Invest 101

Understanding SMART Park: How You Can Earn Higher Returns On Excess Funds While Waiting To Invest

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This article was written in collaboration with Phillip Securities. All views expressed in this article are the independent opinion of DollarsAndSense.sg based on our research. DollarsAndSense.sg is not liable for any financial losses that may arise from any transactions and readers are encouraged to do their own due diligence. You can view our full editorial policy here.

With many investment platforms now offering cash management accounts, investors are becoming increasingly familiar with their features and benefits. One such example is SMART Park by POEMS, which allows investors to “park” idle funds into either an SGD or USD money market fund.

The primary aim of a cash management account is to help investors earn a decent yield on their idle funds – a significant benefit as most investment platforms do not pay interest on cash holdings. This is particularly relevant in the current environment of high inflation and rising living costs.

An important function of cash management accounts is that investors do not get penalised for optimising their returns. You retain full flexibility to invest your money any time you wish.  SMART Park offers daily liquidity with attractive yields of 3.2605% (on SGD investments) and 4.8995 (on USD investments) – as at 18 June 2024.

Managing Idle Cash In Your Investment Accounts

Today, there is an increasing number of individuals who understand the importance of investing their hard-earned cash to grow their wealth over time. However, it’s important to note that each individual has different goals, and varying levels of financial literacy and expertise.

More experienced investors might prefer to actively trade the financial markets – cashing out their profits and entering when valuations are more favourable.

Meanwhile, less experienced investors may also complement a long-term portfolio with a satellite strategy, allocating a small portion to riskier bets and divesting during heightened volatility.

Avoid Mixing Your Investment Funds With Other Savings Goals

It’s common to allocate different savings accounts for various purposes. While it’s possible to withdraw idle cash from your investment accounts to put into high interest rate savings accounts for better yields, this can complicate the management of different accounts and savings goals. You may inadvertently spend some of your excess investment funds or subconsciously allocate them towards another savings goal.

Instead, maintaining separate accounts simplifies the process and ensures each goal is met without confusion.

Additionally, while fixed deposits or T-bills are secure, they might not offer the flexibility required to capitalise quickly when a sudden financial opportunity presents itself.

Investing In A Cash Management Account

There’s a good chance that your investment strategy might occasionally result in idle funds in investment accounts. This could happen after receiving a hefty dividend payout, selling an investment to realise profits, or regularly funding your investment account each month without having decided on your next investment move.

Instead of letting your investment funds sit idle or resort to constant transfers between various accounts just to earn a decent yield, you can simply use a cash management account like SMART Park.

SMART Park not only enables you to earn returns on idle cash in either Singapore Dollars or US Dollars, but it also reduces the hassles associated with currency conversion. This avoids the need to transfer funds into your savings accounts to earn a yield and negates potential losses from conversion spreads.

The primary objective of both the SGD and USD money market funds is to preserve capital, as well as to earn a comparable return to the Singapore-dollar savings deposits (for the SGD fund) and USD short-term deposits (for the USD fund), while managing risks more effectively than short-term duration bond funds.

This is reflected in the 7-day annualised returns provided on the POEMS website. Once you invest in either of these money market funds, you can easily track your returns through your POEMS account by checking the “Summary of Portfolio” section.

Phillip Securities: Rates are based on 7-days annualised return with net income and dividends reinvested and calculated on a single pricing basis (NAV/NAV prices). Returns shown are net of fund expenses.

 

By opting into SMART Park, your idle funds are automatically invested into a money market fund to optimise your returns. This could occur whenever you receive a dividend, deposit new funds meant for investments, or divest a position.

It’s important to note that while frequently entering and exiting the SMART Park investment incurs no sales fees or charges, the underlying funds do incur a management fee. This results in a total expense ratio of 0.49% for the SGD fund and 0.50% for the USD fund. Nevertheless, the returns we see depicted on its website is after deducting this underlying cost.

Apart from preserving your capital, you also enjoy returns that are comparable to those of savings deposits, investing in high-quality bonds maturing in the next 12 months.

When you gain exposure to either fund, you can also rest assured that it is highly diversified and enjoy a low default risk.

SMART Park Top 10 holdings

Left: Phillip Money Market Fund (A Class);

Right: Phillip US Dollar Money Market Fund (A Class)

 

Above (left), you can see the Singapore-dollar-denominated money market fund mainly holds MAS Bills and other high-quality bonds that will mature in the next 12 months.

Similarly, on the right, you can see the USD money market fund also holds high-quality bonds maturing in the next 12 months.

The majority of the issuers include government securities, commercial banks and high-quality companies. It’s also worth noting that the average credit rating of issuers in both funds is A, reflecting a high credit quality and low default risk.

As with any money market fund, they are not principal-guaranteed, but neither fund has experienced any default since inception. As you may also notice, unlike other platforms, the funds are managed by Phillip Capital Management, the asset management arm of the Group.

When you spot an opportunity to re-enter the financial markets, you can invest instantly – without needing to transfer funds from one account to another. Money invested in SMART Park is automatically used to pay for purchases on POEMS, with no additional instructions needed.

Make The Smart Decision To Start Earning Higher Returns Today

SMART Park maximises yield on your idle cash while gaining exposure to relatively safe investments in the form of money market funds.

In today’s dynamic financial landscape, SMART Park offers a hassle-free solution to manage your idle funds efficiently – without having to keep tabs on different pools of funds that may be dedicated towards other savings goals. By investing in secure money market funds, you ensure that your capital is not only safe but also working productively for you.

Embrace the convenience and security of SMART Park, and make the most of your financial resources with minimal effort.

Read Also: US Asian Hours: 6 Things Investors Need To Know About Buying US Stocks During Singapore Market Hours

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