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Looking To Overcome Inflation But Worried About Investing? Why Bond Products Could Be A Simple (Stop Gap) Solution In This Volatile Market

The United Fixed Maturity Bond Fund 1 is a 3-year fixed maturity bond fund and offers an indicative yield to maturity of up to 4.95% p.a.

This article was written in collaboration with Tiger Brokers (Singapore). All views expressed in this article are the independent opinion of based on our research. is not liable for any financial losses that may arise from any transactions and readers are encouraged to do their own due diligence. You can view our full editorial policy here.

Most of us living in Singapore have probably already felt the effects of inflation at this point. According to Singapore’s consumer price index (CPI) data from the Department of Statistics, overall inflation hit a 14-year high of 7.5% in September 2022. These affected major categories of goods and services that include 1) Electricity, LPG & Gas, 2) Food, 3) Services, 4) Private Transport, 5) Retail & Other Goods and 6) Accommodation.

What may be of greater concern is that inflation does not look like it is going away. If anything, inflation is still on the uptick. In the chart below (by MAS), we can see that the inflation rates (for both CPI-All Items Inflation and MAS Core Inflation) have climbed steeply in recent months.

Inflation in Singapore

Source: Monetary Authority of Singapore (MAS)

To combat this runaway inflation, central banks globally have been raising interest rates at an unprecedented pace since the start of the year. Taking reference from the U.S. Federal Reserve (Fed), a total of six rate hikes have been announced in 2022, adjusting the benchmark interest rates from 0% – 0.25% in March all the way to 3.75% – 4.00% by November 2022.

All this just means that we are still likely to experience heightened inflation in the foreseeable future.

We Need To Beat Inflation…But The Financial Markets Look Scary To Invest In

Many of us may have also come across well-intentioned advice to beat inflation by putting our money to work harder. What’s indisputable is that inflation eats away at our buying power by diminishing the value of our savings.

What is less straightforward is how we can go about beating inflation. Investing on our own, especially if we do not have the expertise or time to monitor our investments, can mean losing much more than the hefty bite inflation would have taken out of our savings.

A common method for less savvy investors is to look at a globally diversified portfolio, such as ETFs that track the S&P 500 Index or the MSCI All Country World Index (ACWI). For the uninitiated, the S&P 500 Index comprises the 500 biggest and most liquid companies in the U.S., while the MSCI ACWI, with nearly 3,000 constituents, is designed to represent the performance of large- and mid-cap stocks across 23 developed and 24 emerging markets.

In short, these investment products are designed to protect you from making poor individual investment decisions while also enabling you to earn a market return.

But investors are understandably jittery about putting their hard-earned savings in the markets right now, even in well-diversified investments, let alone riskier ones. Looking at the two examples we used above (the S&P 500 Index and the MSCI ACWI), we can see that prices have been extremely volatile in the past year, with a one-year return of -16% and -17%, respectively.

Investing in globally diversified ETFs

Screenshot taken from Tiger Brokers app

Moreover, a recession might be looming on the horizon. Many companies have already begun cost-cutting measures to protect their cash reserves amid a slowing economy.

Read Also: Why Jeraldine Phneah Believes That Every Millennial Needs To Care About Their Investment Journey

Why Investing In Bonds Can Be A Good Portfolio Diversifier

Just because the stock market has been extremely volatile due to persistent uncertainties over geopolitical tensions does not mean we should leave our money idle in a bank savings account. We can still earn passive income by investing in bonds as the stock market stabilises.

On top of enjoying a certain degree of shelter from the volatility of the stock market, we can also expect better returns if interest rates continue to rise.

However, bonds are not without risks. When we invest in a single bond, we are subjecting ourselves to unnecessary credit risk – the risk of the company’s failure to meet its obligations to pay us. Individual bonds are more likely to be affected by interest rate risk because of the inverse relationship between bond prices and interest rates.

An additional barrier for many retail bond investors could be the large investment required for individual corporate bonds (i.e. a minimum of S$250,000).

