Base currency
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Base currency
Trading in the foreign exchange market involves buying one currency and selling another in pairs. The base currency is the first of the two currencies in a team, and the quote currency is the second. It evaluates the worth of two coins, i.e., the base currency and the quote currency.
The base currency in forex is the amount of the quoted cash required to buy one unit of the base currency. For instance, if you were looking at the CAD/USD currency pair, the Canadian dollar would be the base currency, and the US dollar would be the quote currency.
What is base currency?
Prices for individual currency units are offered as currency pairs on the forex market. A currency pair quotation always starts with the base currency, the transaction currency, and ends with the quote currency, also known as the counter currency. A company may reflect all gains and losses in its accounting by using the base currency as domestic or accounting currency.
Understanding a base currency
All forex transactions require the simultaneous buying and selling of two different currencies, but the currency pair itself can be viewed as a single instrument that can be bought or sold. You purchase the base currency and sell the quote currency when buying a currency pair from a forex broker.
On the other hand, if you sell the currency pair, you receive the quote currency instead of the base currency. Base currencies are present in currency transactions since a currency pair is constantly exchanged. A trader who purchases US dollars using sterling buys USD and sells GBP.
Currency pairings appeal to businesses that operate abroad and transact in different currencies. The USD/GBP or GBP/USD currency combination is useful for a British company that transacts business in US dollars.
Factors that impact base currency
The following are the factors that impact base currency:
- Currency exchange rates and currency pairs fluctuate due to changes in market inflation. The value of a nation’s currency will rise if its inflation rate is lower than that of another. Where inflation is low, prices of products and services rise more slowly. While a nation with higher inflation normally experiences currency depreciation and higher interest rates, a country with persistently lower inflation typically sees growing currency values.
- Interest rates will likely drop in a recession, making it harder for the nation to attract foreign investment. As a result, its base currency loses purchasing power against the currencies of other countries, which lowers the exchange rate.
- Currency value and the dollar exchange rate are affected by changes in interest rates. Interest rates, foreign exchange rates, and inflation are all interconnected. As higher interest rates provide lenders higher rates, which attracts more foreign money and raises exchange rates, a country’s currency gains value in reaction to increases in interest rates.
- Government debt decreases a nation’s ability to attract foreign investment, which increases inflation. Foreign investors will sell their bonds on the open market if the market anticipates government debt in a particular country. The value of its base currency will consequently decline.
Base currency examples
The idea of the base currency is understood from the following example.
In 2023, Jin has plans for a vacation in New York. He is an English resident who exclusively carries pounds sterling. He thus visits the currency exchange with the intention of converting his GBP to USD. According to the store assistant, the exchange rate is GBP/CAD = 0.82. That indicates that 0.82 GBP is equal to 1 US$.
In our illustration, the quotation currency is GBP, and the base currency is USD. As a result, Johnny may swap £ 0.82 GBP for 1 US$ at the currency exchange.
Working of base currency
In currency trading, you buy the base currency and sell the other. Local changes in interest rates, trade imbalances, and economic expansion can make one currency more preferred. Trading occurs in off-exchange marketplaces and regulated exchanges known as forex (short for “foreign exchange”).
“Pips,” total quotation units, are used for currency pairs. A pip is the fourth digit in a quote following the decimal point and represents.01% of one team of money. Currency pairings have bid-ask prices, just like stocks. The customer pays the required price, and the vendor receives the bid amount. The market maker receives payment for the spread, the difference between the two prices.
Exchanges compete on spread costs to draw customers. The minimum investment for trading is 100,000 units of the base currency, a sizable sum. Yet, the minimum margin needed to trade in cash can be as low as 2%, depending on the currency pair.
Frequently Asked Questions
The quote currency can be defined as the second currency in a currency pair, and it is the one that is quoted with the base currency. For example, in the AUD/USD currency pair, the AUD is the base currency, and the USD is the quote currency. The quote currency is also sometimes referred to as the counter currency. The base currency is also sometimes referred to as the primary currency.
Base Currency Equivalent is the quantity of the pertinent currency needed to acquire the relevant US Dollars at the agent’s spot exchange rate.
A currency pair is a quotation of two distinct currencies, with the two values mentioned. When a currency pair order is made, the first listed currency, the base currency, is purchased, and the second listed currency, the quote currency, is sold. The currency pair EUR/USD is the most liquid globally. The second most recognised currency pair globally is USD/JPY.
Exotic base currencies are those seldom used in international financial transactions and with little volume on foreign currency markets. Exotic currencies are typically from countries with emerging economies or that are considered to be high-risk. They are hence often more volatile than other big currencies. Exotic base currencies are typically less liquid than major currencies, making them more difficult to convert into other currencies.
Base and quote currencies are used to calculate the currency pair’s value and make trading decisions.
Related Terms
- Cost of Equity
- Capital Adequacy Ratio (CAR)
- Interest Coverage Ratio
- Industry Groups
- Income Statement
- Historical Volatility (HV)
- Embedded Options
- Dynamic Asset Allocation
- Depositary Receipts
- Deferment Payment Option
- Debt-to-Equity Ratio
- Financial Futures
- Contingent Capital
- Conduit Issuers
- Calendar Spread
- Cost of Equity
- Capital Adequacy Ratio (CAR)
- Interest Coverage Ratio
- Industry Groups
- Income Statement
- Historical Volatility (HV)
- Embedded Options
- Dynamic Asset Allocation
- Depositary Receipts
- Deferment Payment Option
- Debt-to-Equity Ratio
- Financial Futures
- Contingent Capital
- Conduit Issuers
- Calendar Spread
- Devaluation
- Grading Certificates
- Distributable Net Income
- Cover Order
- Tracking Index
- Auction Rate Securities
- Arbitrage-Free Pricing
- Net Profits Interest
- Borrowing Limit
- Algorithmic Trading
- Corporate Action
- Spillover Effect
- Economic Forecasting
- Treynor Ratio
- Hammer Candlestick
- DuPont Analysis
- Net Profit Margin
- Law of One Price
- Annual Value
- Rollover option
- Financial Analysis
- Currency Hedging
- Lump sum payment
- Annual Percentage Yield (APY)
- Excess Equity
- Fiduciary Duty
- Bought-deal underwriting
- Anonymous Trading
- Fair Market Value
- Fixed Income Securities
- Redemption fee
- Acid Test Ratio
- Bid Ask price
- Finance Charge
- Futures
- Basis grades
- Short Covering
- Visible Supply
- Transferable notice
- Intangibles expenses
- Strong order book
- Fiat money
- Trailing Stops
- Exchange Control
- Relevant Cost
- Dow Theory
- Hyperdeflation
- Hope Credit
- Futures contracts
- Human capital
- Subrogation
- Qualifying Annuity
- Strategic Alliance
- Probate Court
- Procurement
- Holding company
- Harmonic mean
- Income protection insurance
- Recession
- Savings Ratios
- Pump and dump
- Total Debt Servicing Ratio
- Debt to Asset Ratio
- Liquid Assets to Net Worth Ratio
- Liquidity Ratio
- Personal financial ratios
- T-bills
- Payroll deduction plan
- Operating expenses
- Demand elasticity
- Deferred compensation
- Conflict theory
- Acid-test ratio
