Fixed deposits offered by banks provide guaranteed returns, which would appeal to investors seeking to avoid market volatility. However, this guarantee comes with a lack of liquidity; funds must remain in the deposit for a set period to earn the advertised return. Early withdrawal may result in penalties.
Banks can offer a board rate of between 0.10% to 3.20% p.a. for a lock-in period of 12 months. While banks may sometimes offer higher promotional interest rates, they usually come with conditions such as a minimum or maximum deposit amount, or a fixed duration. You may also need to apply for the fixed deposits promotions directly with a bank.
In Singapore, two robo advisors, Syfe and Stashaway, currently offer a platform that allows investors to gain access to fixed deposits.
Read Also: Beginners’ Guide To Fixed Deposits In Singapore
How Do Robo Advisor Fixed Deposits Work
Robo advisor fixed deposits users first create a StashAway SimpleTM Guaranteed portfolio or a Syfe Cash+ Guaranteed portfolio and transfers funds into it. Then, the user selects the duration and chooses when to lock the funds in. Once the funds have been locked-in, they will earn the guaranteed lock-in rates. Do note that during this period, funds cannot be transferred in or out.
Users can create multiple portfolios, selecting different durations for each so that they mature at different times. For example, the user can create 4 portfolios, allocating funds equally, and have them expire at 3, 6, 9 and 12 months respectively, so that they can access ¼ of the total sum of money every quarter.
StashAway SimpleTM Guaranteed
Tenor
Guaranteed Rate per annum
1 month
3.6%
3 months
3.8%
6 months
3.6%
12 months
3.3%
Source: StashAway
StashAway states that it takes a small spread, which means the difference between the yield from the bank and the guaranteed rate delivered to the user. Essentially, the fee is already accounted for in the guaranteed rate.
Here is the estimated timeline for how quickly a user can fund their StashAway SimpleTM Guaranteed portfolio. Do note that funds that are not locked-in will not earn returns.
Source: StashAway
Syfe Cash+ Guaranteed
Tenor
Guaranteed Rate per annum
3 months
3.8%
6 months
3.6%
12 months
3.5%
Source: Syfe
When you create a Syfe Cash+ Guaranteed portfolio and adds funds into it, the portfolio will be automatically locked and queued for investment. Funds received before 11am on a business day will be invested later that day, otherwise it will be invested the next business day.
Upon maturity, funds will stay in the portfolio until it is reinvested, reallocated, or withdrawn.
When locked-in, the interest in the Syfe Cash+ Guaranteed portfolio is accrued daily; however it is not compounded, and will only be made available for withdrawal after maturity. Nevertheless, Syfe states that the accrued interest that appears in the account serves as an indicator.
Read Also: Banks Are Offering Higher Interest Rates For CPFOA Fixed Deposits, But What’s The Catch?
Differences Compared To Bank Fixed Deposits
The first difference is that no minimum or maximum sum is required to access high interest rates. Users also have the added benefit of choosing different lock-in durations for their funds.
The second difference is that a robo advisor fixed deposits user can create multiple portfolios that mature at different times. While some banks may allow multiple fixed deposits, bank fixed deposit users may find themselves no longer having sufficient funds to meet the minimum sum criterion for each fixed deposit account.
The third difference is that fixed deposits offered by banks allow the funds to be withdrawn with penalties, whereas StashAway and Syfe do not. However, this can be mitigated by users creating portfolios that take turns to mature, to ensure that a portion of funds will become available to them on a periodic basis.
The last difference is that StashAway and Syfe are insured as individual account holders up to $75,000 by SDIC, whereas fixed deposit holders with banks are individually insured up to the same amount.
DollarsAndSense Exclusive
For DollarsAndSense readers, enjoy the following perks when you sign up for a StashAway or Syfe account below!
StashAway – Sign up with this link and receive a 50% discount on fees for the first S$70,000 invested for 6 months!
Syfe – Sign up with this link and earn up to $155 when you sign up and fund your account!
Read Also: Investing In Fixed Deposits: Pros And Cons Of Using Cash, CPF, And SRS Funds To Invest
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