With falling interest rates, where should our cash be parked?

[TheAlphaLion]

SA, MA, and RA are all paying a minimum of 4.0%/year interest, more if bonus interest applies. The net effective minimum yield for RA is ~3.2%.

These rates/yields do not include possible tax reliefs, which provide additional benefit.

Why is net effective yield 3.2% when RA is supposed to be 4%/annum?

 

[BBCWatcher]

Park liao when interest rate rise cannot take out

Not necessarily -- it depends. For example, if you're celebrating your 54th birthday today, especially if you have a fair number of Ordinary Account dollars (plan to "shield" SA and fund your Retirement Account with OA and/or cash), then a Special Account top up is akin to a 4.0% one year fixed deposit, renewable at 4.0%. As another example, if you're topping up a 98 year old's Retirement Account who has nominated you as his/her CPF heir, then that elder is getting 4.0% interest (or something very close to it, or maybe more if bonus interest applies), and the residual is coming back to you "fairly soon." As yet another example, if you top up a MediSave Account in anticipation of upcoming predictable, MediSave eligible medical expenses, you earn 4.0% interest in the meantime.

I dont tink saving acct int will hit 4% in next 5 years.

Yes, you are comparatively very well compensated for the remaining withdrawal restrictions. If you want full liquidity, the price of full liquidity (the cost of cash dragging) is higher in today's interest rate environment.

 

[BBCWatcher]

Why is net effective yield 3.2% when RA is supposed to be 4%/annum?

The net effective minimum yield is approximately 3.2%. It's assuming that RA pays 4.0% interest, the RA top up feeds into CPF LIFE, that you try to maximize "yield certain" (not necessarily what you should do, but that's the assumption), and that you happen to die in the worst possible month from the point of view of net effective yield.

 

[chopra]

refund cpf oa housing if u still hv mortgage loan from bank

 

[furryballs]

refund cpf oa housing if u still hv mortgage loan from bank

But like that if better lobangs come yrs down the road, then cannot utilize the money

 

[koxinga]

I got 60k coming in from a FD that will mature on 1 Aug. Not keen to renew the FD due to low interest rates. I am planning to use part of the FD for my yearly SRS top up, then use the top up to buy CFA or G3B.
For the balance, I am thinking of using it to pay off some of my existing home loan with DBS.

 

[BBCWatcher]

For the balance, I am thinking of using it to pay off some of my existing home loan with DBS.

Why? For example (not necessarily the best example, but a valid example) you can still get 2.5% from Singlife on the first $10,000. That means you’re guaranteed to make money as long as that deal lasts while your 1.X% interest mortgage chugs along at standard pace. 2.5% definitely beats 1.X%. Even CPF OA is offering 2.5%. There’s also the fact mortgage payments count toward DBS Multiplier account interest, so if you’re nearer to having no mortgage payments you’re also nearer to possibly reducing interest earned on your savings. And you reduce liquidity, too. All not fabulous.

The second best idea you have is to accelerate repayment on a 1.X% mortgage? I suppose mortgage borrowers should thank you for doing your part to keep mortgage interest rates in Singapore ridiculously low, but you’re not required to do that.

 

[Squaredot]

Really abnormal ah..
Im also hoping 102.80 to happen quickly

just done @102.30

it's getting nearer to your price
never say never, anything is possible It's just crazy siah

 

[koxinga]

Why? For example (not necessarily the best example, but a valid example) you can still get 2.5% from Singlife on the first $10,000. That means you’re guaranteed to make money as long as that deal lasts while your 1.X% interest mortgage chugs along at standard pace. 2.5% definitely beats 1.X%. Even CPF OA is offering 2.5%. There’s also the fact mortgage payments count toward DBS Multiplier account interest, so if you’re nearer to having no mortgage payments you’re also nearer to possibly reducing interest earned on your savings. And you reduce liquidity, too. All not fabulous.

The second best idea you have is to accelerate repayment on a 1.X% mortgage? I suppose mortgage borrowers should thank you for doing your part to keep mortgage interest rates in Singapore ridiculously low, but you’re not required to do that.

Yeah. I was considering investing it versus the paying off the loan. I don't think I can do much CPF top up as there is an cap, which it will hit. For paying off mortgage loans, there is never a good time as it stuck in a fixed asset. But I guess if I have spare cash, I don't mind. As for investing , I can always leave it in the DBS multiplier.

 

[peppermint7]

just done @102.30

it's getting nearer to your price
never say never, anything is possible It's just crazy siah

Now I'm all alone on the boat

 

[yongsaver]

What if US suddenly decides to unpeg HK$? Its a ticking time bomb..

https://www.channelnewsasia.com/new...bill-preferential-treatment-china-us-12933260

start to squeeze liao.

 

[yongsaver]

Now I'm all alone on the boat

i dont think he sold already. in any case, u have a boatload of cash, so time can be spent counting la. wont be bored.

 

[chrisloh65]

Nothing will happen, not going to affect HK$ in anyway because the peg is decided by HK and not US.
Anyway, there is already intention to peg HK$ to RMB and unpeg from US$ anyway, and this US bullshxt will just accelerate their decision to take action.

What if US suddenly decides to unpeg HK$? Its a ticking time bomb..

 

[peppermint7]

https://www.channelnewsasia.com/new...bill-preferential-treatment-china-us-12933260

start to squeeze liao.

Are u not going to liquidate some of your HSBC bonds? Stay sideline n see..

 

[peppermint7]

i dont think he sold already. in any case, u have a boatload of cash, so time can be spent counting la. wont be bored.

He sent a frog hopping so happily. I thought he sold liao

 

[peppermint7]

Nothing will happen, not going to affect HK$ in anyway because the peg is decided by HK and not US.
Anyway, there is already intention to peg HK$ to RMB and unpeg from US$ anyway, and this US bullshxt will just accelerate their decision to take action.

If u watch what miles kwok predicted months ago

https://youtu.be/4cwXifDaCjE

It all becomes either too complicated or "crystal clear"

China indeed have the intention to let it be unpeg.

 

[yongsaver]

Are u not going to liquidate some of your HSBC bonds? Stay sideline n see..

today samma sold. this one is one of the laggards in my portfolio, the bonds is slow to recover after the March drop compared to other banks. too many issues liao. lucky din lose money; also never make much..even keel.

 

[peppermint7]

today samma sold. this one is one of the laggards in my portfolio, the bonds is slow to recover after the March drop compared to other banks. too many issues liao. lucky din lose money; also never make much..even keel.

Lol you still say i ownself scare ownself. No smoke without fire la. Better to be kiasee when come to $

 

[yongsaver]

Lol you still say i ownself scare ownself. No smoke without fire la. Better to be kiasee when come to $

yours is deposit. its different. u worry bank will fail, savings gone. me no such worry cos i dont see the bank failing. i sell becos i think the share & bond price will fall. i may still buy back if yield rise enough to compensate for the risk.

 

[Squaredot]

He sent a frog hopping so happily. I thought he sold liao

price too good to resist
sold some, keep some may sell more later