need a National Reach system.

So Please DYODD.



  1. Nothing new for Singaporean savers.

    What US and European savers are experiencing today, Singapore has been experiencing since 2002.

    More or less manageable for S'poreans in the last 18 years as inflation has been lower than the norm (except in 2008).

    The big difference now is whether there is going to be sustained high inflation for the next few years.

    For the next 6-9 months, higher inflation is almost guaranteed. But beyond Q2 2022 is still question mark.

    1. The Core Inflation in SG is well managed so far. However in my perspective, we like to do well and not barely survive. One of the indicator is Property Index. For past 18 years it has tripled. Imagine the gain that one who have benefited to their lifestyle. Yes, inflation could be higher near term but long term trend is unlikely to change unless something drastic happens.

  2. Base on URA property index, price doubled (100%) over the last 18 years. That's about 3.9% pa.

    And most of the gains (67%) occurred in about 5 years from Q2 2009 to Q4 2013, with all the central banks QE.

    Singapore is now a mature economy, hence property appreciation over the long term will follow roughly GDP growth.

    To get supranormal returns will need to buy when there are price dislocations i.e. after market crash or downturn. In other words, not at current time.

    More practical approach to growing wealth & beating inflation over many decades is still consistent investing into diversified global portfolio of stocks & index funds.

    1. Yes you are right for URA. I was looking at resale Property Price Index. https://www.srx.com.sg/price-index . In addition we need to consider rental income over 18 years too. SG is also considered mature economy during 1980s too.