Best Short-Term Investments to Achieve Financial Independence & Retire Early (FIRE) in Singapore

Dreaming of Financial Independence, Retire Early (FIRE) in Singapore? As the cost of living rises, more Singaporeans are turning to short-term investments to fast-track their journey to financial freedom. 

According to a recent poll conducted by Singlife, only 55 percent of Singaporeans know how to achieve financial freedom. Participants indicated that they would need around $612,000 in cash to feel financially free—an 8% increase from the $566,000 reported in 2023.

Achieving FIRE isn't just about cutting back on expenses. Strategic investments play a crucial role in growing your wealth faster. While long-term investments are essential for financial security, short-term options provide flexibility and quicker access to capital.

In this article, you’ll learn about the principles of the FIRE movement, the benefits of short-term investments, and specific investment options like money market funds, peer-to-peer lending, real estate debt investing, and ETFs. We’ll also explore how BigFundr’s short-term investment products can help you achieve financial freedom while balancing growth and liquidity.

Understanding the FIRE Movement

An acronym for Financial Independence, Retire Early, the FIRE movement involves aggressively saving and investing a significant portion of your income at an early age. The goal is to build enough wealth to sustain your living expenses and retire decades earlier than the standard retirement age (currently 63 in Singapore).

As office politics, work stress, and retrenchments become more common in Singapore, many are drawn to the FIRE movement for a chance at a simpler, less stressful life. Our high costs of living and growing expenses in housing, healthcare, food, lifestyle, and transport make relying on employment income alone challenging. 

FIRE offers a way for one to take control of their financial future. It provides stability and freedom from the uncertainties of traditional work, and helps individuals live on their own terms.

To achieve FIRE, individuals often allocate 50–70% of their income towards savings and investments. By living frugally and maximising their investments, more and more Singaporeans are able to grow their wealth efficiently. The goal is to accumulate enough to retire early and withdraw sustainably—often targeting a 4% withdrawal rate annually.

Types of Short-Term Investments Suitable for FIRE

When pursuing Financial Independence, Retire Early (FIRE), short-term investments can provide flexibility, liquidity, and relatively quick returns. Below are four types of short-term investments, each with their benefits and risks.

#1 Money Market Funds

Money market funds are lower-risk investments that allocate funds into high-quality, short-term debt instruments like bonds and Treasury bills. They are designed to offer stable returns making them ideal for risk-averse investors.

Benefits:

• Low Risk: Fixed income with low exposure to the financial markets make this a stable option.
• Liquidity: Investors can easily access their funds without long lock-in periods.
• Steady Returns: While returns are modest, they are generally fairly consistent..

Risks:

• Lower Returns: The safety of money market funds comes at the cost of lower yields compared to other investment types.
• Inflation Risk: Returns may not keep up with inflation, which can erode purchasing power over time.

#2 Peer-to-Peer Lending (P2P)

P2P lending platforms connect investors directly with borrowers, allowing investors to earn interest in exchange for providing loans. The returns may be higher compared to traditional investments, but so are the risks.

Benefits:

• Higher Potential Returns: P2P lending can offer attractive interest rates, often higher than savings accounts or fixed deposits.
• Regular Cash Flow: Depending on the payout schedule, lenders may receive repayments in regular instalments.

Risks:

• Credit Risk: Borrowers may default on their loans, leading to potential capital losses.
• Lack of Liquidity: Unlike stocks or bonds, P2P loans typically have fixed terms, limiting your ability to exit early.
• Platform Risk: The platform itself may face financial issues, affecting the investor's returns​.

#3 Real Estate Debt Investing (Short-Term)

Real estate debt investing involves lending capital to property owners or developers, typically for short-term projects. These loans are often secured by real estate assets, providing added security. 

Benefits:

• Higher Returns: Compared to traditional fixed-income options, real estate debt investing generally offers higher yields.
• Collateral Security: The investment is backed by real estate as collateral, reducing risk. In case of a default, investors may have legal recourse to recover their funds by seizing or selling the property.
• Shorter Tenures: These investments are typically shorter in duration, with terms ranging from six months to three years. 
• Predictable Cash Flow: Investors often receive regular interest payments during the loan period, providing a steady income stream that can be reinvested or used to meet short-term financial goals​.
• Reduced Volatility: Unlike equities or stocks, real estate debt investments are less volatile and aren't subject to daily market fluctuations. This makes them relatively stable, especially for conservative investors.
• Diversification: Adding real estate debt to a portfolio can enhance diversification by including a different asset class, which doesn't always correlate with traditional investments like stocks or bonds.

Risks:

• Market Risk: Changes in property values or economic downturns can affect the borrower’s ability to repay.
• Illiquidity: Although considered short-term, these investments can still tie up funds for several months to years.
• Due Diligence: Investors need to carefully evaluate the borrower’s creditworthiness and the property’s value.

