What You Can Do with Your Hong Bao Money

Happy Chinese New Year :)

It's the third day of the Chinese New Year, for those who celebrate the Chinese New Year and are unmarried, you would've collected a small windfall in the form of Hong Bao money (while those who are married burn a hole in their wallet :P). Instead of blowing all our money on things that we don't need now, what should we (yes, me inclusive) be doing with this money to have the most impact?

(Image source: Jpquidores, commons.wikimedia.org)

Putting it in the stock market

With the market still at a low, using the Hong Bao money collected to invest in the stock market may be a good idea, especially now that we are able to buy smaller lots of 100 shares instead of the previous 1000, which makes some blue chips within the reach of our earnings. With the share price lower, valuations are lower and we are more likely to get better returns over the long term compared to investing when valuations were less attractive.

Putting it in bonds

With the introduction of Singapore Savings Bonds and other corporate bonds on the market such as the Aspial and Oxley issues that offer higher interest rates for the more adventurous, there are more choices for the bond investor in the market, who can choose between higher interest (and more risky) issues or lower risk (and lower interest) issues. While returns for bonds are lower than stocks over the long run (assuming that you are well diversified), the capital for bonds are guaranteed (unless the issuing company goes bankrupt or the debt is restructured)

Putting it in a fixed deposit account

The interest rates for banks have increased in response to competition from the Singapore Savings Bonds. The fixed deposit rate is quite high now, compared to the Singapore Government Securities rate (the one used to calculate the rate for the Singapore Savings Bonds), with some banks offering up to 2% p.a. This is not bad especially if you think you are going to need the money in the near future, as compared to other options that may require longer for you to make the same return (due to volatility in stocks and longer maturities for bonds, both of which may lead to you being unable to get your money out with the same return as a fixed deposit)

Donating

Or, you can also consider donating to the less fortunate. I don't support any particular charity or organisation, but helping the less fortunate is a good way to help spread the festive cheer to those around us as well :)

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