Recently, cash management accounts have become increasingly popular and more widely available with numerous platforms starting to offer and market them.
For many, we likely understand the importance of investing. However, the funds we invest are usually earmarked for long-term expenses, such as our retirement or children’s education, primarily because we can ride out short-term price swings affecting the value of our portfolio.
However, many of us also have another bucket of funds meant for shorter-term savings and liquidity requirements. This could be for our i) emergency funds, ii) money aside to spend on an upcoming big-ticket expense such as a wedding, home renovation, or to purchase a car, and iii) money that we intend to invest periodically due to the volatile markets.
Ideally, we want to continue earning a relatively decent interest return on this fund even though we cannot invest it in stocks. At the same time, we cannot afford to see the value of this fund dive 30%, as in the case of the stock markets in the first quarter of 2020.
Contents
What About Fixed Deposits, High-Interest Savings Accounts Or Singapore Savings Bonds?
What Is A Cash Management Account?
Which Of Our Funds Should We Park In A Cash Management Account?
Cash Management Accounts In Singapore:
What About Fixed Deposits, High-Interest Savings Accounts Or Singapore Savings Bonds?
Usually, we solve this problem by parking our funds into very safe investments such as fixed deposits, high-interest savings accounts, and the Singapore Savings Bonds (SSB) may offer us a viable solution. However, the close-to-zero interest rate environment we live in today has affected the amount of interest that we can earn on these investments.
Read Also: 6 Investments In Singapore That Provide Guaranteed Principal And Returns
A quick check online finds that many fixed deposits currently offer an interest rate that is close to 1.0% per annum (p.a.).
While certain high-interest savings accounts may offer an interest rate of over 3.0% or close to 4.0% as well, often we will be hard pressed to fulfill all the conditions. These typically enable us to earn incremental interest return upon fulfilling conditions that include crediting our salary, spending on our credit card, purchasing investment products and more. There are also caps on the amount of funds that can earn the higher interest rate.
When the Singapore Savings Bonds, or SSB, first came out at the end of 2015, it offered an interest return of over 2.5% p.a. if we held it to its full 10-year maturity. In the latest SSB on offer for August 2020, it is paying a first-year interest of 0.27%. If we hold it for five years, we would earn 0.51% p.a., and if we held it to the full maturity, we would earn a maximum of 0.93% p.a.
Source: Monetary Authority of Singapore (MAS)
This is where, by taking on some risk, a cash management account can come in handy to grow our funds.
What Is A Cash Management Account?
In Singapore, a cash management account is typically offered by financial institutions that are not a bank, such as brokerages and investment platforms. It enables us to earn a higher interest rate either by taking on slightly higher investment risk or by utilising the account for transactions such as investing in the financial markets.
Cash management accounts offer us a similar level of liquidity, allowing us to withdraw our funds on demand. However, it isn’t the same as putting our funds in a bank account as we cannot leverage on the extensively network of banks to withdraw our funds from ATMs or branches, or tap on iBanking or online payment services.
Which Of Our Funds Should We Park In A Cash Management Account?
As mentioned, we should not use put cash meant for our daily expenses into our cash management accounts as we cannot leverage on banking services, such as ATMs, payment facilities on iBanking or debit card.
While we can invest all our funds, it makes most sense to invest only funds that we do not want to put into the financial markets to earn a higher return over the long term. This includes:
#i Emergency funds, that should amount to 6 to 12 months of our daily expenses
#ii Money earmarked for an upcoming big-ticket expense, such as wedding, home renovation, or to purchase a car
#iii Funds that we do not want to invest into the markets right away, but will pour into the markets when we spot opportunities or by dollar-cost averaging
#iv funds set aside to buy a property, especially after selling off investments or another property
Cash Management Accounts In Singapore
There are currently at least five platforms offering cash management accounts in Singapore.
The first thing to note is that a cash management account that delivers a lower projected return may not be inferior. We need to look into the underlying investments to note if we are taking on lower risks, which would explain that.
Also, projected returns are exactly what it is – projected. This means actual returns may deviate. Although, the underlying funds that the cash management accounts are invested into typically invests in short-term and safe debt securities.
