Where I Get Returns For My Idle Cash (April 2023)

As interest rates continue to peak and remain stagnant at current levels, idle cash is making really good money these days for doing absolutely nothing.

The best thing is that there is something for everyone regardless of the amount to be invested or risk appetite.

Here is a short blog post from me dissecting where my idle cash is allocated right now.

Below is a few simple tables illustrating the various options available. I have excluded traditional bank accounts to avoid circus hoop-jumping.

Digital Banks

Singapore Government Securities

Insurance Savings Plan

Fixed Deposits (Robo Advisor)

Cash Fund (Robo Advisor & Online Brokerage)

Bond Fund (Robo Advisor)

Very Low Risk

Sorted according to my perceived risk level, the safest tier is Very Low which includes

• Digital banks
• Singapore Saving Bonds
• Insurance savings plans
• Fixed Deposits

These options are practically risk-free to me with differing liquidity.

Withdrawals for GXS (max. $5,000) and Singlife are immediate which is where I’ve parked my highest priority tier 1 emergency funds.

I don’t have access to MariBank yet, but it’ll possibly replace Singlife once it opens up more slots for sign-ups.

I had used Singtel Dash PET previously but swapped out my funds due to its uncompetitive yield.

Singapore Savings Bonds is great but liquidity is somewhat limited, redemption will only be processed at the end of the month so this is where my tier 2 emergency funds are allocated.

Low Risk (Cash Funds)

When I’m deciding on the cash management option to allocate to, the usual considerations are

• Financial goals
• Time horizon
• Risk appetite
• Investment amount

For emergency funds, my top consideration is capital preservation.

Cash reserve should be risk-free and readily accessible during times of emergency.

Some robo-advisors name portfolios as cash management portfolios even when the underlying funds contain bond funds.

Let’s refresh our memories back to 2021 when events such as the Huarong Finance and Evergrande contagions shook cash management solutions.

Not quite the chart anyone enjoys seeing, right?

This is why Fullerton SGD Cash Fund with investments mainly in Singapore dollar fixed deposits and short-term Singapore Government Treasury Bills is my top-pick.

The fund manager (Fullerton, owned by Temasek and Income Insurance) essentially rolls over monies received from matured FDs and reinvests them in the latest FD contracts to keep up with the most competitive yield available in the current rising interest rate environment.

Unsurprisingly, all 3 online brokerages (Moomoo, Tiger and Webull) use Fullerton SGD Cash Fund as their underlying instrument for their cash management product.

At $2.3 billion fund size, it can easily absorb their demand.

I have always been skeptical of online brokerages and I’m not a big fan of their mobile app user interface, but that’s really my personal preference. You’ll notice that I’ve hardly pushed any referral signups for these three even though their referral rewards are absolutely amazing.

Instead, I’m taking the route of investing in Fullerton SGD Cash Fund via our homegrown MoneyOwl instead. I enjoy supporting these SG-based underdogs – it reminds me of AutoWealth.

While it didn’t make sense to do this (invest into Fullerton SGD Cash Fund) when interest rates were low, WiseSaver is a great option now as interest rates have hovered around 3.5% to 4% for a long time.

Besides, there is only a fund level fee of 0.15% p.a. which is factored into the price of each unit, paid directly to Fullerton Fund Management with no other fees beyond this.

Some Risk (Bond Funds)

All three bigger robo advisors have their flagship cash management solutions which actually utilizes bond funds as their underlying instruments to generate yield, which might come as a surprise to investors who don’t dig deep into them.

• Endowus Cash Smart
• Syfe Cash+ Flexi
• Stashaway Simple

In doing so, we’re exposed to interest rate risk and credit default risk.

Interest rates go up, prices of bonds go down, and prices of funds get affected as a result.

If the borrower is unable to pay its obligations and defaults e.g. Evergrande, the price of funds gets affected as a result.

They are simply products which offer higher returns but they are exposed to more risk – just know what we’re getting into.

Which is why I’m not keen on them.

Yields are only a little higher than safer options available, and if I wanted better yield, I would have gone for other products.

More Risk

Not exactly related because not even included the table but just as relevant were passive income solutions that are marketed as great for retirees and VERY conservative with regular, stable monthly payouts endured quite the rollercoaster ride last year.

Historic losses, they call it – that happened to the safest of asset classes.

Interest rates appear to have peaked (also do check check out the CME FedWatch tool on what the market is thinking).

Many feel that further aggressive moves would cause more banks (Silicon Valley Bank, Signature Bank, First Republic Bank, Credit Suisse) to implode so the Fed is treading very carefully.

If you enjoy buying into assets when they look ugly/attractive, you might have looked at income funds or portfolios with interest.

I’m not saying don’t buy. I’m saying buy if you know what you’re doing.

The question is, did I invest any money? I do like to buy AFTER historic losses happen.

More More Risk

Crypto stablecoins.

4% to 10%.

But let’s not go there today.

We only talk about such things on Twitter and Discord now.

Ending Thoughts

There is no one-size-fits-all solution.

Different options have different risk levels with different liquidity for different needs.

When it comes to cash reserve, my top consideration is still capital preservation so my decision is that the majority of my funds would be allocated to very low and low-risk options.

We all have to do what’s right for ourselves.

Kevin

Kevin started Turtle Investor when his net worth languished at negative $25,755. His desire to turn things around led him to build passive income from investments and side hustles that pay for his daily expenses and vacations. You can learn more about Kevin here.