- Withholding Tax
- Benchmark index
- Double Taxation Relief
- Debtor Risk
- Securitization
- Yield on Distribution
- Currency Swap
- Overcollateralization
- Efficient Frontier
- Listing Rules
- Green Shoe Options
- Accrued Interest
- Market Order
- Accrued Expenses
- Target Leverage Ratio
- Acceptance Credit
- Balloon Interest
- Abridged Prospectus
- Data Tagging
- Perpetuity
- Optimal portfolio
- Hybrid annuity
- Investor fallout
- Intermediated market
- Information-less trades
- Back Months
- Adjusted Futures Price
- Expected maturity date
- Excess spread
- Quantitative tightening
- Accreted Value
- Equity Clawback
- Soft Dollar Broker
- Stagnation
- Replenishment
- Decoupling
- Holding period
- Regression analysis
- Wealth manager
- Financial plan
- Adequacy of coverage
- Actual market
- Credit risk
- Insurance
- Financial independence
- Annual report
- Financial management
- Ageing schedule
- Global indices
- Folio number
- Accrual basis
- Liquidity risk
- Quick Ratio
- Unearned Income
- Sustainability
- Value at Risk
- Vertical Financial Analysis
- Residual maturity
- Operating Margin
- Trust deed
- Profit and Loss Statement
- Junior Market
- Affinity fraud
- Working capital
- Individual Savings Account
- Redemption yield
- Net profit margin
- Fringe benefits
- Fiscal policy
- Escrow
- Externality
- Multi-level marketing
- Joint tenancy
- Liquidity coverage ratio
- Hurdle rate
- Kiddie tax
- Giffen Goods
- Keynesian economics
- EBITA
- Risk Tolerance
- Disbursement
- Bayes’ Theorem
- Amalgamation
- Adverse selection
- Contribution Margin
- Accounting Equation
- Value chain
- Gross Income
- Net present value
- Liability
- Leverage ratio
- Inventory turnover
- Gross margin
- Collateral
- Being Bearish
- Being Bullish
- Commodity
- Exchange rate
- Basis point
- Inception date
- Riskometer
- Trigger Option
- Zeta model
- Racketeering
- Market Indexes
- Short Selling
- Quartile rank
- Defeasance
- Cut-off-time
- Business-to-Consumer
- Bankruptcy
- Acquisition
- Turnover Ratio
- Indexation
- Fiduciary responsibility
- Benchmark
- Pegging
- Illiquidity
- Backwardation
- Backup Withholding
- Buyout
- Beneficial owner
- Contingent deferred sales charge
- Exchange privilege
- Asset allocation
- Maturity distribution
- Letter of Intent
- Emerging Markets
- Cash Settlement
- Cash Flow
- Capital Lease Obligations
- Book-to-Bill-Ratio
- Capital Gains or Losses
- Balance Sheet
- Capital Lease
Most Popular Terms
Other Terms
- Gamma Scalping
- Funding Ratio
- Free-Float Methodology
- Foreign Direct Investment (FDI)
- Floating Dividend Rate
- Flight to Quality
- Real Return
- Protective Put
- Perpetual Bond
- Option Adjusted Spread (OAS)
- Non-Diversifiable Risk
- Merger Arbitrage
- Liability-Driven Investment (LDI)
- Income Bonds
- Guaranteed Investment Contract (GIC)
- Gamma Scalping
- Funding Ratio
- Free-Float Methodology
- Foreign Direct Investment (FDI)
- Floating Dividend Rate
- Flight to Quality
- Real Return
- Protective Put
- Perpetual Bond
- Option Adjusted Spread (OAS)
- Non-Diversifiable Risk
- Merger Arbitrage
- Liability-Driven Investment (LDI)
- Income Bonds
- Guaranteed Investment Contract (GIC)
- Flash Crash
- Equity Carve-Outs
- Cost Basis
- Deferred Annuity
- Cash-on-Cash Return
- Earning Surprise
- Bubble
- Beta Risk
- Bear Spread
- Asset Play
- Accrued Market Discount
- Ladder Strategy
- Junk Status
- Intrinsic Value of Stock
- Interest-Only Bonds (IO)
- Inflation Hedge
- Incremental Yield
- Industrial Bonds
- Holding Period Return
- Hedge Effectiveness
- Flat Yield Curve
- Fallen Angel
- Exotic Options
- Execution Risk
- Exchange-Traded Notes
- Event-Driven Strategy
- Eurodollar Bonds
- Enhanced Index Fund
- EBITDA Margin
- Dual-Currency Bond
- Downside Capture Ratio
- Dollar Rolls
- Dividend Declaration Date
- Dividend Capture Strategy
- Distribution Yield
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Why Idle Cash Attracts Scammers & How to Beat Them
You may come across news about scams on your social media feeds. Recent headlines such as “Scam victims in Singapore lost $456m in the first half of 2025” raise alarm. From investment fraud to phishing emails and fake trading apps, online scams are on the rise. Many of these schemes prey on people with idle cash, basically – money sitting in their bank account without any active management. Common examples of scams include fake “high return” investment platforms promising 10-20% per month, social media scams where strangers solicit “joint investments”, and insurance premiums scams, where callers pose as insurers, claiming that you have “outstanding premiums” to pay or risk a policy lapse. When “Safe” Investments Turn Out to Be Scams Someone close to me once fell for a scheme that seemed harmless at first. The scammers convinced him that he could “book hotel rooms” online as an investment. The pitch sounded safe: invest some money, wait for tourists to check in, and then receive both your capital and profit when they check out. It sounded good, but of course, there were no hotels, no tourists and no returns. Fortunately, he didn’t lose everything, but the stress and the near-miss experience were painful reminders that scams don’t just target the greedy, but also prey on the trusting, the busy and anyone with idle funds seeking an opportunity. Recently, a client called to check if she had any outstanding premiums. She had received a call demanding immediate payment or risk lapsing her policy. Fortunately, she was aware of such scams and contacted me before making any payments. However, this type of scheme can be convincing, as most Singaporeans own some form of insurance, making the scam appear genuine. Here are some important reminders: 1. Legitimate insurers will never ask for your PIN or bank login details. 2. Premium payments should always be made through official company channels. 3. The best safeguard is to schedule annual reviews with your trusted financial advisor, so you’re always clear on which policies you have and when your premiums are due. Even if you do not fall for scams, idle funds carry another silent risk — underutilisation. Cash sitting in a bank account and earning little to no returns is especially vulnerable in today’s high-inflation environment. You might think idle money is “safe”, but in reality, it’s either exposed to scams or quietly losing purchasing power. This is where SMART Park makes a difference. Once you have opted in to SMART Park - Excess Funds Facility and transfer the money into your POEMS account, the funds will automatically be placed into the money market fund. Your cash then generates daily returns, which you can conveniently view from the POEMS Mobile 3 app. Enjoy full flexibility — your funds in SMART Park stay liquid and can be accessed anytime you need them. Simply submit a withdrawal request, and you should receive the funds within 1 working day. This adds an additional layer of security before you decide how to use your funds. Think of SMART park as a secure parking lot: instead of leaving your “car” in a dark alley (where scams lurk), you're parking it in a well-lit and guarded facility. In short, SMART Park is low risk, liquid and generates better returns. Scams often thrive on two things: greed—chasing unrealistic returns, and inattention—ignoring idle money or losing track of your insurance details. By parking your funds in SMART park and staying connected with your advisors, you address both risks: avoiding the lure of risky schemes while letting your money work for you safely and automatically. In today’s world, protecting your wealth is not just about steering clear of scams; it’s also about ensuring your cash isn’t left idle and unproductive. With SMART Park, you can be confident that your funds are managed and are growing steadily in the background. Often, the most harmless-looking attempts by scammers can cause the biggest damage. The smarter choice is to keep your cash somewhere both secure and productive. Ask your advisor today how SMART Park can make your idle cash work for you! Contributor: Elin Chee Financial Services Manager Phillip Securities Pte Ltd (A member of PhillipCapital) http://bit.ly/TTPelin Appendix: [1] https://www.straitstimes.com/singapore/scam-victims-in-spore-lose-record-1-1-billion-in-2024-highest-number-of-cases-ever-reported Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.
