- The Supplementary Retirement Scheme (SRS) is a voluntary savings scheme designed to help Singaporeans save more for retirement. SRS account holders can contribute varying amounts to their account at their own discretion. These contributions are eligible for tax relief and can be used to purchase investments.
- Investors can construct a portfolio through a four-step process for constructing and managing a portfolio – 1) determining inter-asset allocation, 2) determining intra-asset allocation, 3) product selection, and 4) risk management.
- In this article, we use MAPS portfolios as an example to show investors, step-by-step, how to construct and manage a globally diversified portfolio using SRS-approved funds.
What is the SRS and its benefits?
A four-step process for constructing a portfolio using SRS-approved funds
1. Determine your inter-asset allocation
Chart 1: MAPS portfolio inter-asset allocation across our five risk profiles
2. Determine your intra-asset allocation
Chart 2: MAPS portfolio intra-asset allocation for each risk profile
3. Product selection
Table 1: Example of a 50-50 equity-bond portfolio using SRS-approved funds, with our neutral geographical allocation
|
Category |
Product Name |
Weight |
|
SG-Centric Bond |
15.1% |
|
|
Global Bond |
10.0% |
|
|
Asian IG Bond |
7.5% |
|
|
EM Bond |
5.1% |
|
|
Global HY Bond |
7.6% |
|
|
Asia HY Bond |
4.9% |
|
|
US Equity |
10.6% |
|
|
Europe Equity |
10.6% |
|
|
Japan Equity |
3.0% |
|
|
Asia ex-Japan Equity |
12.6% |
|
|
LATAM Equity |
2.7% |
|
|
EMEA Equity |
2.7% |
|
|
China Equity |
2.5% |
|
|
Digital Economy |
Fidelity Global Technology Fund |
5.0% |
4. Risk management - Review and rebalance
Chart 3: Without rebalancing, a portfolio can drift significantly from target allocation over time, especially during market gyrations
Chart 4: Over the long-term, rebalancing (even if done annually) generates a higher portfolio performance than a buy-and-hold (no rebalancing) strategy
4. Risk management - Diversification
Table 1: Best-performing assets over the past five years (Ranked in terms of total returns)
An example of the merits of diversification
Chart 6 Comparison between a global equity, bonds, and 50/50 equity-bond portfolio over the long-term
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