Inflation, the general increase in prices and fall in the purchasing value of money, is a phenomenon that affects all economies to varying degrees. Singapore, as an emerging economy with a high standard of living, is no exception. Inflation erodes the value of savings and investments over time, making it crucial for investors to identify appropriate strategies to grow their wealth during inflationary periods.
One of the most popular ways to invest during inflation is through mutual funds, which pool money from multiple investors to purchase a diversified portfolio of assets. This article will discuss the best mutual funds to invest in during inflation in Singapore. These funds have consistently outperformed the market and provided investors stable returns even during high inflation.
Government bond funds
Government bond funds are a low-risk investment option that can provide stable returns during periods of high inflation. These funds invest in fixed-income securities issued by the Singapore government, making them relatively less volatile than other funds. The interest rates on these bonds are typically linked to the inflation rate, ensuring that investors receive returns that keep pace with rising prices.
One example of a government bond fund in Singapore is the ABF Singapore Bond Index Fund. It tracks the performance of a basket of AAA-rated bonds issued by the Singapore government and provides investors with a steady income stream through regular interest payments. This fund has consistently outperformed the market during periods of inflation, making it an attractive option for risk-averse investors.
Another top-performing government bond fund is the Nikko AM Singapore STI ETF, available when trading with Saxo Bank Group. While this fund invests primarily in stocks, a significant portion of its assets are also allocated to government bonds. This diversification allows investors to benefit from potential capital gains from stocks and stable income from bonds during inflationary periods.
Real Estate Investment Trusts (REITs)
REITs are an attractive investment option during periods of high inflation as they provide investors with a regular income stream through rent. These trusts invest in income-generating properties such as commercial, retail, and industrial real estate. The rental income received by REITs is typically linked to the inflation rate, ensuring investors receive returns that keep pace with rising prices.
One of the top-performing REITs in Singapore is CapitaLand Mall Trust. This trust invests in a diversified portfolio of retail properties and has a track record of providing stable returns even during inflationary periods. Another popular option is Ascendas Real Estate Investment Trust, which focuses on industrial properties. This REIT has performed well during inflationary periods, providing investors with stable returns through its portfolio of high-quality properties.
Dividend stocks
Investing in dividend-paying stocks can also be a profitable strategy during inflation. These stocks distribute a portion of the company’s profits to shareholders, providing investors a steady income stream. During periods of high inflation, companies tend to increase their dividend payouts to keep investors’ returns in line with rising prices.
One example of a top-performing dividend stock in Singapore is DBS Group Holdings. As one of the largest banks in Southeast Asia, DBS has consistently paid dividends and increased its payout ratio over the years. Another attractive option is Hong Kong Land Holdings, which invests in premium commercial and residential properties in Singapore. This company has a track record of providing stable dividends to its shareholders, making it an attractive option for investors during inflation.
Gold funds
Investing in gold can act as a hedge against inflation, as its value tends to rise during periods of high inflation. Gold funds are mutual funds that invest in a portfolio of gold-related assets such as physical gold, mining stocks, and futures contracts. These funds expose investors to the precious metal without the hassle of physically storing and securing it.
One of the best-performing gold funds in Singapore is the Phillip Gold ETF. It tracks the price performance of physical gold and has consistently outperformed other gold funds during inflationary periods. Another popular option is the United Global Precious Metals Fund, which invests in gold and silver mining stocks. This fund has given investors strong returns during inflation due to the increasing demand for precious metals.
Commodity funds
Commodities such as oil, natural gas, and agricultural products tend to increase in price during inflationary periods. Investing in commodity funds allows investors to gain exposure to these assets without directly investing in the physical commodities.
One of the best-performing commodity funds in Singapore is the LionGlobal Commodity Fund. It invests primarily in commodities such as oil, natural gas, and precious metals and has a record of providing solid returns during inflationary periods. Another option is the Nikko AM Singapore STI ETF, which has exposure to commodities through its holdings in various stocks.
Commodity funds are more volatile than other funds, and investors should be prepared for fluctuations in their portfolio value. However, during periods of high inflation, they can provide significant returns to investors.