#4 Exchange-Traded Funds (ETFs)

ETFs are funds that hold a basket of securities such as stocks, bonds, or commodities. They trade on exchanges, allowing investors to buy and sell shares during the trading day. Short-term ETFs, focusing on bonds or specific sectors, provide liquidity and diversification.

Benefits:

• Diversification: ETFs spread your investment across multiple assets, reducing the risk compared to individual stocks.
• Liquidity: ETFs can be traded throughout the day, offering easy entry and exit.
• Lower Fees: Generally, ETFs have lower management fees compared to mutual funds​.

Risks:

• Market Volatility: ETFs can be subject to market fluctuations, especially in short-term sectors or high-yield bonds.
• Tracking Errors: Some ETFs may not perfectly replicate the performance of their underlying index.
• Exchange Rate Risks: For ETFs tied to foreign stock exchanges, fluctuations in currency exchange rates may erode your gains.

Strategies to Maximise Short-Term Investment Returns to Achieve FIRE

You need to proactively manage your short-term investments in order to achieve financial independence early. Here are some strategies to start you off with. 

#1 Diversify to Spread Risk

Diversification involves investing in different asset types to spread risk. By allocating capital across various investments—such as money market funds, P2P lending, real estate debt, and ETFs—you reduce the impact of poor performance in any single asset class. 

#2 Monitor and Rebalance Regularly

For your portfolio to meet your financial goals, you need to regularly monitor and rebalance your investments. Over time, certain investments may outperform others, causing your portfolio to drift from its original allocation. This may be dependent on the financial markets or prevailing economic conditions.

#3 Stay Informed on Market Trends

Keep yourself updated on market trends to make informed decisions and seize opportunities. Monitoring interest rate changes or economic shifts may help you decide when to increase allocations in money market funds or reduce exposure to riskier investments. Following financial news and reports can provide the insights needed for timely adjustments.

#4 Balance Short-Term Gains with Long-Term Financial Goals

While short-term investments can provide quick returns, do also keep your long-term FIRE goals in mind. Balancing between high-risk, high-reward investments with more stable, long-term assets ensures that short-term gains don’t derail your overall strategy. 

#5 Consider Compounding and the Rule of 72

Compounding plays a key role in accelerating wealth accumulation, even in short-term investments. The Rule of 72 is a useful tool to estimate how quickly your investments will double based on a fixed annual return. For example, if your short-term investment returns 6% per year, it will take approximately 12 years to double. Reinvesting your gains from these investments can significantly increase your long-term wealth.

BigFundr's Short-Term Investment Products

BigFundr is a Singapore-based investment platform that offers short-term investment opportunities focused on real estate-backed loans. Designed to meet the needs of investors pursuing Financial Independence, Retire Early (FIRE), BigFundr’s products provide attractive returns while maintaining low risk. 

The platform provides investment options with short tenures ranging from 6 to 18 months, making them ideal for those looking to grow their wealth in a relatively short period. This flexibility makes it easier for investors to manage their cash flow while staying focused on their FIRE journey.

Consider these key features of BigFundr:

• Competitive Returns: BigFundr offers competitive returns of up to 6.38% per annum, helping investors accelerate their wealth accumulation—critical for those aiming to retire early.
• Safe and Secure: The platform provides multiple layers of security, including a first legal charge on real estate and personal liability from borrowers, safeguarding your principal investment. Additionally, buy-back provisions further reduce the risk of loss.
• Stable Regular Income: BigFundr delivers predictable, regular income from interest payments, helping you meet short-term financial targets while reinvesting to maximise returns.
• Low Risk: BigFundr’s comprehensive security measures, such as collateral-backed loans and due diligence on borrowers, ensure your capital remains protected, allowing for peace of mind as you work towards FIRE.
• Professional Management: BigFundr’s experienced professionals handle the investment process from start to finish, freeing up your time to focus on other aspects of your FIRE plan.
• Ease of Reinvestment: BigFundr allows you to roll over your investments upon maturity, enabling you to take advantage of compounding. This feature helps investors maximise their returns, boosting the speed at which they reach financial independence.

With its blend of high returns, safety and security, and flexibility, BigFundr offers a solid option for short-term investors aiming to achieve FIRE in Singapore. Find out how you can get started here.

Conclusion

In summary, achieving FIRE in Singapore requires a strategic mix of short-term and long-term investments to balance risk, returns, and flexibility. By diversifying into options like money market funds, peer-to-peer lending, real estate debt, and ETFs, you can accelerate your journey to financial independence. 

Platforms like BigFundr provide tailored solutions with high returns and secure investments, helping you to meet your financial goals more quickly. Whichever path you take, do remember to consult your financial advisor and consider your own long-term financial plans.