Fixed deposits in Foreign currency (USD)

[abbby]

Has anyone saved your money in fixed deposit in US currency? Can share your experiences, pros and cons? I see their interest rate is good at about 3.7%...I think because it's on the higher risk of fluctuation of exchange rate?

[malcontent]

Do you have any upcoming expenses in USD? If your future expenses are all in SGD, it’s not worth the currency risk just to gain a few percentage points.

[abbby]

No expenses in USD...Think I'll pass then..Any thoughts on local banks unit trusts?

[Strong Eagle]

On a related note, I had an Ozzie friend in Singapore who financed a nice piece of property in Australia through a Singapore bank. He financed when the Oz dollar was flying high against the Singapore dollar, 80 percent loan.

But then the Oz dollar started falling against SGD and the Singapore bank started making top up calls because in SGD dollars, on paper anyway, the property no longer met the 80 percent threshold of 80 percent loan to value. He made at least two cash calls, and was trying to figure out what to do when a wildfire in Oz burned the whole place to the ground, a tragedy because it was a beautiful house but it sure did solve his problem, although I don't know if his insurance policy was denominated in Oz dollars or SGD.

[malcontent]

No expenses in USD...Think I'll pass then..Any thoughts on local banks unit trusts?

I have only one thought on local bank units trusts… expensive — not just the somewhat transparent management fees, but hidden fees too. Often you really have to dig into them to discover the truth.

Fees make a huge difference in the long-term (and if you are investing in equity unit trusts, it’s for the long-term). Just like compounding of gains does wonders, compounding of fees over time does just the opposite.

However, I am happy to say that the unit trust market in Singapore has seen some new entrants in recent years that are shaking things up. Amundi funds in particular stands out as leading the way on low cost unit trust offerings.

For someone in Singapore (non-US) that doesn’t want to bother with the hassle of buying globally competitive low-cost ETFs on the London exchange, I believe Amundi unit trusts are the first unit trusts to be offered in Singapore that appear reasonably low-cost. You still have to be careful about platform and other added fees depending on where you purchase them through.

This article does a reasonably good job of explaining all of this objectively:

https://dollarsandsense.sg/singapore-in ... aper-etfs/

[smoulder]

No expenses in USD...Think I'll pass then..Any thoughts on local banks unit trusts?

In the first place, is the money that you have on hand your short term cash (excluding immediate cash for every day expenses) or long term which won't be touched for more than 10 to 15 years (example retirement)? If its short term, fixed deposits or MMFs are likely more appropriate. Or unit trusts if they are investing in similar products making them less volatile vs unit trusts investing in equities which would be more suitable for long term investments.

[malcontent]

On a related note, I had an Ozzie friend in Singapore who financed a nice piece of property in Australia through a Singapore bank. He financed when the Oz dollar was flying high against the Singapore dollar, 80 percent loan.

But then the Oz dollar started falling against SGD and the Singapore bank started making top up calls because in SGD dollars, on paper anyway, the property no longer met the 80 percent threshold of 80 percent loan to value. He made at least two cash calls, and was trying to figure out what to do when a wildfire in Oz burned the whole place to the ground, a tragedy because it was a beautiful house but it sure did solve his problem, although I don't know if his insurance policy was denominated in Oz dollars or SGD.

That is a crazy story, but I can believe it. The bank should have insisted on local currency coverage.

The aussie dollar has weakened tremendously over the past 15 years. You probably remember when you could only get 75 or 80 cents for one sing, now it’s around A$1.12 for S$1. I feel sorry for anyone in Singapore who was lured by higher interest rates on A$ fixed deposits years ago. It’s a good lesson for anyone tempted by a foreign currency FD.

[malcontent]

No expenses in USD...Think I'll pass then..Any thoughts on local banks unit trusts?

In the first place, is the money that you have on hand your short term cash (excluding immediate cash for every day expenses) or long term which won't be touched for more than 10 to 15 years (example retirement)? If its short term, fixed deposits or MMFs are likely more appropriate. Or unit trusts if they are investing in similar products making them less volatile vs unit trusts investing in equities which would be more suitable for long term investments.

@smoulder you would make a good financial planner. You are absolutely right, investment horizon needs to be addressed before any meaningful discussion about what to invest in. That usually starts by understanding overall asset allocation.

@abbby do you have a specific goal for this investment or is it part of your overall retirement portfolio? Do you know how much equity exposure you currently have as a percent of your overall investable assets? This should be at least 50-75% depending how close you are to retirement. If you are sitting on a bunch of cash (which is all too common in Singapore) the sooner you can make a plan and start executing it, the better.