Besides cash, majority of the cash management accounts also allow us to invest our Supplementary Retirement Scheme (SRS) account funds. This enables us to receive tax relief while also earning a decent interest return on our funds.
Another thing to note is that unlike fixed deposits and bank deposits, our investments in cash management accounts are not protected by the Singapore Deposit Insurance Scheme (SDIC).
Here are more details on each cash management account.
Endowus Cash Smart Core
We can invest both our cash and SRS funds into this cash management account.
Returns
The projected returns for individuals investing in Endowus Cash Smart Core is 1.1% to 1.3%. This is after taking into consideration that Endowus rebates trailer fees worth 0.18% to investors.
Minimum Initial Deposit
While there is not minimum initial deposit for Endowus Cash Smart Core, we need to invest $10,000 into the Endowus platform, which also consists its cash investment and CPF investment.
Underlying Funds
Endowus Cash Smart Core invests 50% of its funds in the Fullerton SGD Cash Fund and the other 50% in the LionGlobal SGD Enhanced Liquidity Fund.
As stated in its factsheet, the Fullerton SGD Cash Fund “intend to hold its assets primarily in Singapore Dollar deposits with eligible financial institutions with varying terms of maturity of not more than 366 calendar days.” It also states that up to 10% of its net asset value may be placed with eligible financial institutions exceeding 366 days but not more than 732 days.
LionGlobal SGD Enhanced Liquidity Fund invests “in a broadly diversified portfolio of high quality debt instruments.” It also states that it invests in debt instruments diversified across varying issuers and tenures while maintaining weighted average portfolio credit rating of A-.
Fees
Endowus Access Fee per year – 0.05%
Fund-Level Fees
The expense ratio is what we incur as a total.
Fullerton SGD Cash Fund:
- Management fee – 0.1%
- Expense ratio – 0.15%
LionGlobal SGD Enhanced Liquidity Fund
- Management fee – 0.25%
- Expense ratio – 0.85%
Endowus Cash Smart Enhanced
We can invest both our cash and SRS funds into this cash management account.
Returns
The projected returns for individuals investing in Endowus Cash Smart Core is 1.9% to 2.2%. This is after taking into consideration that Endowus rebates trailer fees worth 0.30% to investors.
Minimum Initial Deposit
While there is not minimum initial deposit for Endowus Cash Smart Core, we need to invest $10,000 into the Endowus platform, which also consists its cash investment and CPF investment.
Underlying Funds
The difference between Endowus Cash Smart Enahnced invests 50% of its funds in the UOB United SGD Fund and the other 50% in the LionGlobal SGD Enhanced Liquidity Fund. From this, we can understand that the UOB United SGD Fund is slightly more risky and hence provides a slightly projected higher return.
UOB United SGD Fund invests “in money market and short term interest bearing instruments and bank deposits with the objective of earning a yield enhancement over Singapore dollar deposits.”
LionGlobal SGD Enhanced Liquidity Fund invests “in a broadly diversified portfolio of high quality debt instruments.” It also states that it invests in debt instruments diversified across varying issuers and tenures while maintaining weighted average portfolio credit rating of A-.
Fees
Endowus Access Fee per year – 0.05%
Fund-Level Fees
The expense ratio is what we incur as a total.
UOB United SGD Fund:
LionGlobal SGD Enhanced Liquidity Fund
FSMOne Auto-Sweep Account
Unlike the majority of other cash management accounts, we cannot park our SRS funds with FSM Auto-Sweep Account. This could be because FSM Auto-Sweep account automatically “sweep” all our excess cash from sales proceeds, bond maturities, dividends and coupons towards earning better returns. This helps us eliminate any period of time when our funds are invested to earn better-than-bank interest rates.
Do note that non-SGD denominated cash as well as funds we deposit into our FSM account but do not give any instructions to “auto-sweep” into investments, will not be automatically invested.
When we invest through FSM, we don’t have to do anything for the money to be transferred from this account and into paying for our investments.
Returns
The projected returns on FSM Auto-Sweep Account is 0.9% p.a.
Minimum Initial Deposit
There is a minimum one-time deposit of $50, while the minimum recurring top-up is $100.
