Looking to grow your emergency cash funds, short-term savings or Supplementary Retirement Scheme (SRS) funds but prefer an alternative that has minimal risks and is highly accessible? Cash management accounts in Singapore may be the ideal solution for you since they are high in liquidity, low risk and do not impose lock-in periods.
If you are new to cash management accounts in Singapore, read on to find out how such trading accounts work and which are the best accounts that you should consider.
What Is A Cash Management Account?
Cash management accounts work like regular saving accounts from banks. You can deposit your funds and wait for them to earn money through low-risk investments in money market funds and/or short-term bonds.
Cash management accounts in Singapore are high in liquidity and without lock-in periods, however they can only be opened with financial institutions such as brokerages, investment platforms or robo-advisors instead of banking institutions. Cash management accounts offer higher returns than everyday savings accounts but because they are regarded as investment products, your capital is not guaranteed by Singapore Deposit Insurance Corporation (SDIC). This means, there is a chance that you will lose your deposits.
That said, cash management accounts’ risk exposure is still relatively low compared to other investment products. They are still viable options if you want to earn more than the base interest 0.05% that regular savings accounts are awarding you. Yes, it is true that some banks do offer higher interest rates but mostly you are required to jump over hoops to get the highest rates.
If you are a seasoned investor looking to do portfolio diversification, including cash management accounts may help to even out your investment risk exposure. The returns may be smaller than higher-risk investment products like equities and futures, but they present opportunities for steady growth over time.
How Are Cash Management Accounts Different From ETFS And Bonds ?
Image Source: Unsplash
Cash management accounts, exchange-traded funds (ETFs) and bonds are all low-risk investment products but they have different characteristics that may or may not appeal to investors.
For starters, buying ETFs is like buying a basket of underlying assets, whether that is stocks, commodities or currencies, your risks are spread across different assets hence lowering the risk.
Cash management accounts, on the other hand, invest mainly in short-term bonds or money market funds. Because money market funds are generally known to be safer than stocks, this also implies that cash management accounts may be a safer investment product than ETFs.
When it comes to bonds, there is usually a minimum investment sum, a maximum investment limit and a fixed lock-in period that are not imposed on both cash management accounts and ETFs.
Bonds in general are considered less risky than stocks since there is a contractual agreement from bond issuers to return the face value of the security to the investor at maturity; stocks do not have such promise from the issuers.
Here’s a quick comparison of the three investment products:
|
|---|
| |
Cash Management Accounts |
ETFs |
Bonds |
| Underlying Investment |
Short-term bonds, money market funds |
A basket of underlying stocks, commodities or currencies |
Debt instruments issued by a company or government body |
| Capital Guaranteed |
No |
No |
Yes (unless bond issuer defaults payment) |
| Fixed Return |
No |
No |
Yes |
| Fees Required |
Yes |
Yes |
Yes |
| Minimum Initial Deposit |
No |
No |
Yes |
| Lock-in Period |
No |
No |
Yes |
| Risk Level |
Low |
Low |
Low. Investor can refer to the bond ratings before investing |
Best Cash Management Accounts in Singapore
Image source: iStock
Ready to give cash management accounts in Singapore a try? Here are some of the best choices in the market.
Endowus Cash Smart
There are three cash management accounts under Endowus’ Cash Smart series that cater to different risk appetites and cash management needs.
|
|---|
| Cash Management Accounts |
Description |
| Endowus Cash Smart Secure |
- Underlying funds include 50% Fullerton SGD Cash Fund and 50% LionGlobal SGD Enhanced Liquidity
- Projected return is 3.7% to 4% per annum
- Suitable for immediate and near-term cash needs
- Fees include 0.15% fund-level fees and 0.05% Endowus Fee
|
| Endowus Cash Smart Enhanced |
- Underlying funds include 50% UOB United SGD Fund and 50% LionGlobal SGD Enhanced Liquidity
- Projected return is 4.5% to 4.8% per annum
- Suitable for both near-term and mid-term cash needs
- Fees include 0.27% fund-level fees and 0.05% Endowus Fee
|
| Endowus Cash Smart Ultra |
- Underlying funds include 27.5% LionGlobal SGD Enhanced Liquidity Fund, 25% Fullerton Short Term Interest Rate Fund, 25% LionGlobal Short Duration Fund, 12.5% Nikko Shenton Income Fund and 10% PIMCO Low Duration Income Fund
- Projected return is 4.9% to 5.3% per annum
- Suitable for mid-term cash needs
- Fees include 0.29% fund-level fees and 0.05% Endowus Fee
|
MoneyOwl WiseSaver
You can start investing with as little as S$10 with this Cash Management Account. It has a projected return of 4.04% per annum and does not charge any sales, advisory or platform fees. You only need to pay fund-level fees of 0.15%.
|
|---|
| |
|
| MoneyOwl WiseSaver |
- Underlying funds is Fullerton SGD Cash Fund
- Projected return is 4.04% per annum
- Suitable for those who prefer ultra-low-risk investment
- No charges except 0.15% fund-level fees
|
StashAway Simple and Simple Plus
StashAway has two cash management accounts — Simple and Simple Plus — offering different returns ranging from 3.3% to 5%. The Simple Plus offers higher return than Simple, but that also means differences in risk, underlying funds, fees and holding period.
|
|---|
| Cash Management Accounts |
Description |
| StashAway Simple |
- Underlying funds include 30% LionGlobal SGD Money Market Fund and 70% LionGlobal SGD Enhanced Liquidity Fund
- Projected return is 3.3% per annum
- Suitable for those who prefer ultra-low-risk investment
- No charges except 0.15% fund-level fees
|
| StashAway Simple Plus |
- Underlying funds include 20% LionGlobal SGD Enhanced Liquidity Fund, 35% Nikko AM Shenton Short Term Bond Fund and 45% LionGlobal Short Duration Bond Fund
- Projected return is 4.6% to 5% per annum
- Suitable for those who prefer low-risk investment
- No charges except 0.19% fund-level fees. A management fee of 0.05% per annum will be imposed from 30 June 2023
- At least 12 months holding period
|
Looking for the best cash management accounts in Singapore to suit your preferences but not sure how to go about it? The first step is to find the right robo-advisor that offers attractive perks that resonate with your needs.
ALSO READ:
The Most Popular Types of Investment in Singapore (And How to Get the Most Out of Them)
4 Common Misconceptions About Investment-Linked Insurance Policies
Ready to Have a Baby? Here’s the Cost of Having a Baby in Singapore
This article was first published on Value Champion and was republished on theAsianparent with permission.
