Both DBS and Stanchart will be cutting interest rates even further on your banking deposits from 2021.
From Jan 1 2021, interest rates on DBS Multiplier will fall by more than 50% across multiple categories, especially for eligible transactions in the middle of the range ($2000 to $15,000).
For most average Singaporeans, you are most likely going to earn less than 1% per year in interest when putting your money in your Multiplier account.
This is the third such change in less than a year, which comes alongside a pandemic that has not been fully contained globally.
Similarly, Stanchart’s popular Jumpstart account which initially promised 2% annual yields on deposits up to $20K, will see its rates cut to 0.4% per year from next year.
The above changes reflect a challenging global economic environment with the Federal Reserve keeping interest rates low in the US, amidst a soaring US stock market that has reached all-time highs and a bumper year for high-profile tech IPOs (e.g. Airbnb, Doordash).
As interest rates are expected to stay low for longer, perhaps until 2022, the US stock market might not look as overvalued as it seems. Overall market sentiment is not extremely euphoric, and there are still a lot of money sitting on the sides.
Further vaccine rollouts across the world might also support further gains in stock markets.
For those who are looking for a safe, but higher yielding strategy on cash, cash management products from Endowus and StashAway might be interesting to look at, as I have detailed in my analysis on my cash management strategy here.
Singlife still pays 2% per annum on the first $10K for their Singlife Account, although new sign ups have been temporarily suspended until 2021 as a result of their merger with Aviva. Etiqa’s GIGANTIQ also pays about 1.8% per year and both are insurance savings plans.
Overall, some people say cash is trash, and to a certain extent, I agree. Cash should be viewed as a liquidity strategy (i.e. for emergency or spending) and not as an investment strategy.
In the long-term, net of inflation, you are looking at a negative return on cash for perceived safety – which isn’t really safe at all.