In our previous post, The Frugal Fox noted that Singtel Dash EasyEarn would be a good place to park your cash and get 1.8% p.a. on your first $20,000.
But what if you’re looking for a product that can offer high interest rates on all your deposits? Cash management products may be the answer. Whether you have $10,000 or $100,000, the advertised rate you see applies to every cent.
What are cash management products?
Cash management products started gaining traction in 2020 after interest rate cuts left investors seeking higher returns on their money, but with relatively low risk.
In a nutshell, cash management products are very low-risk investments that put your cash in cash funds, money market funds (MMF) or short-duration bond funds. Because these are investment products, a number of Singapore investment brokerages and robo-advisors started offering them last year.
Depending on the provider you choose, your return could range from 0.25% p.a. to as high as 1.75% p.a. with no lock-up periods and no account limits. This return applies to all your deposits – so if you park $40,000 with them, you’ll get to earn whatever advertised rate on every single cent!
One thing to be aware of is that cash management products are investment products and are thus not guaranteed by SDIC. If that’s a deal-breaker, you may consider insurance savings plans instead.
For The Frugal Fox, ease and flexibility of withdrawals as well as high interest rates are our top considerations. As such, we have narrowed down our consideration for cash management products as such:
- Syfe Cash+ (1.75% p.a.)
- Endowus Cash Smart (1.7% ~ 1.9% p.a.)
- Stashaway Simple (1.4% p.a.) Update: Stashaway will cut the projected rate 1.4% to 1.2% from March 1 on expectations of “ultra low” interest rates.
Syfe Cash+: What is it?
Syfe Cash+ is the new kid on the block. It was launched earlier this week and caught our eye with the projected return of 1.75% p.a.
The underlying funds are all from Lion Global Investors, a member of the Oversea-Chinese Banking Corporation Limited (OCBC) Group.
- LionGlobal SGD Money Market Fund (30% allocation)
- LionGlobal SGD Enhanced Liquidity Fund (35% allocation)
- LionGlobal Short Duration Bond Fund (35% allocation)
The funds’ underlying assets are short-term and low-risk financial assets ranging from government and corporate bonds to high quality interest rate securities. Don’t be alarmed by the average credit rating of ‘BBB’ for the LionGlobal Short Duration Bond Fund. BBB is considered investment grade and represents a relatively low-risk bond or investment.
Another important takeaway from the table above is the overall weighted duration of 1.12 years for Syfe Cash+.
Funds with shorter weighted duration (i.e. their underlying assets have shorter maturities) generally tend to be less risky because the fund will get its principal back much quicker. Put simply, there is less time for things to go catastrophically wrong.
Endowus Cash Smart: What is it?
The cool thing about Endowus is that there are three different cash management portfolios you can pick based on your risk appetite and how soon you need to access your funds.
Looking at the underlying funds, Endowus Cash Smart CORE is the least risky and also the one with the lowest return p.a. (0.8% to 1%).
- Fullerton SGD Cash Fund – Class A (50% allocation)
- Lion Global SGD Enhanced Liquidity Fund (50% allocation)
Endowus Cash Smart Enhanced has slightly higher risk and in turn, you’re compensated with a slightly higher return of 1.4% to 1.6%.
- Lion Global SGD Enhanced Liquidity Fund (50% allocation)
- UOBAM United SGD Fund (50% allocation)
The newest addition is Endowus Cash Management Ultra. It carries higher risk than the other two funds but offers higher returns of 1.7% to 1.9%.
- Fullerton Short Term Interest Rate Fund (70%)
- Lion Global SGD Enhanced Liquidity Fund (30%)
The difference in risk levels and returns is due to the bond maturity which you can see in the table below. Cash funds typically have the shortest maturity followed by money market funds which tend to have maturities of around 12 months or less. Short-term duration bond funds generally have maturities of around 24 months.
Higher duration risk for higher returns
In this low interest rate environment, you’ll have to take on higher duration risk to get higher returns. The Fullerton Short Term Interest Rate Fund has an average duration of 1.9 years and makes up 70% of Cash Management Ultra. For this reason, it is able to offer higher returns of 1.7% to 1.9%.
