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Whether we profit through capital gains or dividend income, all of us know we need to invest to earn higher returns. If we leave our savings uninvested in a savings account, the meagre interest we earn (which can be as little as 0.05% p.a. for some savings accounts in Singapore) would definitely not be enough to keep pace with inflation, let alone grow our investment portfolio.
While we can all agree that it’s important to invest, the reality is that we may not stay invested with all of our money at all times.
Many investors, including myself, tend to keep some cash reserves so that we can choose to deploy our funds when good investment opportunities present themselves. Other times, we may receive proceeds from a divestment but not immediately look to reinvest them in the market.
However, the problem that we face with holding cash is that it gives us no returns. While we wait for our next investment opportunity, our undeployed investment monies are not being put to use, and we don’t earn anything from them. Thus, merely channelling funds from our savings account into an investment isn’t the best way to optimise our investment returns.
Another problem that we may face is that if we are investing in overseas companies, the purchase and sales of the stocks would likely be in a foreign currency such as the USD. Thus, if we were to pay for the purchase via our Singapore Dollar savings account, we will incur a foreign currency conversion fee. Likewise, if we sell our investment and the proceeds, which is in USD, are deposited in our Singapore Dollar savings account, we will also incur a foreign currency conversion fee.
To solve this problem, a conduit, such as the FSMOne Auto-Sweep Account can be a simple investment solution. Available in SGD and CNH, USD is the latest addition since the start of July 2023.
How The Auto-Sweep Account Works?
The Auto-Sweep Account is available for FSMOne investment account holders to opt into.
How it works is that it automatically transfers and sweeps all our excess cash, be it SGD, CNH or USD, such as sales proceeds, bond maturities, dividends, and coupons, into a cash management account that can give us a higher yield.
Managed by FSMOne, the Auto-Sweep Account (available in SGD, USD and CNH) will invest in various high-quality and conservative investment products, such as Money Market Funds and Short Duration Funds to achieve a higher return. A part of the fund’s holdings will also remain in cash.
As we can see from above, an investor who opts in for the FSMOne USD Auto-Sweep Account will earn an indicative yield of 4.50% p.a. (as of 20 July 2023) for the USD in his account. The investor can also earn a good return on his SGD and CHN monies as the Auto-Sweep Account, if opted in, will automatically sweep the excess currencies into the relevant accounts.
The investment objective of the FSMOne USD Auto-Sweep Account (and all other FSMOne Auto-Sweep accounts) is to earn a higher return on idle cash than what can be earned on the cash account.
It’s important to point out that the yield shown is only indicative based on the current holdings and market value of the fund. It’s neither a guaranteed rate nor an accurate indication of what future rates will be since that will depend on future market interest rates and market conditions.
Earn Higher Returns Without Compromising On Liquidity
While earning higher returns is good, the key advantage of the Auto-Sweep Account is not only being able to earn higher returns as compared to a savings account but also the liquidity that it provides.
Traditionally, higher returns may come with a liquidity trade-off. For example, if we put our money in a fixed deposit account, we will likely earn higher returns as compared to a savings account. However, the problem is that, from a liquidity standpoint, we can’t easily access those funds if we want to make any unplanned opportunistic trades. Thus, fixed deposits are unsuitable options to keep our unused investment monies.
This is where the Auto-Sweep Account has an advantage over fixed deposits. Not only are the returns higher but investors can also tap into the funds without any penalties to pay for their investments as and when needed.
For the FSMOne USD Auto-Sweep Account, you can use it instantly as a payment method for Stocks and ETFs, Unit Trusts, Bonds, and other investment products on FSMOne. In the event that you wish to withdraw the balances from the USD Auto-Sweep Account back to the FSMOne USD Cash Account or to your bank account, you can expect to receive it back as quickly as the same day, provided you submitted your withdrawal instructions before 10 am. Otherwise, you will receive the proceeds back the next working day. This short redemption cycle provides us huge flexibility when managing liquidity needs.
Invest & Trade In Different Currencies Without Needing A Foreign Currency Savings Account
For those who invest and trade in overseas markets where stocks are typically denominated in foreign currencies such as USD, the FSMOne USD Auto-Sweep Account can also be a very helpful account that we can use to hold all our USD.
Through the FSMOne USD Auto-Sweep Account, we can buy and sell stocks that are denominated in USD without needing a separate USD savings account. Furthermore, we can earn a good interest return from the FSMOne USD Auto-Sweep Account without incurring any unnecessary fees or foreign currency conversion fees.
Currently, FSMOne offers the Auto-Sweep account in three currencies: USD, SGD, and CHN. By opting in to the Auto-Sweep account, we no longer have to feel pressured to turnaround our investments quickly in order not to lose out on the opportunity cost of holding on to cash for an extended period of time. Instead, we can wait patiently for an opportune time to make our investments.