facebookI have 30k spare cash and would like to invest. What should I invest currently in in this High interest rate environment? - Seedly

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I have 30k spare cash and would like to invest. What should I invest currently in in this High interest rate environment?

I would like to invest in something long term. I am currently 30 years old.

AMA Christopher Tan

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Christopher Tan

23 Jan 2019

CEO at Providend Ltd

Hi Sean, thanks for your question! Although you have mentioned that you would like to invest long term, I still would like to be a bit more comprehensive and share my thoughts.

  1. If this is the only $30K you have in the bank account, you should set aside this amount as part of your emergency fund. As such, this sum of money should not be invested in anything risky and should be liquid. For this, you can consider first putting your money in higher interest rate bank accounts such as DBS Multiplier, UOB One or OCBC 360. The interest can be as high as say 3.5% p.a. But are usually capped at $50k - $60k.
  1. But if this $30K is in excess of your emergency fund, you can consider putting it in retail bonds if they are being issued. In a higher interest rate environment, bond yields tend to be higher. However, one thing to note is that if you need to sell of these bonds before maturity, if the interest rates are rising, you risk losing your capital.
  1. If you are investing long term into equities, you really should not need to worry about short term interest rate fluctuations. The main factor that drives long term stock prices is earnings. This is especially if you are invested into a portfolio of say indexed ETFs. Over the long term, it has been shown that based on total returns, the stock market always rise. Some ETFs you can consider would be:

a. SPDR S&P 500 ETF

b. SPDR Straits Times Index ETF

c. Db x-trackers MSCI Pacific Ex Japan UCITS ETF

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