During volatile market conditions like what we have experienced in 2020, it makes sense that some investors may prefer holding a large proportion of their investment portfolio in fixed income assets.
However, even if you want to invest in fixed income assets such as government and corporate bonds, it is important to hold a diversified portfolio. Investors can do so easily via fixed income ETFs
In this week’s edition of 4 Stocks This Week, we will highlight 4 fixed income ETFs that investors can invest in on the Singapore Exchange (SGX).
Phillip SGD Money Market ETF (SGX: MMS)
Listed earlier this month, the Phillip SGD Money Market ETF (SGX: MMS) is the first Singapore-domiciled money market ETF on SGX and the only money market ETF in South East Asia. The ETF aims to provide a similar return to the FTSE SGD 3-month SOR Index.
As a money market ETF, the Phillip SGD Money Market ETF invests only in short-duration debt instruments such as fixed deposits, government and corporate bonds and commercial bills with an average of 90 days to maturity. The annual yield is at about 0.52%
Nikko AM SGD Investment Grade Corporate Bond ETF (SGX: MBH)
For those who wish to invest in quality corporate bonds offered by quasi-sovereign entities in Singapore and high-quality companies, you can consider the Nikko AM SGD Investment Grade Corporate Bond ETF (SGX: MBH).
Denominated in Singapore Dollar, this ETF uses the iBoxx SGD Non-Sovereign Large Cap Investment Grade Index as its benchmark. Since the start of the year, the ETF has gone up by about 4.4% from 1.029 (2 Jan 2020) to 1.074 (16 Oct). Based on its current share price, the yield is at about 2.40%.
XTrackers Singapore Government Bond UCITS ETF (SGX: KV4)
If you only want to invest in the triple-A bonds issued by the Singapore government, the XTrackers Singapore Government Bond UCITS ETF (SGX: KV4) is the ETF that you are looking for. This ETF basically invests only in bonds issued by the Singapore government with an average duration at 7.60 years.
While the ETF’s current yield is low at 0.78% (since this is an exceptionally low-risk ETF), it’s worth noting that given the low-interest-rate environment and market volatility in 2020, the ETF has done well in 2020. Since the start of the year, its price has gone up from 149.23 to 159.88 (as of 16 Oct). The year-to-date return is currently at 7.41%. Not bad for what is supposed to be a low-risk, low-return ETF.
ABF Singapore Bond Index ETF (SGX: A35)
Another very low-risk fixed income ETF, the ABF Singapore Bond Index ETF (SGX: A35) invests in SGD-denominated bonds issued by the Singapore government and quasi-government entities.
With an average duration of 8.45 years, the ETF gives a yield of about 1.28% based on its current price. Similar to the XT SingGovBonds, yield-to-date return for the ABF Singapore Bond Index ETF in 2020 has been good at 7.94%.
It appears that given the low-interest-rate environment and market volatility that we have experienced in 2020, fixed income ETFs in Singapore that invests in high-quality bonds have performed well, and they remain a safe place for investors to park their money while continuing to earn decent interest.
Discover The World of ETFs at FSMOne.com's ETFestival 2021!
Miss travelling? Go around the world with ETFs at FSMOne.com's ETFestival 2021 on 15 May. Listen to industry experts share with you about ETF investing and take part in activities to win attractive prizes. Regardless of how well you know ETFs, you can be sure to take away valuable insights and take off with a better understanding of ETFs. Book your “flight” here!
4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.