Night Owls and Early Birds: A Guide to Extended Hours Trading
Introduction Extended-hours trading refers to buying and selling securities outside regular trading hours. Unlike standard trading sessions, these transactions are executed primarily through Electronic Communication Networks (ECNs), which facilitate trades when traditional exchanges are closed. Key Takeaways Two Sessions: Extended-hours trading in the US consists of two sessions — pre-market (4:00 am to 9:30 am ET) and post-market (4:00 pm to 8:00 pm ET). Market Indicator: Activity during these sessions often provides early signals for the regular trading day, though participation is typically lower, resulting in reduced liquidity. News Impact: Extended-hours trading is especially useful for reacting to breaking news, earnings releases, and merger announcements, many of which occur outside standard market hours. Risks & Volatility: Prices can swing more sharply during these sessions due to reduced trading volume and wider spreads. As a result, extended-hours activity may not always reflect the true momentum of the broader market. What is Extended-Hours Trading? Extended-hours trading is exactly what it sounds like — trading that takes place outside of the US market’s official opening hours. It is divided into two sessions: the pre-market (4:00 am to 9:30 am ET) and the post-market (4:00 pm to 8:00 pm ET). Pre-market activity often provides early clues about how stocks might perform once the market officially opens. While trading volume is generally lower during this period, significant changes in price and volume can hint at potential market direction and investor sentiment. Similarly, the post-market session reflects how investors react to news and earnings announcements released by many highly traded companies after the closing bell. This activity can offer insights into overall market sentiment and may influence expectations for the next trading day. Why Trade in Extended-Hours? 1. Opportunities for Early Reactions to News and Announcements Important news — such as earnings reports, financial results, or merger and acquisition news — is typically made before the market opens or after it closes. Extended-hours trading gives investors the chance to respond immediately, rather than waiting for the opening bell. Key economic data releases, such as jobs reports and inflation figures, also tend to come out around 8:30 am ET, during pre-market hours. In times of heightened volatility, extended sessions are often the first to reflect breaking news, allowing investors to adjust their positions quickly. Likewise, announcements made during post-market hours can trigger sharp price swings and significant gaps from the previous close. For example, Oracle (ORCL.US) surged more than 30% in post-market trading following news of a deal with OpenAI. Yahoo Historical Price on ORCL.US Though not as drastic, these movements after earnings reports or stock exchange filings are quite common. An example is when Coinbase (COIN.US) fell about 6% after its Q2 2025 earnings release. CNBC Reporting on Coinbase (COIN.US) Q2 Results 2. Gauge for breakouts or breakdowns during normal trading hours The price range of a stock during extended-hours trading can provide traders with insight into its support and resistance levels during regular hours, as well as potential breakouts or breakdowns. Changes in prices and trading volumes during these hours can foreshadow broader market movements throughout the day. 3. Access to longer trading hours Extended-hours trading allows investors to place trades immediately to manage their positions without for the market to open. This offers greater flexibility and convenience, as the trading window is longer. Traders restricted to regular trading hours may have to limit their strategies accordingly. Monitoring extended-hour activity also aids in risk management and informed trade positioning. Engaging in extended-market trading can offer opportunities for a timely entry or exit, giving investors a potential edge when the regular market resumes. Risks in Extended-Market trading 1. Lower Liquidity and Wider Spreads In extended hours trading, there are usually fewer buy and sell orders compared to regular market hours. This lower activity makes it difficult to buy or sell at your desired price. Your order may only be partially filled, or not filled at all. Fewer trades and higher volatility can also cause wider bid-ask spreads and larger price gaps between buyers and sellers. 2. Risk of Higher Volatility Prices can move more sharply during extended hours than during the regular session. This increased volatility means your order might not be fully executed, or it may be completed at a less favourable price. 3. Risk of Unlinked Markets Different extended-hours trading systems may display varying prices for the same security. Because these systems are not always interconnected, you might receive a less competitive price on one platform compared to another. 4. Risk of News Announcements Important company or market news is often released outside regular trading hours. Such announcements can cause sudden and sharp price movements during extended sessions, making it harder to trade at expected prices. What are the differences between extended-market and regular trading? Characteristics Extended Hours Regular Liquidity and volume Low High Bid-ask spread Wide Narrow Susceptible to higher or lower price gaps (refer to chart A above) Yes Generally no Price movements Prices are determined by a smaller group of investors, which may be heavily influenced by market news. (e.g. earnings release) Proper supply and demand dynamics determine price movements, ensuring orderly trading conditions. Market participants Predominantly institutional investors Both institutional and retail investors The table above captures the main differences between extended-market and regular trading sessions. Can I trade in the extended-hours market? How? Yes, you can! US extended-hours market prices on POEMS are available from 4:00 am to 9:30 am ET and 4:00 pm. to 8:00 pm. ET. You may refer to the table below to see the corresponding time in Singapore. Pre-market start time Pre-market end time Regular market start time Regular market end time Post-market start time Post-market end time US Eastern Standard Time (EST) 04:00 09:30 09:30 16:00 16:00 08:00 Singapore time (daylight saving) 16:00 21:30 21:30 04:00 04:00 08:00 Singapore time (non-daylight saving) 17:00 22:30 22:30 05:00 05:00 09:00 Extended-market orders can be placed starting from 4:00 am ET and remain valid until the close of the post-market session at 8:00 pm ET. Quotes for extended-market trading are only available during these hours. Any unfilled orders will automatically be carried forward into the next regular trading session. To begin trading in the extended market, click here. If you have any further questions, please visit our FAQ on US pre-market trading. Visit our website or contact our dedicated Night Desk team at globalnight@phillip.com.sg or (+65) 6531 1225. Start investing smarter with POEMS today — open an account and trade the US markets now! Open an Account Now! Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.
