Should You Keep Or Reinvest Your Reit Dividends
Now, have you ever wondered if you should reinvest these dividends or simply take them in cash?
The beauty of investing in Singapore REITs is these REITs offer you a dividend reinvestment plan .
When you enroll a DRIP, the cash dividends automatically be replaced by fractional REIT shares instead.
You dont have to pay transaction costs this way, but if you think about it, its basically reinvesting your cash dividends into new REIT shares.
If you ask me, my preference is to automatically reinvest dividends, especially if youre growing wealth for the long term.
And you want to reinvest dividends in the high quality Singapore REITs that have safe dividend payouts.
When not to reinvest dividends automatically?
Of course, DRIP may not be for everyone. For instance, you need those dividends to pay off immediate living expenses.
Also, many financial advisors suggest to hold enough cash for months as a safety net if something bad happens.
Then, you want to collect your dividends instead of reinvesting them to make sure you have enough cash reserves.
Whether youre retired or not, the power of DRIP can grow your wealth much faster over time.
In the chart below, the iEdge S-REIT Total Return Index have more than doubled its returns since Feb 2011, after reinvesting dividends from Singapore REITs.
Singapore REITs have also outperformed the Straits Times Index.
In fact, even during the REIT crash last year, performance has still been solid.
What Is A Stock Market Index
To understand an index fund, its important to know what an index is. A market index is normally a collection of stocks that are listed on a stock exchange. Singapores most well-known index is the Straits Times Index , a market capitalisation weighted index which tracks the performance of the top 30 companies listed on the Singapore Exchange. The Wall Street alternative is the S& P 500 index, which includes the top 500 listed companies in the US.
Youll notice these indices are frequently cited in the media because investors use them to track the overall performance of a market. They rise and fall depending on a range of economic indicators and company news. For example, when an economy is healthy, its stock market indices tend to rise because investors feel more confident buying stocks. If trade tensions increase between countries, stock market indices usually fall as investors become nervous.
In A Low Interest Rate Environment What Is The Risk For Buyers Of Bonds
If a bond is sold before its maturity, it will be sold at its market price, which may rise or fall depending on market conditions at the time, such as supply and demand, general market conditions and other factors.
Interest rates and bond prices generally move in opposite directions. When market interest rates rise, prices of fixed-rate bonds tend to fall. This does not mean interest rates of bonds will change.
Hence, if you are unable to hold your bond to maturity, you may suffer a partial loss of your principal amount if you have to sell your bond when prices are down.
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What Is An Ideal Rate Of Return
Singapores inflation rate is currently hovering around 3% to 4% each year. If your investments produce returns below that, you are still effectively losing money. Therefore, your annual rate of return should be 5% at least. In the long run, this helps you to hit crucial financial milestones and prepare for retirement.
You might be able to rely on savings alone to retire, but youd need a lot of money to be able to do that. You need to stash aside enough money that, even with inflation, things like rising medical costs and diminishing income can be overcome. Its not impossible if your income is S$15,000 a month or more but its hardly an easy or comfortable way to live.
Investments In Singapore That Provide Guaranteed Principal And Returns
If guaranteed principal and returns sound good, here are 6 types of investments that you should check out.
There arent many investments that guarantee your principal as well as returns in Singapore. Of those that do, you need to further weed out the potential scams i.e. investments that sound too good to be true are usually too good to be true. You can refer to the MAS Investor Alert List, providing a list of unregulated persons or companies as a first layer of check.
One other thing to understand is that when you get to enjoy such safety in your investments and visibility in your investment returns, you need to be prepared to accept a lower rate of return that is closer to the risk-free rate.
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Angel Investments In Singapore
There are a number of tax advantages for PRs or citizens to invest in a Singapores Pte. Ltd. company directly. There are also fewer restrictions on investors when compared to other parts of the world.
The government allows for start-up businesses to receive a tax holiday on the first 100,000 of income for the first 3 years, almost across the board. This is a de-facto tax holiday, and oftentimes the tax incentives can be even more robust.
Which Etf Should I Choose
There are so many different ETFs, so which one should you choose? Here are 3 things you may want to consider:
1. Expense Ratio
The expense ratio is the fee that you will need to pay the fund managers when you invest in the ETFs. Here are the expense ratios of the ETFs that Ive previously mentioned:
All of the expense ratios are below 0.1%, which is really low! The UCITS ETFs tend to have a higher expense ratio than the NYSE counterparts.
Even though the costs seem really low, the extra fees that you pay for UCITS ETFs may eventually add up!
