Is Your Portfolio Risk-Free? Here's Why You Need to Diversify Your Portfolio

You've taken the time to build your portfolio with care, selecting assets you believe will protect and grow your wealth while minimising risk.

But is your portfolio truly risk-free? 

From the International Monetary Fund (IMF) forecasting a more sluggish period of economic growth in Singapore, to a global market bracing for its most volatile year since the pandemic, the investment landscape appears to be anything but stable. 

In times like these, individual investors may believe that it’s better to stick with what feels safe. However, true financial safety doesn’t come from avoiding risk entirely — it comes from managing it wisely.

Now with that in mind, let’s break down the reality of investment risks and explore how portfolio diversification is one of the most effective ways to protect your investments. Along the way, we’ll also show you why alternatives like fixed income securities could be exactly what your portfolio needs.

Why No Investment Portfolio Is Ever Truly Risk-Free

The concept of risk in investing isn’t just limited to dramatic market crashes or the major recession that comes along every decade or so. Investment risk can appear in many different forms, and even the most secure investment decisions come with some level of risk. 

Here are just some of the types of investment risks your portfolio could be exposed to right now:

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Our breakdown of investment risks in the table above shows that no product is truly immune to factors like market shifts and monetary policy. If anything, “safe” investments simply mean that they are less volatile choices, and not necessarily zero-risk ones. 

So what’s the solution? 

Diversification. 

There’s no magical portfolio combination that can truly protect you from all risk. That’s why smart investors diversify their exposure by spreading their investments across different asset types, sectors, and instruments.  

Adopting this strategy allows you to limit your exposure to any one source of investment risk.  Diversification may not guarantee zero risk, but it’s one of the most effective tools you have for creating a rewarding yet low-risk investment portfolio. 

The Impact of Monetary Policy on Investment Risk

‍Monetary policy plays a big role in influencing investment risk. While not immediately obvious, its effect on investment risk cannot be understated enough.

Central banks, such as the Monetary Authority of Singapore (MAS), control key levers of the economy, including interest rates and liquidity levels. When central banks raise interest rates, borrowing becomes more expensive, and asset prices — including real estate, equities, and bonds — often decline as a result. Conversely, when rates are cut, liquidity increases, risk appetite grows, and asset valuations tend to rise.

For fixed income investors, this environment presents a double-edged challenge: not only do traditional savings vehicles offer almost no real return after inflation, but yields on publicly traded bonds and other income-generating assets also fall. Investors seeking predictable income are often pushed towards alternatives like private credit, where returns are less directly tied to central bank policies and more dependent on asset quality, loan structures, and borrower strength.

In Singapore, however, the Monetary Authority of Singapore (MAS) utilises the exchange rate, as opposed to interest rates, as its primary policy tool. However, the MAS's decisions still have an indirect impact on local interest rates. 

When interest rates rise as they did globally through 2022 and 2023 — the value of existing bonds will usually fall. This is because new bonds now offer higher yields, making the older ones less appealing to investors. 

Now, let’s say you’re an individual investor who holds long-term bonds. As interest rates rise, the market value of your bonds falls and if you need to sell before maturity, you may be forced to accept a loss. 

But even if you hold the bonds to term, the real value of your returns may be eroded by higher inflation and opportunity costs from newer, higher-yielding instruments available in the market.

As a result, what may have initially appeared like a safe, low-risk asset can suddenly pose risks of price volatility and capital loss, especially if bonds are sold before maturity.

On the flip side, falling interest rates may see investors struggling to secure reliable sources of yield from sources such as government bonds. As a result, individual investors may push themselves to take on higher risk in markets that are unfamiliar to them. This situation exposes investment portfolios to greater risk and volatility. 

For these reasons, it’s important that individual investors in Singapore keep a close eye on how monetary policies can influence the real returns of their investment portfolios. 

The Role of Fixed Income Securities in a Diversified Portfolio

Simply put, a diversified portfolio means that you haven’t put all your eggs in one basket. 

When you spread your investments across varied asset classes, like stocks, bonds, and real estate, you help make sure that no single market event will derail your entire portfolio. 

The idea is to hold a mix of assets, each of which responds differently to economic conditions. By doing this, you reduce overall risk and boost the likelihood of receiving stable, long-term returns on investment. 

So, where do fixed income securities come into play?

Fixed income securities are investments that provide regular, predictable returns in the form of interest payments over a set period of time. Compared to a volatile asset class like stocks, fixed income securities offer more stability and certainty to your portfolio. 

Fixed income securities are so stable because their returns are locked in. Your yields won’t change with the stock market or rely on how well the issuing company is performing. Think of this investment type as a steady anchor that will help balance your overall portfolio and reduce exposure to major risks. 

In Singapore, some fixed income securities you can choose to invest in include:

• Government bonds issued by local or national authorities, such as the Singapore Savings Bonds (SSBs). With SSBs, investors benefit from a government-backed guarantee as well as liquidity, which means they can redeem at any time with no penalties.
• Corporate bonds issued by private companies. Because there is a heightened credit risk, these bonds typically offer higher yields than government bonds. Singapore's stable business environment makes corporate bonds an attractive choice, but be sure to carefully research the issuing company and their creditworthiness before investing. 
• Private credit is a loan made directly between a non-bank lender and a business, usually a small to medium-sized enterprise (SME). This model provides businesses that may not qualify for conventional bank loans with an avenue to access capital. 

How BigFundr Helps Investors Build a Balanced, Risk-Aware Portfolio

BigFundr understands that building long-term wealth isn't just about chasing returns, it's about managing risk and curating a resilient portfolio that can weather changing market conditions.

Our model ensures that individual investors can now access professionally vetted fixed income and private credit investments that are safe, accessible, and transparent. 

We are dedicated to robust risk management and capital preservation:

• BigFundr’s real estate-backed loans are based in developed countries like Singapore, the United Kingdom (UK) and Australia.
• All our projects are thoroughly verified by independent legal experts to ensure full legal compliance according to the local laws. 
• We lend only up to 70% of a property's value, providing you with a 30% safety cushion in case property prices decline. 
• Every loan must undergo a stringent evaluation process by the financial analysts and investment experts at  BigFundr before it can be listed on our platform.
• All our transactions and repayments are conducted in Singapore Dollars, protecting you from the risk of foreign exchange losses. 
• Your money will be held in a dedicated trust account with DBS Bank, one of Singapore’s most reputable financial institutions, until it can be disbursed. 
• If a borrower defaults, BigFundr is first in line to recover funds through the sale of the property. We can also pursue the borrower for any shortfall, offering three layers of protection.

By investing through BigFundr, you’ll have access to a diversified portfolio of income-generating fixed income and private credit opportunities, all designed to deliver steady returns within a secure, risk-managed environment.

It’s Not About Avoiding Risk — It’s About Managing It

Expecting a zero-risk investment environment is not realistic, but managing risk intelligently and effectively is something every individual investor in Singapore can do. 

The key is portfolio diversification, and fixed income investments will help you build a portfolio that balances growth, stability, opportunity, and protection. 

Are you ready to rethink how your portfolio is structured? 

If you want to explore low-risk investments in Singapore that still yield meaningful returns, BigFundr can help you create a balanced, risk-aware portfolio. Our carefully vetted fixed income and private credit opportunities are designed with capital preservation and risk mitigation measures so you can invest with confidence. 

Discover fixed income investment options on BigFundr today! You can also talk to our experts about your portfolio diversification strategy and explore our services.  

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