Should You Invest Your Supplementary Retirement Scheme (SRS) Savings?
Many individuals in Singapore can expect to spend an average of 2025 years in retirement. Over such an extended period, inflation may gradually reduce overall purchasing power. Therefore, it is essential to secure financial stability by ensuring there are sufficient savings to cover essential needs and living expenses during this period. Investing your SRS savings may be crucial for combating inflation and maximising your retirement savings. Aside from the average 0.05% bank interest earned on idle savings, SRS savings can be invested in various instruments, providing more opportunities to grow at a rate that may keep up with or even outpace inflation. What is the Supplementary Retirement Scheme (SRS)? The Supplementary Retirement Scheme (SRS) is a voluntary savings scheme introduced by the Singapore government to help individuals build a larger pool of retirement savings earlier in life. It provides an additional layer of savings to complement CPF, offering tax advantages and investment growth opportunities. Singapore Citizens/Permanent Residents can contribute up to a yearly maximum of S$15,300, and foreigners can contribute up to S$35,700. SRS Annual Contribution Limits Singaporeans/Permanent Residents S$15,300 Foreigners S$35,700 Individuals can make tax-free withdrawals from their SRS accounts of up to S$40,000 annually over a period of 10 years. The statutory retirement age is fixed when the first SRS contribution is made. Any subsequent change in the statutory retirement age will not affect an individual’s ability to withdraw. This ensures that the SRS withdrawal age remains consistent even if the official retirement age changes later. Why Should You Invest Your Supplementary Retirement Scheme (SRS) Savings? While SRS offers a baseline interest rate of 0.05%, there are a variety of investment options available through the scheme to make your money work harder for you. Through the SRS framework, your accumulated savings can be diversified across multiple asset classes and markets – including Unit Trusts, Stocks, ETFs, and many more. Additionally, gains from your SRS investments are not subject to tax while they remain in your account. By investing early, your SRS savings benefit from compounding, providing an additional stream of income to complement your CPF savings. In summary, SRS offers three benefits: tax relief on contributions, potential investment returns, and tax concessions on withdrawals, where only 50% of the withdrawn amount is subject to tax. How to Open an SRS Account? You can open an SRS account with any of the three local participating banks either online/in-person: DBS Group Holdings Ltd Overseas-Chinese Banking Corporation (OCBC) Ltd United Overseas Bank (UOB) Ltd Before opening an account, you will be required to confirm that you do not have an existing SRS account with another SRS operator before proceeding. *For foreigners: Please complete the Declaration Form for SRS (For Foreigners) to declare your foreigner status* Required Documents Document required for opening an SRS account: NRIC/FIN or Passport Who is eligible to open an SRS account? Singapore Citizens, Singapore Permanent Residents (SPRs) and foreigners who: Are at least 18 years of age; Are not an undischarged bankrupt; and Do not have a mental disorder and can manage themselves and their affairs; Do not already have an SRS account (including one that has been suspended) with the same or another operator; and Do not have a pending application with another SRS operator to open an SRS account; and Have not previously had an SRS account with the same or another SRS operator where all the funds had been withdrawn i) On medical grounds; or ii) On or after reaching the statutory retirement age prevailing at the time of your first contribution. SRS Investment Options: What Can You Invest in? SRS savings can be allocated across various investment vehicles – ranging from low-risk fixed deposits to higher risk options like stocks. This flexible approach enables individuals to align their investments with their goals and risk tolerance. Investment Options available for SRS Savings Unit Trusts REITs Stocks Singapore Government Securities ETFs Single Premium Insurance Products Fixed Deposits Low Volatility/Sustainable Options for SRS Investing with Phillip Capital Management (PCM) Investors looking for investment strategies designed to provide consistent returns and high liquidity may find the ‘Phillip Money Market Fund’ suitable as a low-risk option. Investors with higher risk tolerance who are interested in companies engaging in sustainable practices can look into funds such as the ‘Sustainable Reserve Fund’. 1. Phillip Money Market Fund The Phillip Money Market Fund aims to provide a high level of liquidity while delivering returns comparable to those of Singapore dollar savings deposits. The Sub-Fund invests primarily in short-term, high-quality money market instruments and debt securities. Through strategic diversification, it enables the fund to optimise yield without compromising flexibility. https://www.poems.com.sg/fund-finder/phillip-money-market-fund-534010/ 2. Sustainable Reserve Fund The Sustainable Reserve Fund is a diversified, short duration bond fund that aims to achieve income yield enhancement over the 6-month Singapore Overnight Rate Average (SORA). Guided by its proprietary ESG-integrated investment framework, the fund employs an inclusionary, sustainability-focused selection process—investing at least 70% of assets in issuers committed to taking appropriate actions that contribute to a green economy. The Sub-fund primarily invests all its assets in global fixed-income instruments (including short-term interest-bearing debt instruments and bonds), money market instruments and bank deposits (including fixed deposits). Structured as a short-duration bond fund, it achieves robust diversification across issuers, with no specific sectoral emphasis. Find out more here: https://www.poems.com.sg/fund-finder/sustainable-reserve-fund-a-sgd-dis-sgxz21949797-534202/ https://www.poems.com.sg/fund-finder/sustainable-reserve-fund-a-sgd-acc-sgxz39183199-534201/ Limited Time Reward Enhance the growth potential of your SRS savings with Phillip Capital Management! From now till 31st December 2025, Receive S$10 worth of PMMF BONUS UNITS for every S$10,000 invested in eligible funds using SRS – Plus, enjoy additional rewards when subscribing with a Regular Savings Plan (RSP) during the promotion period.Find out more: https://tinyurl.com/mt4nb2k5*T&Cs apply Conclusion The Supplementary Retirement Scheme (SRS) is more than just a tax-deferral tool. Investing your SRS savings can serve as a powerful strategy to counter inflation in the long run. Ultimately, it plays a strategic role, amplifying the growth potential of your retirement nest egg while preserving its value. FAQs about Supplementary Retirement Scheme How do I start investing using my SRS Savings on POEMS? Open an SRS account with any of the three participating banks stated above. Link your SRS Account to your trading account via POEMS 2.0 or POEMS Mobile 3 App: Log in to POEMS 2.0 > My Settings > My Account > Bank A/C information > Select ‘SRS’ tab > Fill up the required information Log in to POEMS Mobile 3 App > ‘Me’ Tab > Bank A/C Information > Select the pen icon on the top right-hand corner > Select ‘SRS’ and fill up the required information Filter investment type to ‘SRSIA’ to search for funds. I’m new to SRS investing. What’s a good way to get started? If you’re investing for the first time, start with beginner-friendly options: Unit Trusts – offering diversified portfolios to mitigate investment risks. SMART Portfolio - a discretionary investment service that matches a best-fit portfolio based on your online risk analysis. What happens to my SRS savings when I reach the retirement withdrawal age? You may make penalty-free withdrawals spread over 10 years (starting from the date of your first penalty-free withdrawal) on or after the statutory retirement age that was prevailing at the time of your first SRS contribution. 50% of the withdrawal sum from your SRS account is subject to tax and will be taxed at the rate applicable to you. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.