2. Dividend Withholding Tax
The dividend withholding tax is something that you may want to consider as well. These S& P 500 ETFs will issue a dividend to you. Your dividends will be taxed before they are distributed to you.
Due to the different tax treaties, you will incur different taxes based on the funds domicile. Here are the dividend withholding taxes that you will incur:
If you invest in an Ireland-domiciled ETF, you will incur a lower dividend withholding tax!
S27 and the NYSE S& P 500 ETFs are domiciled in the USA. As such, you will incur the higher withholding tax . You will not be able to avoid this tax if you invest in the SGX-listed ETF.
It may be more cost efficient to invest in an Ireland-domiciled ETF as you will incur a lower tax.
With a poorer liquidity, it may be hard for you to buy or sell at your intended price.
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Start Your Investment Journey With Syfe
With the multitude of investment options out there including local stocks, ETFs, REITs and their global counterparts, its really hard to choose unless you are already an investment expert. To ease your financial stress, robo-advisors such as Syfe sift through the different stocks to give you a diversified investment portfolio that caters to your personal needs.
Investing with Syfe means that there is no minimum investment requirement something not all robo-advisors offer along with the freedom to move your assets between portfolios or withdraw your money to your bank account at any time. Additionally, there are no hidden fees and no withdrawal fees either.
If youre unsure about what to pick, Syfe also allows you to speak one-on-one with a wealth expert to get you sorted. Plus, their interface is user-friendly, so investment noobs can quickly get started.
Heres a brief rundown of their available products:
If youre interested to start investing with Syfe, you will also enjoy zero fees for six months on your first $30,000 investment with the promo code < THESMARTLOCAL> .
Whether youre a mid-career professional taking your first step into the world of investing or a fresh graduate looking to park your emergency funds in a cash management account, investing in Singapore can seem daunting. But once you get started with the help of multiple methods available, youll realise that it doesnt have to be complicated after all.
This post was brought to you by Syfe.
Ways You Can Invest In Silver In Singapore
In recently weeks, investing in silver has been gaining widespread attention mainly fuelled by the #ShortSqueeze by Redditors on the WallStreetBets subreddit or WSB. WSB itself has grown its subscriber base to more than 8 million members more than Singapores population!
On the back of Redditors entering silver investments, silver prices have surged to close to 8-year highs. Of course, those following the saga will also know that stocks such as GameStop, AMC Entertainments, Nokia and many more surged several hundred percent due to the influx of these investors.
As an investment, silver is a precious metal commonly used as a store of value . This makes it a good hedge against crisis and inflation, as it tends to retain its value better than a countrys currency or during a market crash. Silver is also used as jewellery and tableware, as well as for electronics, solar panel, medical equipment, and anti-bacterial purposes.
As silver is the latest target investment, we look at 5 ways investors in Singapore can gain exposure to silver. However, do note that any investment carries risk, and it is never advisable to invest based on speculation or because you heard a friend say so.
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Will The Application Of The Net Investment Returns Framework To Temaseks Expected Returns Result In Any Impact On Temasek
The NIR framework provides rules for determining how much the Government can spend on its Budget, based on the expected long term real rate of returns of the investment entities in the framework.
The inclusion of Temasekâs expected long term returns in the NIR framework does not affect, change or impact:
â Temasekâs dividend policy
â Temasekâs strategies and operations as a long term investor and
â Temasekâs special responsibility under the Singapore Constitution to protect Temasekâs past reserves.
The NIR framework does not determine the amount of dividends that Temasek distributes to our shareholder.
The Government has a variety of sources of liquidity and cash flows that enable the Government to manage its liquidity needs independent of the strategies of Temasek, MAS and GIC.
Temasek will continue to declare dividends annually based on the profit we earn, in accordance with our Board-approved dividend policy. The dividend policy balances the sustainable distribution of profits as dividends to our shareholder, with the retention of profits for re-investment and future returns. The policy also takes into account the constitutional requirement to independently protect Temasekâs past reserves.
For further information, please see the ‘Ask MOF’ section of the Singapore Ministry of Finance website: .
High Return Vs Capital Protection
Many Singaporeans inherently understand the idea of meaningful return. To some, a meaningful return is a double digit return on equity or interest/dividend. Or perhaps, there is no upper bound to how much return they desire. This means that the higher the return, the more meaningful it is. However, how about the possibility of loss? What if the investment does not work in your favor.
Hence, it is also important to look at capital protection. Just as we seek to achieve the highest possible return, we must also do so in safe strategic ways. Yet, there are many ways we can achieve this safety. Some may look for less risky assets, believing in only Investment Grade Credits and Government Bills. Others may believe in building that safety within their investment technique by having a margin of safety when deciding on an investment. With so many ways to increase the possibility of capital preservation, which way should you use and why?