We can bypass these constraints by investing in a bond fund that provides diversified bond exposure. This helps to remove our worry over any individual bonds. Moreover, the minimum investment amount for such funds is typically lower than the minimum investment for single bonds.

Unlike investing in a single bond, there is usually no maturity date for bond funds. Whenever an individual bond within the bond fund matures, the proceeds would be reinvested into a new bond.

This act of reinvesting in new bonds may cause the prices of bond funds to appreciate and depreciate to reflect the changing interest rate environment. Some investors may not prefer this risk of unpredictability and may instead want more certainty over their investment returns.

The good news for these investors is that we can now enjoy the best of both worlds. Exclusively available on Tiger Brokers, the United Fixed Maturity Bond Fund 1 gives us exposure to a diversified bond fund, while offering a fixed maturity of 3 years.

Investing In United Fixed Maturity Bond Fund 1

As you may have guessed from its name, the United Fixed Maturity Bond Fund 1 is 1) managed by UOB Asset Management (UOBAM) and 2) offers investors a  fixed maturity bond fund product.

The United Fixed Maturity Bond Fund 1 has a 3-year lock-in period. This means you would only receive your capital and coupon payments as a lump sum upon maturity. The Fund also has a low minimum investment amount of S$1,000, making it suitable for all types of investors.

The unique feature of the United Fixed Maturity Bond Fund 1 is that it allows us to have more certainty on the returns over the investment period, but without the risk that is associated with single bonds.

We get to enjoy an indicative weighted average yield to maturity of up to 4.95% * on the United Fixed Maturity Bond Fund 1 by holding it for its entire 3-year duration. At the same time, investors looking for regular income also receive half-yearly dividend distributions worth up to 3.5%*.

What this means is that if we invest S$10,000 in the bond fund, we get S$175 every 6 months (or $350 a year) for the next three years. Once the United Fixed Maturity Bond Fund 1 matures at the end of three years, we should receive in total inclusive of dividends a higher amount than our investment (of up to S$11,485), which should translate into an overall return of up to 4.95%* per annum on the investment.

On top of the fact that the United Fixed Maturity Bond Fund 1 holds a diversified bond portfolio, it also only has exposure to investment-grade bonds. This makes the likelihood of these bonds defaulting low (historically, less than 1%**), which adds to the safer nature of this investment opportunity.

Tiger Brokers also will not be charging any management fees for the United Fixed Maturity Bond Fund 1, which puts more money into the hands of investors at the end of the day. While relevant fees and charges will still be forked out from the underlying sub-funds, the indicative returns mentioned above already take into account this cost.

Investors can subscribe for the United Fixed Maturity Bond Fund 1 between 14 and 28 November. To give investors even more returns, Tiger Brokers is offering a 15% cashback for 10 days when you invest in the bond fund. For example, if we invest S$10,000, we would stand to earn about S$40 – which will be deposited into our Tiger Brokers account 10 days after the inception of the United Fixed Maturity Bond Fund 1.***

Interested investors can subscribe using the Tiger Trade app. To find the United Fixed Maturity Bond Fund 1 on the Tiger Brokers app, you can:

  • Step 1: click on the “Quotes” tab on the bottom of the screen;
  • Step 2: click on the “Funds” tab at the top of the screen; and
  • Step 3: subscribe to the United Fixed Maturity Bond Fund 1

 How to invest in the United Fixed Maturity Bond Fund 1

This exclusive offer is available for a limited period of time (14 to 28 November 2022), so grab this opportunity while it lasts!

Read Also: Tiger Vault: 6 Things You Need To Know About This Latest Cash Management Account When Investing Through Tiger Brokers

* Based on 4.95% p.a. indicative returns, as of 3 Nov 2022, actual amount could vary.

** Source: S&P Global Ratings – 2021 Annual Global Corporate Default And Rating Transition Study (April 2022)

*** Terms and conditions apply