Patience Pays Off: Mastering the Wheel Options Strategy
Introduction In today’s dynamic economic landscape, investors would miss out on profit-taking windows as a result of heightened volatility. In reality, it may also take a while for investors to see a return on their investment in a safer stock, while faster-paced alternatives like buying short-term options may be too risky. That’s where the Wheel Strategy comes in — a patient, structured approach that helps you generate consistent income while taking advantage of market movements, without the stress of chasing quick wins. What is the Wheel Strategy? The Wheel Strategy combines two option strategies: the cash-secured put and the covered call, and works in a cycle as follows: You sell a cash-secured put to collect a premium while waiting to buy a stock at your chosen price, potentially. If the cash-secured put is assigned, you now own the stock at that price. From there, you switch to selling a covered call, earning an additional premium while holding the shares. If the shares get called away, you return to step one and repeat the cycle. This approach is often described as “slow but steady.” Instead of chasing big, risky wins, you’re consistently generating income from option premiums. As such, it is particularly suited for investors who want a steady cash flow, lower stress compared to large speculative trades, and a disciplined, rules-based strategy that doesn’t require constant monitoring. Think of it as a patient way to let the market work for you over time, while still giving yourself opportunities to accumulate shares or take profits depending on how the stock moves. If you’d like a deeper understanding of cash-secured puts and covered calls, be sure to check out our earlier market journals, where we break down these strategies in detail. Why Patience Matters Each cycle of the wheel takes a certain amount of time to complete. Essentially, you are earning “rent” from your cash or shares. By continuously collecting option premiums, you create a steady income stream while tailoring your strategy to prevailing market conditions. This approach can provide consistent gains over the long run. The strategy works best when applied to stable, highly liquid, and fundamentally strong stocks, where the risks of sudden price shocks are lower and premium collection is more reliable. Risks to Consider ● Underlying Stock Risk Downside risk arises from a decline in the underlying stock price. This means the investor bears the same downside exposure as directly holding the stock — in the worst-case scenario, the stock price could fall to zero, resulting in a total loss of the investment. However, this risk can be mitigated by investing in stable, fundamentally strong companies. Blue-chip stocks, in particular, are less prone to sharp price declines, thereby helping to reduce downside exposure. ● Opportunity Cost The Wheel Strategy also carries opportunity cost. If the stock rises significantly above the strike price, your profit is capped. With cash-secured puts and covered calls, the maximum gain is limited to the option premium received and, in the case of covered calls, the stock appreciation up to the strike price. This differs from simply buying and holding the stock, where potential gains are theoretically unlimited if the stock continues to rally. While option strategies provide steady income and some downside cushioning, they do so at the expense of unlimited long-term upside. Who This Strategy Is For As the name suggests, the Wheel Strategy requires patience. It often involves eventually owning the underlying stock — either at expiration or earlier if the option buyer exercises their rights. This strategy is especially suited for investors who are comfortable holding stock long term, since assignment is always a possibility. The Wheel is designed to provide consistent cash flow and can even lower the average cost of entry into a stock. In times of macroeconomic uncertainty, when market direction can be harder to predict, the Wheel Strategy offers a disciplined approach: it allows investors to stay engaged in the market, collect income, and potentially acquire quality stocks at attractive prices, while managing risk more systematically. Conclusion The Wheel Strategy serves as a reminder that patience can pay off in investing. Instead of chasing fast-moving trades or hoping for sudden windfalls, you’re steadily collecting premiums, small hits that add up over time. It’s not about timing the market perfectly or predicting every move. It’s about having the discipline to follow a structured process, staying comfortable with owning quality stocks, and letting time work in your favour. Ready to start? Explore our beginner-friendly options platform today, or if you would like to dive deeper into other strategies, check out our detailed guide on Cash-Secured Puts. For more information on trading the US markets through POEMS, visit our website or contact our Night Desk representatives at 6531 1225 (available from 2 PM onwards). Don’t wait—register your account today and take the first step towards accessing these exciting markets! Open an Account Now! Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.
Summary Factor-based (often called smart-beta) ETFs use transparent, rule-based indexes to tilt exposure toward specific investment attributes (factors) such as value, quality, momentum, dividend yield, growth, or low volatility. They offer a middle ground between purely passive market-cap indexing and fully active management, adapting ETF mechanisms with a systematic, repeatable focus or priority aimed at improving risk-adjusted returns or reducing volatility. Examples include dividend or quality ETFs in Singapore (e.g., high-yield Singapore ETFs such as Phillip Sing Income ETF (OVQ)) and US factor ETFs like iShares MSCI USA Momentum Factor ETF (MTUM) and VanEck MSCI International Value ETF (VLUE). 1. What is a Factor-Based ETF? Simple Definition A factor ETF tracks an index that explicitly selects and weights stocks according to one or more measurable characteristics or “factors” — e.g., companies with high dividend yields, superior profitability, or recent price momentum. Why “Smart-Beta”? The term smart-beta highlights that these ETFs use “smarter” index construction rules than simple market-cap weighting. They are still index-based (rule-driven), providing transparency and low operational subjectivity, but differ from a plain traditional index by seeking outcomes such as higher income, lower volatility, or exposure to value/growth dynamics. 2. Common Factors and What They Capture Core Factors for Consideration Value: Stocks that appear cheap on metrics like price-to-earnings or price-to-book. o Favours cyclicals, financials at times. Growth: Companies with strong sales/earnings growth expectations. o Favours tech and disruptive firms. Momentum: Stocks that have performed well recently (trend-following). o Can capture strong performers but may reverse in mean-reverting markets. Quality: Firms with stable earnings, high returns on equity, low leverage. o Typically less volatile in downturns. Dividend / Income: Companies with higher or growing dividends. oAttractive for yield seekers and income investors. Low Volatility: Stocks with lower historical price swings. oUseful for defensive allocations. Size: Small-cap tilt. Factor Behaviour It is important to understand how each factor behaves differently across cycles. For example, value often outperforms after a market trough or rotation, momentum performs well in trending markets, and low-volatility may protect capital in downturns. Investors can use factor diversification by combining different factor exposures to smooth returns. 