What to Do With Your Spare Cash When Markets Are Volatile

It seems like everyone around you is suddenly a market expert, casually talking about their latest stock wins¹ over lunch. Meanwhile, you're staring at your bank balance, wondering whether keeping spare cash is being financially sensible, or just indecisive.

You want your savings to grow, but volatile markets don't exactly give you the vote of confidence to invest. Put your cash into the market now and it could fall shortly after. Keep it in the bank and your money stays accessible, but depending on the account, the interest you earn may still lag behind inflation². 

Here's the thing: not every dollar needs to be invested, and not every dollar needs to sit in cash either. Instead of trying to predict what markets will do next, start by asking a more useful question: When will you need this money?

Splitting your cash according to your time horizon can help keep your short-term finances stable while putting it to work towards your longer-term goals. 

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1. When market signals get confusing 

Markets move for all sorts of reasons, from economic data and interest rates to government policies and investor sentiment. Lately, the headlines can feel particularly confusing.

Singapore's economy is expected to grow strongly³, with the GDP growth forecast upgraded to 4.5% to 5.5%. At the same time, everyday expenses remain elevated with household electricity tariffs rising 17% and gas tariffs increasing 7.1% from July to September. 

When positive economic headlines sit alongside rising living costs and uncertain markets, it can be difficult to know whether your spare cash should be kept accessible, invested or set aside for a specific financial goal.

So, what are you supposed to do with your spare cash? It's easy to get caught between two perspectives and end up with decision paralysis:

• Fear of missing out: Markets are going up, so keeping cash in the bank can feel like missing an opportunity.
• Fear of losing money: Markets can turn quickly, so you may prefer keeping everything somewhere safe and accessible—in case of rainy days.

Neither reaction is necessarily wrong. The problem comes when market uncertainty leaves you doing nothing indefinitely. Rather than trying to call the next market move, give your money a job based on when you need it.

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2. Separate your cash into different buckets

Not every financial decision needs to be a market call. Your bank balance may look like one pool of money, but not every dollar has to serve the same purpose.

Emergency savings

The money you may need at short notice, such as for an unexpected medical bill, urgent home repairs or a sudden loss of income.

A common rule of thumb⁴ is to keep around 3 to 6 months of essential expenses in readily accessible savings. For example, if your household needs about $4,000 a month for essential expenses, that could mean keeping roughly $12,000 to $24,000 in an accessible account.

The exact amount depends on your circumstances, but the key point is the same: emergency money should be easily accessible and not dependent on market conditions.

Money you'll need within 12 months 

This includes a holiday, annual insurance premiums, renovation payments, school expenses or other large bills you already know are coming. If you will need the money next year, putting it into something volatile may not be sensible. All it takes is being forced to cash out during a market downturn and you may end up with less than you originally invested.

In this case, capital preservation and certainty may matter more than chasing higher potential returns.

Long-term capital

Money earmarked for goals in the next 10 to 20 years, such as retirement, or your children's education. With a longer horizon, you generally have more room to ride out short-term market fluctuations. 

Depending on your risk tolerance and financial goals, investments such as diversified equities or long-term investment products may have a role to play.

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3. Two plans, two time horizons: How Etiqa Growth Assure II⁵ Fits 

You may have cash that you don't need immediately, but you're also not comfortable locking it away for the next decade either. It helps to think about your short- and long-term financial plans together.

For instance, you can allocate part of your finances towards a longer-term insurance or retirement plan, while considering a separate short-term product for cash that you can comfortably set aside for a year.

Start with an eligible Etiqa regular-premium insurance plan to support your long-term financial goals, and complement it with Etiqa Growth Assure II⁵, a one-year single-premium endowment plan designed for funds that you can comfortably set aside for one year to meet your short-term financial goals. Find out more about Etiqa Growth Assure II⁵ here.

Here’s how it helps to serve people from different life stages: 

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4. How Etiqa Growth Assure II⁵ works

Etiqa Growth Assure II⁵ is a one-year, single-premium endowment plan. You make a one-off premium payment, and the plan matures after one year.

Since these are two separate plans, you’ll have two separate premium commitments. Your regular premiums go towards the eligible insurance plan, while the one-off premium goes into Etiqa Growth Assure II⁵ for qualifying cash you can set aside for one year.

The guaranteed maturity return depends on the eligible Etiqa insurance plan it is paired with:

• 2.26% p.a. guaranteed maturity return when paired with Enrich income or  Enrich flex plus.
• 4.88% p.a. guaranteed maturity return when paired with selected other eligible Etiqa insurance plans.

After one year, Etiqa Growth Assure II⁵ matures and pays out its guaranteed maturity return, while your regular-premium plan continues accordingly.

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5. Final words

Unlike exams, there’s no answer sheet for what markets will do next. Waiting for the “perfect” time to invest could leave your money sitting in cash for longer than planned. A useful starting point is to consider when you may need the money. 

Keep your essential funds accessible, consider options that fit your timeframe and risk tolerance, and work out a longer-term financial plan.

If you’re balancing both short- and long-term goals, Etiqa Growth Assure II⁵ can cover the short-term by offering a one-year guaranteed maturity return of 2.26% p.a. or 4.88% p.a., depending on the eligible plan selected. The paired regular-premium insurance plan can then support your longer-term financial goals.