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Question On Special Purpose Acquisition Companies
QUESTION: What is the panel’s take on portfolio companies potentially pursuing a SPAC merger for a listing, especially as these instruments are starting to lose lustre not only with investors, but also regulators in large markets like the US, where we have seen some of those potential SPAC deals be put on hold?
MUKUL CHAWLA: To your SPAC question, I think it’s a solution for some companies. We have some companies who are going to take advantage of it, others for whom itâs not the right solution. We don’t take a stand necessarily on the class itself, and there are interesting opportunities to invest in SPACs as well. We remain open to our companies exploring these SPACs as ways to tap into the public markets.
I want to just highlight, it’s been a very active year for a number of our companies accessing the public markets, and I think we have a slide on this that we can show. But it speaks to the fact that it’s been an attractive opportunity for a number of our companies as the trends that we leaned into have accelerated in many cases through the pandemic. That represented an interesting opportunity for these companies to strengthen their balance sheets as such. So SPACs or otherwise, we encourage our companies to look at all sources of capital, and it may be the right thing for some of our companies to do.
How To Invest In The S& p 500
This article contains affiliate links. You can read more about these links in my
Youve become tired of the poor returns that youve received from the Straits Times Index . Most of your friends have been telling you to invest in the S& P 500 which provides much better returns!
The S& P 500 is an index that tracks the performance of the largest 500 companies in the United States.
However, how do you go about buying the S& P 500 in Singapore? Heres a guide to get you started.
Disclaimer: This article is meant for information purposes only, and it is not intended to provide you with financial advice. You should always do your own research first, before making an investment decision
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Free Beginner Investment Courses
If the only thing you know about investing is the stonks meme, it might be time to start learning the basics after all, theres nothing better than seeing those numbers grow.
Investment courses can get extremely pricey, but there are plenty of free resources available online to help you get started. Whether youre new to investing or need a bit of a refresher, learning from experienced traders is always a good idea.
For more self-improvement classes, check out:
Singapore Government Treasury Bills
For us in Singapore, a good proxy for the risk-free rate can be the return that the government of Singapore, which is one of the few triple-A rated economies in the world today, pays on its 6-month or 1-year treasury bills, the shortest-term government securities available.
This is as close to the risk-free rate as you can get and the latest issuance of T-bills in September 2021 offered a median yield of 0.27% per annum, while the most recent 1-year T-bills issued in July 2021 offered a median yield of 0.28% per annum.
Treasury bills are typically useful for investors who are looking for very short-term investments of up to one year, without taking on any investment risk.
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Congrats You Own Your First Cryptocurrency
Now that you know how to buy cryptocurrency, you will need to know how to transfer it to your wallet or transfer it to an exchange for trading.
Looking for more Crypto Exchanges in Singapore to buy or sell cryptos?
Find out more about how to cash out your cryptos with the best rates in this article here!
Disclosure: This post contains referral and affiliate links to 3rd party products and services. If you go through them to make a purchase, we will earn a commission at no additional cost to you. The decision is yours, and whether or not you decide to buy something is completely up to you.
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What Are The Risks Of Index Funds
Of course, no investment is ever 100% safe and you should always seek professional advice before making any investment decision. Here are some of the risks that investors need to be aware of:
- You could lose your money. Like any investment, you take the bad with the good. When an index does well, your investment delivers profitable returns, but when an index drops, so does your investment.
- Its not a short-term plan. Passive funds perform best over many years. If you invest in an index fund but find you need the money six months later, theres a good chance youll have less than you started with.
- Not all assets are safe. Although many index funds track relatively safe major indices, technically any pool of assets can be bundled into a fund. Some index funds track volatile global markets, such as the oil sector, while others bundle in riskier investment assets. Always do your homework.
- Not all ETFs are index funds. ETFs come in all shapes and sizes and not all are passively managed. Some are highly complex and risky.
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Does An Individual Need To Pay Tax On The Interest Received On Temasek Bond
Interest derived by individuals tax resident in Singapore from Temasek Bond is exempt from tax, except where such income is derived through a partnership in Singapore or is derived from the carrying on of a trade, business or profession in Singapore.
As we cannot advise you regarding your personal tax matters, you should not rely on this response as being tax advice and should consult your own tax advisers as to the Singapore or other tax consequences of the acquisition, ownership, or disposition of Temasek Bond, in particular the effect of any foreign, state, or local tax laws to which you may be subject.