3. How Factor Indexes Are Constructed & Reviewed Selection & Scoring Universe: Start with a market universe (e.g., S&P 500 or Singapore stocks). Scoring: Each stock receives a score based on factor metrics (e.g., yield, ROE, price momentum). Ranking & Cut-Off: Stocks are ranked; the top N (quantity) or top X% (percentage) are included. Weighting: Stocks can be equally weighted, factor-weighted, or follow a modified market-cap rule. Rebalancing Schedule Most factor indexes rebalance on a scheduled basis (quarterly, semi-annually). This maintains the factor tilt but creates potentially higher turnover compared to passive traditional indexes. Higher turnover can increase transaction costs and taxable events (for taxable accounts), leading to a higher expense ratio due to the operating cost of rebalancing. Thus, investors should check rebalancing frequency and expected impact of ETF expense ratios. Example: Income / Quality Index (Singapore) Method: Rank by dividend yield, financial health and business quality; pick top 30 names. Result: A high-income, quality-tilted basket (e.g., Phillip SING Income ETF methodology). 4. Differences Between Factor Selection vs Traditional Index Selection Traditional Market-Cap Index Selection: All eligible stocks included; weight proportional to market capitalization. Outcome: Emphasises largest companies; automatically increases weight as a stock’s price rises (momentum bias). Factor Index Selection: Stocks selected by factor scores (value, dividend, quality). Outcome: Overweights companies with desired traits even if they are not the biggest by market cap; can intentionally underweight or exclude certain sectors. Practical Consequence Factor indices purposely deviate from market-cap benchmarks to pursue specific performance characteristics — this is why their returns can diverge significantly from plain indices. 5. Factor ETFs: Practical Uses and Examples Uses in a Portfolio Return enhancement: E.g., value or momentum factor for potential excess returns. Risk management: Low-volatility or quality factors to reduce drawdowns. Income solutions: Dividend factor ETFs for yield-focused allocations. Diversification: Combining factors with market-cap exposure to potentially smooth returns across cycles. Examples (US & Singapore) Momentum (US): : MTUM — momentum tilt. Value (US): VLUE — value tilt. Dividend (US):: VYM or SDY — dividend-focused indices. Singapore Income / Quality (SGX): Phillip SING Income ETF (OVQ) — high income + quality selection. Thematic overlaps: Growth/AI exposures can be achieved via growth factor ETFs or through thematic ETFs that incorporate factor rules. Source: S&P Dow Jones Indices. As at 30 September 2024. Based on S&P 500 Index and relevant factor indices. Past performance is not indicative of future returns. You cannot invest directly in an index. Index performance does not take into account any ETF fees and costs. 6. What to Look for When Selecting Factor ETFs Key Selection Criteria Clear methodology: Read the index rulebook—how are factors measured and weights assigned? Rebalancing frequency and turnover: Higher turnover means higher trading costs and potential tax implications. Historical factor behaviour: Understand cycle sensitivity (e.g., value vs. growth). Fees: Factor ETFs generally cost more than plain market-cap ETFs but less than fully active funds. Compare expected net-of-fee outcomes. Liquidity & AUM: Sufficient assets under management and trading volume reduce bid/ask spreads and tracking uncertainty. Overlap: Check overlap with existing holdings—factor ETFs can unintentionally concentrate similar stocks across multiple funds. 7. Key Takeaways — Factor ETFs Key Selection Criteria Smart-beta blends rules and targeting: Factor ETFs offer targeted tilts while preserving index transparency and systematic discipline. Know the factor: Different factors perform in different environments; combine factors to diversify factor risk. Mind the mechanics: Rebalancing frequency, turnover, and fees materially affect outcomes—read the methodology.. Use factors strategically:Consider factors as building blocks — e.g., combine a core market-cap ETF with a dividend factor ETF and a quality ETF for balanced exposure. Call to Action Consider adding selected factor ETFs to your watchlist and reviewing how they perform to observe if any can play a role in your investment portfolio. Some examples mentioned in this article are: OVQ (SGX — Singapore income/quality) MTUM (US — momentum) Mind the mechanics Rebalancing frequency, turnover, and fees materially affect outcomes—read the methodology.. VLUE (US — value) VYM / SDY (US — dividend focus) As always, align your ETF picks with your preferred investment goals and strategy. Review choices based on total portfolio exposure to avoid unintentionally becoming overexposed to one or a few counters.. Stay tuned for our next feature, where we explore different aspects of ETF categories in greater detail. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore. CFD Disclaimer This promotion is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to buy or sell the investment product mentioned. It does not have any regard to your specific investment objectives, financial situation or any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of your acting based on this information. Investments are subject to investment risks. The risk of loss in leveraged trading can be substantial. You may sustain losses in excess of your initial funds and may be called upon to deposit additional margin funds at short notice. If the required funds are not provided within the prescribed time, your positions may be liquidated. The resulting deficits in your account are subject to penalty charges. The value of investments denominated in foreign currencies may diminish or increase due to changes in the rates of exchange. You should also be aware of the commissions and finance costs involved in trading leveraged products. This product may not be suitable for clients whose investment objective is preservation of capital and/or whose risk tolerance is low. Clients are advised to understand the nature and risks involved in margin trading. You may wish to obtain advice from a qualified financial adviser, pursuant to a separate engagement, before making a commitment to purchase any of the investment products mentioned herein. In the event that you choose not to obtain advice from a qualified financial adviser, you should assess and consider whether the investment product is suitable for you before proceeding to invest and we do not offer any advice in this regard unless mandated to do so by way of a separate engagement. You are advised to read the trading account Terms & Conditions and Risk Disclosure Statement (available online at https://www.poems.com.sg/) before trading in this product.
