DOUBLE FIXED DEPOSIT RETURNS WITH PEACE OF MIND

The US Federal Reserve's decision to cut interest rates by a hefty 50 basis points on November 6, sent at least two signals to the market.

Firstly, it highlighted that the US economy is not in the best of shape even after eleven rate cuts last year. In fact, one wonders if one more rate cut will make a big difference when the underlying problems in the US economy may be more serious than it appears on the surface. There are structural issues in the US that needs to be addressed, such as overcapacity in key industries, resulting in businesses reining back on their spending. It will take time for these excesses to be weeded out and cutting rates may only remedy some problems.

The unexpectedly sharp rate cut by the Fed also highlights that rock bottom interest rates are likely to remain depressed for some time to come. Deflation is the new buzz word in economic circles and it is a problem that will not go away anytime soon.

This poses a dilemma for many investors who are holding dormant cash balances. Latest statistics from the Monetary Authority of Singapore shows that at the end of September, there was a sizeable $88 billion in fixed deposits lying idle in the local banking system and earnings low returns. For the risk averse investor, their idle bank balances can be put to harder work if they are carefully invested in selected low risk products that can offer much better returns than bank deposits.

We highlight two products that investors can consider:

Guaranteed Return Plan (More than $80 million has been sold so far!)

This is another 100% capital guaranteed* 8-year single premium plan from Overseas Assurance Corporation. This product has been a hot seller and there are only 50 plans left for purchase at finatiQ. It guarantees a net return of 3.4% p.a. over eight years, plus we'll give you a $50 shopping voucher for every $10,000 invested - which works out to an additional return of 0.5%. It can be purchased using cash, CPF or SRS.

Secure Cash Saver

This is a 100% capital guaranteed* 5-year single premium plan that offers 125% insurance cover and guarantees a yearly cash payout of 1.388% for the first four years. The plan can also offer an additional cash payout of up to 11.05%** at maturity. Collectively this translates to a projected annual return of up to 3.2% p.a., more than twice the current fixed deposit rates. Those who do not wish to withdraw the yearly cash payouts have the option to accumulate and reinvest them at 4% p.a.***.

*100% capital guarantee only if held to maturity

** Rates are dependent on investment amounts

*** Subject to revision