You will position common Singapore savings and investment options on the triangle and justify each placement.
A relationship manager, a colleague and a finance video on your phone will each, sooner or later, tell you about a place to put your money. Each will describe it in its best light. What helps you more than any single recommendation is a picture of where that option sits next to the others, so you can see what it gives and what it takes.
In this exercise you make that picture for eight options people in Singapore commonly hold. It takes about 25 minutes, plus reading time for the product pages. You need paper, or a blank slide or drawing app.
Draw a large triangle. Label the top corner return, the bottom left corner safety and the bottom right corner liquidity, as in lesson 5.1, Every place you put money trades risk, return and liquidity. Safety means low risk, so every corner is something you want more of.
Placing a dot inside a triangle by eye is hard, so score first. For each option give each corner a score of low, medium or high. Then put the dot closer to the corners scored high and away from the ones scored low. An option scored medium on all three goes in the middle. The scores are your judgement, and two careful people can place the same option a little differently. That is fine, as long as each of you can say why.
The eight options are a savings account, a fixed deposit, Singapore Savings Bonds, Treasury bills, an index ETF, a single stock, an endowment plan and private property.
For each one, answer three questions, using official sources: the issuer's or bank's product page, MAS, which runs the pages for Singapore Savings Bonds and Treasury bills, SGX for anything listed, and IRAS for property taxes.
How does it pay? Interest, a discount you get back at maturity, dividends, bonuses, rent, or a change in price. What can go wrong? A price fall, a failure of the issuer or institution, losing money by leaving early, or the return falling behind inflation. How do you get money out, and how fast? Same day, at the end of a term, by selling on an exchange, or by finding a buyer.
Leave today's rates off the triangle. They change every few weeks or months, while the way a product pays and locks up your money changes rarely, and that is what the placement is about.
Some placements will feel shaky. Put a question mark beside those dots and write the source you would check to settle it, for example the MAS page for Singapore Savings Bonds or the policy's product summary for an endowment plan. An honest question mark is more useful than a confident dot in the wrong place.
Here is how Jun Hao, from lesson 1.4, placed the eight. His reasoning is an example of the method, not a ranking of the products.
He put the savings account on the edge between safety and liquidity, with return scored low. Money comes out the same day, eligible deposits have SDIC cover up to the limit, and it pays the least of the eight.
The fixed deposit went close to the safety corner. It has the same insurance as a savings account and pays more for locking the money in, but breaking it early means reduced interest or none, so he scored liquidity low to medium.
Singapore Savings Bonds also went near safety, a little closer to liquidity than the fixed deposit. They are backed by the Singapore Government, and he can redeem in any month and get his money back with the interest earned so far. The cash is not paid out the same day, though, and he was not sure how long it takes, so he drew a question mark and wrote "check redemption timing on the MAS page".
Treasury bills sat beside the fixed deposit. The Singapore Government issues them at a discount and repays them in full at maturity. There is no early redemption. To get the cash before maturity he would have to sell through a bank in the secondary market, where the price may be lower and buyers can be few, so he treated the money as locked until the bill matures.
The index ETF landed between return and liquidity, short of both corners. He can sell it on SGX during trading hours and have the cash a few working days later. Its price moves with the market and can fall a long way, which is why safety scored only medium, but it holds many companies, so one failure does little damage.
The single stock went near the return corner and far from safety. A widely traded share is easy to sell, but everything rides on one business, and the return he scored high is a hope rather than a promise.
He put the endowment plan near safety and well away from liquidity. Part of its payout is guaranteed and part is not, and surrendering in the early years usually returns less than the premiums paid. He was unsure how it is protected if the insurer fails, so this one got a question mark and the note "check the benefit illustration, and whether SDIC's Policy Owners' Protection Scheme covers it".
Private property ended up low on the triangle, closer to safety than to liquidity, with return scored medium. It earns rent and may rise in price, but buying and selling cost a great deal and finding a buyer takes months. A loan makes both gains and losses larger. He wrote "check seller's stamp duty on IRAS" beside it, his third question mark.
Nothing landed on all three corners, which is what the triangle predicts. Each of these products is taught properly in the investing track, starting with the course Bonds, T-bills, SSBs and fixed deposits. This exercise only needs enough of each to place it.
A finished triangle has all eight options placed, a one-line reason beside each, and a question mark with a named source on every placement you could not settle. Jun Hao's ended with three question marks, which is about right for a first attempt. With the scale and the research questions in front of you, the drawing itself is the quick part.
Draw the triangle, place all eight options on it, and write one line of reasoning for each placement.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).