An Active ETF is an exchange-traded fund with a portfolio that is actively managed by investment professionals. Unlike passive ETFs that simply mirror a stock index, investment in active ETFs involve ongoing buy and sell decisions aimed at achieving a specific goal — whether that is outperformance, generating income, or capturing exposure to a particular theme. How Active ETFs differ from Passive ETFs Objective: Passive ETFs aim to replicate an index (e.g., S&P 500). Active ETFs aim to outperform a benchmark or achieve a specific outcome (e.g. high income or targeted growth). Management: Passive ETFs follow rules automatically while active ETFs rely on human judgement, quant models, or a combination of both. Costs: Active ETFs usually charge higher management fees because of the research, trading, and portfolio management involved. Transparency & Holdings: Passive ETFs typically disclose holdings frequently and are predictable. Some active ETFs may disclose less often to protect proprietary strategies, although many still provide daily updates. 2. Why Demand for Active ETFs Is Growing Access to differentiated strategies Active ETFs open the door for retail investors to tap into strategies once reserved for mutual funds or large institutions. These can include thematic bets on artificial intelligence, enhanced income strategies, or opportunities in niche and tightly regulated markets. ETF wrapper benefits With active ETFs, investors enjoy the best of both worlds: the expertise of an active manager combined with the advantages of the ETF structure. This includes intraday liquidity (they trade like a stock), potential tax efficiencies, and lower minimum investment amounts compared with some mutual funds. Innovation and regulation Recent regulatory developments and improvements in ETF infrastructure have empowered asset managers to launch a wider variety of active strategies in ETF form. This growing menu of options caters to investors’ appetite for more tailored outcomes, driving innovation across the industry. 3. Common Active ETF Strategies (with Examples) Fund managers launch active ETFs using different strategies to appeal to investors with specific goals or preferences. Some of the most common approaches include: A. Thematic & Growth Active ETFs Goal: Capture long-term growth by investing in themes such as Artificial Intelligence (AI), robotics, or disruptive technologies. Example (US): ARK Innovation (BATS: ARKK) — actively selects disruptive growth companies Example (SG): Lion-Nomura Japan Active ETF (SGX: JJJ) — actively selects Japanese stocks with AI-assisted processes B. Income & Option-Enhanced ETFs Goal: Deliver steady income by combining dividends with strategies like covered calls or option overlays. Example (US): JPMorgan Equity Premium Income ETF - (NYSEARCA: JEPI) uses options to enhance yield C. Sector / Regional Active ETFs Goal: Leverage managers’ best ideas in a specific region or sector (e.g. Japan, ASEAN, healthcare) Example (SG): Active Japan ETF JJJ (SGX: JJJ) - An Active ETF where the manager selects 50–100 stocks tailored to current market opportunities 4. Benefits and Risks: What Investors Should Consider Benefits Potential to beat benchmarks: Active managers can exploit inefficiencies, allocate tactically, and lean into high-conviction opportunities Customisation: Investors can express specific views — such as AI adoption or Japan’s recovery — through a single ETF Operational convenience: Active ETFs trade on exchanges like stocks, offer intraday liquidity, and usually have lower minimums than traditional mutual funds Risks & Drawbacks Manager risk: Returns depend heavily on the manager’s skill and process. Past performance is no guarantee of future success Higher fees: Active strategies are generally more expensive, and over time, higher costs can eat into returns Transparency tradeoffs: Some active ETFs limit disclosure to protect proprietary models, which can reduce clarity for investors Underperformance odds: Statistically, many active funds fail to outperform comparable passive benchmarks over time 5. How Singapore Investors Might Use Active ETFs Portfolio Roles Satellite allocation: Use active ETFs as satellites around a core passive portfolio (e.g., 5–15% tactical exposure to AI or income) Access niche markets: Gain exposure to overseas or tightly regulated markets via locally listed active ETFs without complex account setups Income overlay: Replace or complement fixed income with option-enhanced active ETFs for higher distributed yield Tips for ETF selection Understand the manager’s process and look for a track record in comparable mandates Check fund fees, turnover, and tax considerations Limit allocation to active ETFs to a level consistent with your conviction and risk tolerance (e.g., 5–20% of portfolio) Review holdings / performance regularly and watch for changes in strategy or personnel 6. Key Takeaways — Active ETFs Active ETFs blend professional management with ETF convenience: intraday trading, tax efficiency, and low operational friction. They can deliver differentiated outcomes — alpha, income, or niche themes — but they demand confidence in the manager and come with higher costs. They are best used as satellite positions, complementing a low-cost passive core. Due diligence is essential: read the prospectus, examine the manager’s process, and evaluate costs and track record. Conclusion Active ETFs are reshaping the investment landscape by combining the expertise of active management with the convenience of the ETF structure. They provide opportunities for outperformance, targeted exposure, and innovative income strategies, but they also come with higher costs and the risk of underperformance. For Singapore investors, active ETFs can serve as useful satellite allocations alongside a low-cost passive core, offering access to niche markets, thematic opportunities, or enhanced income. Success, however, hinges on careful manager selection, disciplined allocation, and regular review. As the ETF market continues to evolve, active ETFs are likely to play a growing role in portfolios — not as replacements for passive funds, but as complementary tools to help investors navigate a more complex investment environment. Stay tuned for our next feature, where we explore factor-based ETFs and how they fit into a modern portfolio. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore. CFD Disclaimer This promotion is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to buy or sell the investment product mentioned. It does not have any regard to your specific investment objectives, financial situation or any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of your acting based on this information. Investments are subject to investment risks. The risk of loss in leveraged trading can be substantial. You may sustain losses in excess of your initial funds and may be called upon to deposit additional margin funds at short notice. If the required funds are not provided within the prescribed time, your positions may be liquidated. The resulting deficits in your account are subject to penalty charges. The value of investments denominated in foreign currencies may diminish or increase due to changes in the rates of exchange. You should also be aware of the commissions and finance costs involved in trading leveraged products. This product may not be suitable for clients whose investment objective is preservation of capital and/or whose risk tolerance is low. Clients are advised to understand the nature and risks involved in margin trading. You may wish to obtain advice from a qualified financial adviser, pursuant to a separate engagement, before making a commitment to purchase any of the investment products mentioned herein. In the event that you choose not to obtain advice from a qualified financial adviser, you should assess and consider whether the investment product is suitable for you before proceeding to invest and we do not offer any advice in this regard unless mandated to do so by way of a separate engagement. 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100% Spenders in Singapore: How to Break Free from Living Paycheck to Paycheck