Underlying Funds
FMS Auto-Sweep Account invests 45% in the LionGlobal SGD Enhanced Liquidity Fund, 40% of its funds in the Fullerton SGD Cash Fund, and keeps the remaining 15% in cash. This is why it delivers a slightly lower return even though it is invested in the same underlying funds as the Endowus Cash Smart Core portfolio.
As stated in its factsheet, the Fullerton SGD Cash Fund “intend to hold its assets primarily in Singapore Dollar deposits with eligible financial institutions with varying terms of maturity of not more than 366 calendar days.” It also states that up to 10% of its net asset value may be placed with eligible financial institutions exceeding 366 days but not more than 732 days.
LionGlobal SGD Enhanced Liquidity Fund invests “in a broadly diversified portfolio of high quality debt instruments.” It also states that it invests in debt instruments diversified across varying issuers and tenures while maintaining weighted average portfolio credit rating of A-.
Fees
A management fee of 0.05% per quarter is charged.
Fund-Level Fees
The expense ratio is what we incur as a total.
Fullerton SGD Cash Fund:
LionGlobal SGD Enhanced Liquidity Fund
MoneyOwl WiseSaver
We can invest both our cash and SRS funds into this cash management account.
Returns
The projected returns when we invest in the MoneyOwl WiseSaver portfolio is 0.79% p.a.
Minimum Initial Deposit
There is a minimum one-time deposit of $100 to get started. We can invest as low as $50 a month if we choose to go on a regular savings plan.
Underlying Funds
The underlying fund is the Fullerton SGD Cash Fund.
Fees
There are no sales charge, advisory or platform fees charged by MoneyOwl. The only fees we incur is from the fund level.
Fund-Level Fees
Fullerton SGD Cash Fund:
Phillip Smart Park (SGD)
Similar to FSM Auto-Sweep Account, we cannot park our Supplementary Retirement Funds (SRS) into Phillip Smart Park.
Returns
Phillip Smart Park is projected to pay an interest return of 1.0225% p.a.
Minimum Initial Deposit
While there isn’t a minimum amount we need to have in our Phillip Smart Park account, we need to maintain $100 in order to enjoy the listed returns.
Underlying Funds
The underlying fund is the Phillip Money Market Fund.
Fees
There are no fees charged for maintaining this account.
Fund-Level Fees
Phillip Money Market Fund:
Read Also: Money Market Funds: What Are They And How Singapore Investors Can Use Them
Phillip Smart Park (USD)
Similar to FSM Auto-Sweep Account, we cannot park our Supplementary Retirement Funds (SRS) into Phillip Smart Park.
Returns
Phillip Smart Park is projected to pay an interest return of 1.3280% p.a.
Minimum Initial Deposit
While there isn’t a minimum amount we need to have in our Phillip Smart Park account, we need to maintain $100 in order to enjoy the listed returns.
Underlying Funds
The underlying fund is the Phillip US Dollar Money Market Fund.
Fees
There are no fees charged for maintaining this account.
Fund level Fees
Phillip Money Market Fund:
StashAway Simple
We can invest both our cash and SRS funds into this cash management account.
Returns
The projected returns for StashAway Simple is 1.9% p.a. As listed on its website, StashAway rebates 0.125% of its trailer fees back to investors to achieve a better return.
Minimum Initial Deposit
There is no minimum deposit or balance required.
Underlying Funds
StashAway Simple allocates 50% of our funds in the LionGlobal SGD Money Market Fund and the other 50% in the LionGlobal SGD Enhanced Liquidity Fund.
The LionGLobal SGD Money Market Fund aims to invest in high quality short-term money market instruments and debt securities to provide a return comparable to that of SGD short-term deposits.
LionGlobal SGD Enhanced Liquidity Fund invests “in a broadly diversified portfolio of high quality debt instruments.” It also states that it invests in debt instruments diversified across varying issuers and tenures while maintaining weighted average portfolio credit rating of A-.
Fees
StashAway does not charge any fees to investors.
Fund-Level Fees
LionGlobal SGD Money Market Fund:
LionGlobal SGD Enhanced Liquidity Fund
Read Also: StashAway Simple Cash Management Account Vs Regular Savings Accounts – What’s the Difference?
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