For a while, it was easy.
You didn’t need to think too hard—just park your cash in fixed deposits or T-bills and collect close to 4% risk-free.
But now?
Rates have dropped below 3%. And they’re likely heading lower as global central banks slowly cut interest rates to support weakening economies. The US Federal Reserve is expected to make three rate cuts this year.
The latest Singapore 6-month T-bill cut-off yield is just 2.73%, while most fixed deposit rates have also fallen below 3%.
If you want higher yields, you’ll have to look elsewhere.
And let’s be upfront—there’s no elegant solution without taking on more risk. But there are still good options to consider.
#1 Cash Management Accounts
One of the few places where you can still get above 3% from quasi-cash instruments is in cash management accounts.
With the rise of robo-advisors and digital banks, some platforms still offer >3% to attract new deposits. Here are some current offerings:
- Endowus 2.7% to 3.8%
- Stashaway 2.5% to 3.6%
- Maribank 3.26%
- Syfe 2.3% to 3.2%
- Chocolate Finance 3.3%
These are projected yields, not guaranteed. These accounts invest in money market funds, which in turn hold short-term bonds and T-bills. If interest rates fall, yields will too. That’s the reality.
Still, there’s nothing wrong with reaping the rewards while they last.
After the Chocolate Finance saga, some investors have become more cautious. The good news? As long as the platform is regulated in Singapore, your funds are held separately in a trustee account. Investors eventually got their money back—it just took time to liquidate the underlying money market funds.
Bottom line: cash management accounts are still considered low risk.
#2 US Treasuries
US Treasuries still offer over 4% annualized yield—better than most local options.
However, two key risks to note:
First, US Treasuries are denominated in USD, so there’s forex risk if your spending or wealth is primarily in SGD. If the USD weakens against the SGD—as it has by about 2% year-to-date—your returns will shrink when converted back to local currency. This currency loss can eat into your gains and potentially wipe out the yield advantage, making it a less worthwhile investment.
The second risk is reinvestment risk. US Treasuries typically mature in 6 to 12 months, and by the time they do, interest rates are likely to be lower. That means you may have to reinvest at yields below 4%—and still face forex risk. The buffer to absorb currency fluctuations could be even thinner than before. In essence, buying Treasuries now may just be kicking the can down the road—delaying the need to find better long-term solutions rather than addressing it today.
#3 Bond Funds
Previously I covered 4 bond funds paying monthly interests with yields above 5%. Reproducing the summary table below:
Sounds like a no-brainer, right?
Well, not quite.
Even high-quality, investment-grade bond funds carry interest rate risk—if rates fall, yields drop too. And don’t forget expense ratios, which can exceed 1%, eating into returns. Some funds may even return capital just to maintain payout levels.
Still, if rates fall, bond prices can rise, giving capital gains on top of income. That depends on duration—longer-duration bonds benefit more if long-term rates drop alongside short-term ones.
But if inflation proves stubborn or stagflation sets in? Rate cuts might stall, and bond performance may turn out flat.
That said, bond funds remain a solid, moderate-risk option in a diversified portfolio.
#4 REITs and Dividend Stocks
Now we move beyond bonds and into the world of stocks.
From a financial risk standpoint, stocks are generally considered riskier than bonds for two key reasons. First, stocks tend to be more volatile, with larger price swings. Second, in the event of a liquidation, bondholders rank higher than shareholders in claiming a company’s assets.
That said, not all stocks are created equal. Some are relatively “safer,” with more stable earnings and consistent dividend payouts. Finding stocks with yields above 5% isn’t difficult—but identifying those with high quality and sustainable dividends is where the real challenge lies.
REITs remain a popular yield play, as they’re required to distribute most of their earnings as dividends. This typically results in higher yields. However, they’re not without risk. The impact of rising interest rates hit REITs hard—many are still recovering from the rate hikes, with lackluster stock prices and reduced distributions due to higher borrowing costs. That said, there are more resilient REITs to consider.
When it comes to dividend stocks, banks have been investor favourites, and for good reason. While REITs suffered from higher interest rates, banks benefited. The three Singapore banks have reported record profits and even declared special dividends. And it’s not just a local story—bank stocks across the region have done well. Case in point: the Lion-OCBC Securities APAC Financials Dividend Plus ETF (YYY), which holds leading banks across Asia and Oceania, has gained 13% in under a year since its launch.
So… What’s the Best Option?
There’s no silver bullet. No single product will tick all boxes.
Instead, think in terms of building a robust, diversified portfolio—a mix of cash management accounts, short-term bonds, dividend stocks, and select growth opportunities to navigate different market cycles.
We’ve had a good run with 3–4% yields on safe instruments. But that chapter is closing.
Now’s the time to think ahead and structure your investments wisely—before rates fall further and options dry up.
If you’re feeling unsure about how to invest now that rates are falling, you’re not alone—and I’d be happy to help you figure out what makes sense for your situation: get in touch here.