In 2024, 78.3 per cent of companies in Singapore granted wage increases as compared to 65.3 per cent in 2023, according to the Ministry of Manpower’s Report on Wage Practices 2024 1. Despite this growth in earnings, there are still people who end up with no savings every month, specifically 29%, according to a survey done by Sun Life Singapore 2. These are what I call “100% spenders”; every dollar that comes in goes straight out, leaving no savings, let alone investments. On the surface, they may look financially comfortable, but in reality, they are only one emergency away from financial stress. When asked about their lack of savings, familiar replies surface: “Life is expensive in Singapore” or “I’ll save when I earn more.” But the real reason is not just the cost of living; it is also how easy spending has become, combined with a culture that encourages greater consumption as incomes rise. The Ease of Spending Take PayNow, for example. It has become second nature to users to scan a QR code and pay within seconds. A recent study found that 68% of Gen Z in Singapore prefer PayNow as their main mode of payment 3. This convenience is good for efficiency, but it also makes spending too easy. When spending cash, you physically see the notes leaving your wallet; a more conscious action which reminds you of your accumulative expenses over time. With PayNow and contactless credit cards, no physical cash leaves your hands, making it easy to lose track of how much you are actually spending. The same applies to installment plans. Platforms like Atome have become extremely popular, especially among younger consumers. Research shows that 77% of Gen Z in Singapore have used Buy Now, Pay Later (BNPL) services, compared with fewer than half of millennials and only 13% of boomers. 4 Atome alone has over 1.3 million registered users, mostly aged between 21 and 45. 5 It is not uncommon to see young clients juggling four or five instalments at once. Each one is small, perhaps a few hundred dollars for clothes or gadgets, but together they consume a large portion of monthly cash flow. Debt becomes normal before savings have a chance to take root. Lifestyle and Culture Technology is only part of the story; the bigger driver is lifestyle inflation and social pressure. As income rises, so do expectations. What was once a luxury — dining out, travel, or premium subscriptions — quickly becomes a necessity. Social media amplifies this, making conspicuous consumption part of everyday life, fueling consumers’ urge to “keep up”. The reality is that most adult Singaporeans understand the basics of savings, having been taught the mechanics of compulsory savings under the CPF scheme. The issue is not financial literacy but the gap between knowledge and action. It is less about what people know and more about taking responsibility for putting that knowledge into practice. Building Systems That Work Discipline and will power rarely sustain long-term financial change. What works far better is creating a system that makes saving automatic, much like CPF does. Create a personal CPF-like savings or investment account. As soon as your salary is credited, arrange for a fixed portion, usually 15 to 25 per cent, to be automatically deposited into this separate account. Treat it as untouchable. Over time, it will grow into an emergency fund, long-term savings, or investment capital. Reframe instalments. If you are comfortable committing S$100 a month to fashion or gadgets, why not redirect that same amount into a savings plan or a regular investment? When used wisely, instalments for regular savings can build assets, not debts. Manage lifestyle inflation. Rather than upgrading your lifestyle every time income increases, tie those upgrades to net-worth milestones. This helps to ensure lifestyle growth does not outpace wealth growth. The Results With systems in place, change often happens naturally. People who once struggled to save may find their balances growing steadily. Those who claimed “I just can’t save” realise they can, because the system does it for them. This is not about cutting out joy or living with harsh restrictions; it is about structuring finances so that both spending and saving are intentional. By automating positive habits, the cycle of being a “100% spender” can finally be broken. Final Thoughts In Singapore, spending has never been easier. With modern technology, every temptation is just a tap away. But while technology and culture encourage us to consume, only responsibility and structure can create long-term security. The key is to build systems that make saving and investing a habit, not a choice. That is how “100% spenders” transform into wealth builders — and achieve financial freedom. Contributor: Joshua Lim Wealth Manager Phillip Securities Pte Ltd (A member of PhillipCapital) https://bit.ly/TTPjoshualim Appendix: [1] https://www.ntuc.org.sg/uportal/news/Nominal-and-real-wages-grew-in-2024-but-are-expected-to-taper-in-2025/ [2] https://finance.yahoo.com/news/large-part-singapore-unprepared-retirement-123057707.html [3] https://www.xero.com/us/media-releases/digital-payment-trends-singapore-gen-z-leading-shift/?utm_source=chatgpt.com [4] https://www.channelnewsasia.com/today/big-read/buy-now-pay-later-debt-credit-4846131?utm_source=chatgpt.com [5] https://www.magzter.com/stories/newspaper/The-Straits-Times/YOUTH-IN-SINGAPORE-BUYING-INTO-BUY-NOW-PAY-LATER-SERVICES-REPORT?srsltid=AfmBOor-Ell17DenCu69OwzKn5QiL0V8nczkM5cCFGoKuiUwhSLZ58tY&utm_source=chatgpt.com Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.
Recognising Biases in Investing and Tips to Avoid Them
Common biases like overconfidence, herd mentality, and loss aversion influence both risk assessment and decision-making. Know the emotional and behavioral biases in investing. In investing, the biggest challenge is often not the market but our own minds. Emotions, habits, and common mental shortcuts can quietly steer decisions in the wrong direction. A Charles Schwab survey found that over 50% of retail investors make choices purely because of the fear of missing out (FOMO). Other influences such as confirmation bias, overconfidence, and the bandwagon effect can cloud judgment and lead to poor outcomes. But once you’re aware of these traps, you can take steps to avoid them and make investment decisions that truly work toward your financial goals. What Is Behavioural Bias in Investing? Behavioural biases are predictable psychological patterns in thinking that lead us away from logical, fact-based decision-making. For example, you hear that investors are rushing into a certain tech stock touted as "the next big thing". You purchase the stock at a premium without analysing the stock in detail. If the decision plays out in your favour, this flawed reasoning feels justified, which may encourage bigger mistakes in the future. If the stock falls, you realise that you were merely jumping on the bandwagon. 5 Common Investor Biases (and How They Can Hurt Your Portfolio) Herding - Chasing Hot Stock Herding happens when investors mimic the actions of others, assuming the crowd possesses superior information or due to a lack of confidence in their own analysis. This often results in chasing trends at the last minute, after most of the profit has been realised. Confirmation Bias Confirmation bias occurs when you consciously look for information that confirms your existing beliefs but dismiss evidence that proves the contrary. For instance, if you believe a technology company is a great investment option, you might only read positive articles and ignore any negative news about that company. Loss Aversion Loss aversion makes investors hold onto losing stocks longer than they ought to, in the hope of a recovery. The pain of a loss feels greater than the joy of an equivalent gain, causing poor decisions and prolonged losses. Overconfidence Overconfident investors overestimate their abilities and knowledge, believing they can outpace the market. This often leads to excessive trading, under-diversification, or unnecessary risks. Irrelevant Price Anchoring Anchoring bias occurs when investors become obsessed with certain prices, such as the previous high of a stock or the price they paid for, and makes irrationally buy or sell decisions consequently. Strategies to Mitigate Behavioural Biases Even though these behavioural biases can affect your investing strategy and reduce potential returns , there are ways to mitigate them. Do Your Research: Carry out fundamental and technical analysis before investing in a stock. This analysis helps you assess risks and returns objectively and choose the right stocks for your portfolio. Be Disciplined: Be it systematic investment, setting stop-loss levels, or asset allocation, discipline takes emotion out ofdecision-making and helps you stay consistent. How Phillip SMART Portfolio Can Help You Invest Bias-Free The Phillip SMART Portfolio is built to take emotion and bias out of investing: Cyborg Methodology – An algorithm processes over 1,000 data points daily, reducing reliance on emotions on trends, while experienced managers add market insight. Automated Rebalancing – Keeps your portfolio on track, avoiding panic selling, herding behaviour or chasing rallies. Professional Oversight – Experts manage your portfolio using a disciplined, research-based approach, countering overconfidence and confirmation bias. Low Entry Barrier – Start from just S$300, making it easier to begin investing steadily, reducing loss aversion and fear of entering the market. Customised Portfolios – Choose from Income, Growth, or US Equity profiles to match your goals and risk tolerance, preventing irrational anchoring to irrelevant benchmarks. Find out more about SMART Portfolio : https://smart.poems.com.sg/ Conclusion Behavioural biases are an inseparable part of the human psyche and making decisions that are completely free from these biases is often easier said than done. However, by developing a rational and focused approach, investors can avoid the pitfalls of these biases. Alternatively, you can also leverage the Philip SMART Portfolio that uses a data-driven strategy to grow your corpus and secure your future. Disclaimer These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.
