Fixed Returns or Stocks? The Great Investment Showdown!

At 52, Mr. Tan thought he had retirement all figured out. His investments in dividend-paying shares delivered healthy returns in the past, giving him confidence that his nest egg would keep growing. 

But with recent market swings cutting into his gains, he’s reconsidering his strategy. Fixed-return investments are starting to look appealing—a safer way to ensure a stable income, even if the returns are lower.

So, which path should he take? Or you for that matter. 

As we near retirement, the choice between fixed returns and stocks is more than just potential gains; it’s about balancing stability with growth. This article explores both options, weighing their strengths and weaknesses, and considers how BigFundr’s approach might offer the best way forward.

What are Fixed Return Investments?

Also known as fixed-income investments, fixed-return instruments provide you with a predictable income stream through regular interest payments over a set period. Typically, investors effectively lend money to an issuer—a government, corporation, or bank—in return for a promise of steady returns and the return of the principal at maturity.​

The appeal of fixed-return investments lies in their stability. They provide a buffer against the stock market's volatility, making them a preferred choice for investors approaching retirement or seeking a steady income. 

In Singapore, these instruments are seen as a safeguard against market fluctuations, appealing to those who prioritise capital preservation. While they may not yield as high a return as stocks, their predictability makes them a valuable part of a balanced portfolio.

What are Stocks?

Stocks (or shares as they are commonly known in Singapore) on the other hand, represent ownership in a company. When you buy shares, you purchase a small slice of the company itself, giving you a stake in its future performance. 

Unlike fixed-return investments, stocks don’t guarantee fixed income. Instead, they provide returns based on the company’s profitability and market performance​.

The value of stocks can increase—or decrease—based on a range of factors, from the company’s financial health to broader economic trends. This potential for growth attracts many investors seeking higher returns, though it also introduces greater risk. 

In strong bullish markets, stocks may appreciate significantly, rewarding investors with both capital gains and dividends. However, in volatile or bearish markets, the value of shares can drop quickly, posing a challenge for those nearing retirement.​

Stocks vs Fixed Returns

So which is better for you? This really depends on what you are looking for.

Stocks offer higher growth potential, with gains tied to a company’s success. However, they may also be volatile, meaning prices can drop sharply, posing risks for those needing stable returns.

Fixed-return instruments, on the other hand, provide you with more predictable income and lower risk. This makes them ideal for conservative investors. However, they may lower returns that do not keep pace with inflation.

In short, stocks bring growth and risk; fixed-return instruments offer security but limited returns. 

What We Recommend

Finding the right balance between stocks and fixed-returns depend on your stage of life, financial goals, and appetite for risk. Here’s a rough guide to help you decide:

Just Starting Out (Mid-20s to 30s)

Should you be in your 20s or 30s with years of earning ahead, taking on a bit more risk can work to your advantage. A portfolio with around 80% in stocks and 20% in fixed-return options allows you to capture the growth potential of shares over the long term. 

This allows you to take advantage of stocks’ tendency to recover and grow over time. At the same time, a small allocation to fixed returns provides you with stability without weighing down your growth.​

Growing Responsibilities (30s to Late 40s)

If you are in your 30s and 40s with a young family to care for, a balanced approach may make the most sense. Consider a 60/40 split—60% in stocks and 40% in fixed-return investments. 

Such an allocation allows for growth to support long-term goals, such as your children’s education or a potential home upgrade, while fixed returns can offer stability for the unexpected. At this stage, a diversified mix can provide peace of mind as it offers both growth and safety.​

Retirement on the Horizon (50s to 60s)

For pre-retirees and retirees, security takes priority. If you’re nearing or already in retirement, consider a 40/60 balance—40% in stocks, 60% in fixed-return instruments. This combination allows you to benefit from steady income, which can cover day-to-day expenses while keeping a modest stock allocation to offset inflation. 

A conservative approach guards you against market downturns, while maintaining some growth potential to preserve your purchasing power​.

How BigFundr Balances Attractive Returns with Financial Stability

BigFundr offers a tailored approach for investors seeking both security and attractive, inflation-beating returns. Here’s what sets BigFundr apart:

• Above-Inflation Fixed Returns: BigFundr’s property-backed investments offer interest rates exceeding 6%* per annum, providing returns that can keep pace with or even outstrip inflation, making them a solid option for wealth growth.
• Real Estate Collateral: Each investment is backed by physical real estate as collateral, offering a layer of security often missing from typical stock or fixed-income options. This ensures your investment is linked to tangible assets, reducing risk.
• Preserving Investor Funds: BigFundr offers a 3-layer system of safeguards, including the First Legal Charge on properties, personal guarantees by borrowers, and a buy-back provision by fund management companies. These defensive actions shield your capital and interest from potential defaults.
• Monthly Interest Payouts: Investors benefit from consistent, monthly interest payments, which can accelerate wealth-building while providing regular income.
• Low Entry Threshold: Starting with just S$1,000, BigFundr offers access to property-backed investments without the usual high costs of direct real estate ownership, making it accessible to a broader range of investors.

If you’re ready to begin or expand your real estate investment journey, consider starting with BigFundr’s low-risk, accessible options. Sign up today and take your first step toward financial independence through real estate debt investments.

(*Rates are as of December 2023 and may vary with market conditions.)

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Every investor's financial situation is unique, and investment decisions should be made based on individual objectives, risk tolerance, and financial position. We recommend consulting a licensed financial advisor or investment professional before making any investment decisions.