The premise of dividend portfolios is that they produce substantial income over time, and provide a “rebate” to the purchase price of the stock. Nonetheless, this works best in steady bull markets and less so for environments where stock prices are collapsing. Investors are constantly subjected to capital loss the longer they stay in the market, which could embody more risk than they prefer. Here are some alternatives that might help you sleep better at night.
#1: Corporate Bonds
Once only available to those with deep pockets, MAS has now allowed the issuance of corporate retail bonds, which provide investors with more competitive yields than fixed deposit accounts. Depending on risk appetite/credit ratings etc, yields can go up to above 5% for the higher-yielding issuers.
If your objective is to not worry about how prices move day-to-day and yet receive decent yields on your capital, corporate retail bonds might be your best bet (barring the risk of default by the issuer). However, these require more research and due to their clauses and pricing methodologies, are not as easy to grasp as stocks.
#2: Singapore Savings Bonds
Some investors prefer to earn a decent yield while not giving up on liquidity. Enter Singapore Savings Bonds (SSBs). These bonds, issued monthly, allow investors to earn approximately equivalent yield on SGS bond issues without having their money tied up long-term.
If your priority is liquidity and earning yields with little worries, SSBs may be the best way forward. Given the issuer is the Singapore government (world-renowned for fiscal prudence and AAA creditworthiness), issuer default risk tends to be slim, making SSBs a decent addition to your income portfolio.
#3: P2P Lending
Perhaps you prefer to live closer to the edge but still cannot stomach the volatility of the stock market. P2P lending might be for you. Touted as one of the new innovative sources of crowdfunding, P2P lending allows even those with shallow pockets to lend out their money at decent yields.
It is needless to say here that in the absence of a long-term industry track record for P2P lending, and with the issuers being those that for some reason are not tapping on conventional funding sources, issuer default risk tends to be much higher than average and requires a lot of pre-investment research and judgment on your part.
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