According to Endowus’ website, their Ultra portfolio has a total weighted duration of 1.61 years. This is slightly longer than the weighted duration of 1.12 years for Syfe Cash+, which may indicate that it’s relatively riskier.
Stashaway Simple: What is it?
Like Syfe Cash+ and Endowus Cash Smart, StashAway Simple is a non-guaranteed high-interest yielding cash management portfolio.
The forecasted 1.4% return is non-guaranteed and is simply a projected return. If your risk appetite is more conservative, you’ll be glad to know that StashAway Simple holds no short-term duration bonds.
Update: Stashaway will cut the projected rate 1.4% to 1.2% from March 1 on expectations of “ultra low” interest rates.
- LionGlobal SGD Money Market Fund (50% allocation)
- LionGlobal SGD Enhanced Liquidity Fund (50% allocation)
You’ll notice that their allocation is very similar to Syfe Cash+. The only difference is that Syfe Cash+ contains a short-duration bond fund. Yes, this does mean that Cash+ is slightly riskier compared to Stashaway Simple, but The Frugal Fox is of the view that the extra return is worth the risk.
One thing we do appreciate is that Stashaway is the only provider to benchmark their cash management product to a risk index. This makes it easy to compare Stashaway Simple with Stashaway’s low-risk investment portfolios.
According to Stashaway, the StashAway Risk Index for StashAway Simple is 1.7%. That means you have a 99% chance of not losing more than 1.7% of your funds.
Underlying allocations for Syfe, Endowus and Stashaway cash management accounts
Before we evaluate the ease of deposits and withdrawals with Syfe, Endowus and Stashaway, here’s a summary of their underlying fund allocations.
Deposits and withdrawals
All three providers – Syfe, Endowus, Stashaway – are similar in their deposit and withdrawal requirements.
- There is no limit on the sum that can earn the projected rate
- There is no withdrawal fee
- There is no lock-up period
Syfe Cash+ and Stashaway Simple have the added benefit of having no deposit requirements. You can put in any amount you prefer. For Endowus Cash Smart however, take note that the minimum starting deposit is $10,000.
In terms of fees charged, Syfe Cash+ and Stashaway Simple have no management fees but Endowus Cash Smart does charge a flat fee of 0.05%.
Lastly, The Frugal Fox likes that you can use your SRS funds to invest in Endowus Cash Smart and StashAway Simple!
Why we think Syfe Cash+ stands out
The main considerations for The Frugal Fox are fast and easy withdrawals (you never know when you may need the cash urgently) and high interest rates.
Syfe Cash+ checks these boxes. It’s withdrawal lead time of 2 – 4 business days is pretty fast compared to the other platforms. We also like the certainty of the 1.75% p.a. figure. With Endowus Cash Smart Ultra, the range of 1.7% to 1.9% is not definite enough. We also don’t see why we’ll have to pay a 0.05% fee when we can get a similar return with Syfe Cash+ for free.
That said, we’re pretty comfortable with risk and we do not foresee needing the money in the next 1 – 2 years. If we were to need the money in the next few months, we might go with Stashaway Simple for the lower risk instead.
Low interest rates are the new normal. Right now, The Frugal Fox gets barely 1% p.a. in interest even after salary credits and other category spends.
Getting a guaranteed 1.8% p.a. on our first $20,000 (for the first year at least) with Dash EasyEarn is our preferred choice.
But to hedge the uncertainty of what will happen in subsequent years, we’re also putting our savings in Syfe Cash+. We intend to put in ad-hoc amounts and transfer the cash to our Syfe REIT+ portfolio as a dollar-cost averaging strategy. Right now, it is possible to transfer cash between the Syfe Cash+ and Syfe investment portfolios. Their website says an automatic transfer feature is in the works too!
If you’re interested to sign up for Syfe Cash+, you can use the following referral codes.
Syfe: If you’re a new customer, create an account via app or web browser and use the referral code SRP732ACX.
For Syfe, you’ll receive $10 if you place a minimum of $1,000 into the Syfe investment portfolios. You can read the full T&Cs here.