The core inflation rate in Singapore reached a a high of 4.4% in Juneaffecting the prices of everything from transportation to utilities and consumer goods and services. But what does this mean for your investment portfolio?
Inflation not only reduces your purchasing power, it can also eat away at your investment gains, necessitating a rebalancing of your portfolio to compensate for the effects. In a recent in-app survey conducted by moomoo SG, 66% of Singaporeans surveyed were concerned about the strength of the US dollar and high inflation.
To fight inflation, the US Federal Reserve (Fed) began its rate hike cycle this year, raising interest rates by a total of 2.25% or 225 basis points (bps) so far in 2022.
Observers expect the Fed to hike interest rates Additional 2% or 200 basis points in the remaining months of 2022 curb inflation and further stimulate the US dollar. According to trade data from moomoo, Singapore-based investors have increased their portfolio weighting in US dollar (USD)-denominated funds as a result, with Gen X men in particular allocating 52.3% of their portfolios to funds with assets in USD.
JOIN THE MONEY MARKET
Among investors between the ages of 22 and 45, fund investments were particularly popular. With inflation on the rise, money market funds are favored by many who are looking for short-term, lower-risk, lower-cost vehicles to park their money.
A money market fund is a mutual fund that invests only in cash and cash equivalents – such as certificates of deposit, repurchase agreements and US Treasury bills – which are known as money market instruments. Money market funds generally have higher credit quality and are considered an investment vehicle with higher liquidity.
Compared to demand deposits, the potential returns of money market funds can reach up to 200 times. Some 65% of investors on the moomoo platform indicated that they believe the SGD-settled currency might be safer for their portfolio.
Across the different age groups of Singaporean investors, trade data from moomoo indicated that money market funds are dominant and are the preferred investment to counter high inflation rates.
Among Gen X men, fund allocations were 86.2% to money market funds, 12.9% to stock funds, and 0.9% to bond funds. For women of the same generation, the distribution was 75.8%, 21.3% and 2.9% respectively.
Millennial women allocated 25.8% of their portfolio to stock markets, 73.1% to money market funds and 1.1% to bond funds. Their male counterparts had an allocation of 20.4% to equity funds, 77.9% to money market funds and 1.7% to bond funds.
Gen Z men put 29.8% of their portfolio in stock funds, 69.6% in money market funds and just 0.6% in bond funds. Gen Z women allocated 39.5% to stock funds, 57.3% to money market funds and 3.2% to bonds.
Despite the differences in allocation, one trend emerges: money market funds are the vehicle of choice for many investors who prefer a lower-risk investment, whether they are beginners or already have well-established portfolios.
Whatever portfolio allocation you favor, it is important to remember to diversify to guard against risk, and to establish a regular financial or investment plan.
MOOMOO CASH PLUS: A FLEXIBLE OPTION
With the moomoo online trading platformusers get hassle-free access to money market funds without having to deal with high fees.
Moomoo Cash Plus aims to preserve the value of the principal and maintain a higher degree of liquidity, while producing a return on investment. Users can choose between two money market funds, one denominated in SGD and the other in USD. Users can subscribe to moomoo Cash Plus and use the fund at any time. Funds can be withdrawn and deposited in a bank or redirected to new investments such as stocks or initial public offerings without margin interest. No transaction fees or interest will be charged.
To celebrate Singapore’s National Day, moomoo SG is offering users who subscribe S$100 to Cash Plus S$2 cash back every dayup to a total of S$60, for the month of August 2022.
Inflationary pressures may linger, but rebalancing your portfolio with the help of moomoo Cash Plus can help provide peace of mind – and keep you working towards your investment goals.
Learn more about Moomoo Cash Plus promotions.
Nothing herein should be considered an offer, solicitation or recommendation to buy or sell any securities, futures or other investment products. It does not take into account your investment objectives, financial situation or special needs. All information and data, if any, are provided for illustrative purposes only and past performance should not be taken as an indicator of future results. Investments in stocks, options, ETFs and other instruments are subject to risks, including possible loss of the amount invested. The value of investments may fluctuate and therefore clients may lose the value of their investment. Please consult your financial advisor as to the suitability of any investment.
This advertisement has not been reviewed by the Monetary Authority of Singapore.