Explore the Fundamentals of Investing in SGS Bonds

 Explore the Fundamentals of Investing in SGS Bonds

By smart investing, you can have a good run for your money and create wealth. It is essential for anyone to improve their financial stability through investing, which is possible only if you take control of your finances. “Wise spending is part of wise investing. And it’s never too late to start.”, as the famous quote by Rhonda Katz goes.

Wise investing requires a financial plan, knowing how comfortable you are at taking a risk, and starting with an appropriate investment. If you want to see good returns, have a smart investment plan. You can put your money in SGS bonds if you have just started investing and want to avoid any risk of not getting returns. With these securities, you can diversify your portfolio and earn a steady income in terms of interest.

Understanding SGS Bonds

SGS Bonds, also known as Singapore Government Securities bonds, are tradable debt securities backed by the Singapore government. Investing in these bonds will enable you to earn regular interest until the maturity of the bonds. You receive interest every six months until maturity, which ranges from 2 years to 30 years. On maturity, you get your initial amount invested back. SGS Bonds are grouped under three categories:

  • SGS (Market Development): These bonds are governed by the Government Securities Act and are meant to help develop the domestic debt market.
  • SGS (Infrastructure): With these bonds, the government raises funds to finance long-term infrastructure in Singapore. They are regulated by the Significant Infrastructure Government Loan Act (SINGA).
  • Green SGS (Infrastructure): Most of the primary green infrastructure projects are financed through the issue of Green SGS (Infrastructure) Bonds, which come under the regulations of the Significant Infrastructure Government Loan Act (SINGA).

If you want to invest in SGS Bonds, you should be at least 18 years old. You can buy them at a uniform price auction issued every month by the Monetary Authority of Singapore (MAS), representing the government of Singapore. When compared to other bonds, SGS bonds are for the long term and they are a safe investment option.

Know how SGS Bonds work

SGS Bonds are generally bought for a period ranging from 2 to 30 years. They help you earn fixed interest, which is paid twice a year.

To give an example, if you buy SGS Bonds to the worth of 2000 SGD at an interest rate of 1 percent for 10 years, you will get 20 SGD as returns in 10 SGD coupons every 6 months until the maturity of the bond. Nevertheless, the interest you get varies based on the type of SGS Bonds you invest in and the maturity period.

Why should you invest in SGS Bonds?

Some of the reasons to consider for investing in SGS Bonds are:

  1. They are supported by the Singapore Government

When compared to the normal bonds issued by public companies, SGS Bonds are government-backed securities. They are low-risk and reliable to help you diversify your investment portfolio by having them. SGS Bonds help grows your investment capital and also get the principal amount back after maturity.

  1. They offer a fixed income

For those who have just begun investing, SGS Bonds give a good option by allowing them to have steady returns until the maturity period. The interest is paid half-yearly and it is due to you from the time you have bought the bonds, and until they reach maturity. The rate of interest will be higher for those SGS Bonds with a higher maturity period.

  1. You have a chance for capital gains

These bonds can be bought in the secondary market below the par value, for instance, at DBS branches. Other than the interest, you gain a profit on the investment upon maturity. SSGs are known for better stability than SSBs in the market. Therefore, investing in SSGs helps you earn more.

  1. You require low investment

Investing in SGS is possible with an investment as low as 1000 SGD. You cannot do so with other stocks. The interest earned on investments in SGS Bonds is higher than that earned on a savings account.

  1. Use cash, SRS, or CPFIS to apply

When it comes to applying for SGS Bonds, you can use your Central Provident Fund Investment Scheme (CPFIS), Supplementary Retirement Scheme (SRS), or cash, which will help you have a happy and peaceful retirement life.

  1. They help you get tax exemptions

Individuals are eligible for tax exemptions on interest earned and capital gains on SGS.

To conclude, SGS Bonds are one of the best options of investments for those who want to see some returns. However, you can seek the assistance of a financial advisor to decide on your investment portfolio.

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