For The Modern Singaporean Investor: Is Your Business Portfolio Leaking Cash Overseas?

As an investor, you meticulously track the expense ratios on your funds and the yield on your bonds. But what’s the ‘yield drag’ on the biggest asset in your portfolio—your business? 

For many Singaporean investors business portfolios, a silent cash leak in overseas operations is costing them more than any fund manager’s fee. This hidden inefficiency erodes profits and stifles international growth potential.

How To Fix The Money Gap?

There are a couple of ways you can solve this money gap in your investment deals. So here are a few of them that you may not know about. 

1. Diagnosing The ‘Yield Drag’ In Your Business Portfolio

Traditional international payments can act as a significant performance drag on your business assets. 

While cross-border flows represent only one-sixth of total transaction values, international payments generate up to SGD$200 billion globally in revenue, split roughly evenly between transaction fees and foreign exchange (FX) revenues. 

This equates to 27 per cent of global transaction revenues and is increasing by 6 per cent annually.  This isn’t a simple ‘cost of doing business’; it’s a direct reduction in your business’s annual return. 

A business generating  SGD$1 million in international revenue could be losing up to  SGD$60,000 a year to this inefficiency—capital that could be reinvested for growth.

2. Higher Tax Outgo

There are investors who are known to run tax-optimized portfolios that are often full of tax-inefficient investments such as bonds and FDs. Other than lower interest rates, they are often a powerful move. 

With a 3-year bank FD yielding a 5.4% yield, as post-tax returns of 3.78% in the 30% tax bracket. If they are adjusted for inflation, then the return will be negative. Instead of this, you should consider a more tax-efficient alternative, such as debt funds. 

Other than this, investors also evade tax not by taking advantage of certain tax provisions that are available under the law.  A couple of these can easily minimize your overall tax liability by dividing the investment between the husband and wife. 

With the harvesting tax losses, another provision is easily available for your usage. The LTCG can set off against both the short-term and long-term capital losses. But when it comes to STCG, it can set off against short-term capital losses. The best part is the gains in equities that can be set off against the losses in debt, gold, or property.   

3. Rebalancing Your Portfolio’s Financial Plumbing’

Smart investors diversify. This principle should also apply to your business’s finances. By incorporating a specialised platform to pay global business partners, you are essentially ‘rebalancing’ your operational Singaporean investor business portfolio away from high-cost, low-efficiency assets in traditional banking towards high-performance, low-cost alternatives in technology. 

Such platforms offer the ability to make payments in more than 40 currencies, providing greater flexibility and cost control. 

The goal is to plug those “cash leaks” by moving from a single-provider dependency to a more diversified one. Efficient model using modern financial technologies.

4. Taking Wrong Or No Actions

If you are trying to time the market by stopping and restarting the investment cycle. It can take a significant chunk out of your portfolio. Investors who are willing to sell in a fresh market usually peak. Expecting a correction that often regrets their own decision as the market keeps scaling to newer heights. 

Unless and until you require the money, the best decision is to stay invested in the market in order to capture the upside. It is important to weed out the chronic underperformers from the portfolio from time to time. 

Therefore, it is essential to reassess fund performance every 2-3 years.  That way, you are paying a huge opportunity cost if you remain invested in a low standard investments and laggards. 

This way, your profile can also be compromised if you continue to invest in dividend plans (now known as Income Distribution cum Capital Withdrawal plans) of mutual funds. 

When you are opting for this, you are withdrawing from your funds instead of infusing them. It is better to invest in the growth option and withdraw as per your needs. 

5. A Simple ‘Alpha’ Strategy: The Before/After ROI

This operational optimisation is not just about monthly savings; it’s about actively generating ‘alpha’ for your business asset. 

Businesses with optimised financial operations and higher profit margins can command valuations that are 15-20% higher upon exit compared to their less efficient peers. 

While high gross margins are desirable, they must be considered alongside customer retention rates. A simple comparison demonstrates the return on investment of making this change:

• Before Optimization: A business with  SGD$1 million in international revenue faces a 3-6% operational expense ratio on payments, equating to a  SGD$30,000 to  SGD$60,000 annual yield drag.
• After Optimisation: By shifting to a high-performance FinTech platform, the business reduces its operational expense ratio to under 1%, cutting the annual drag to less than  SGD$10,000.
• ROI: This creates an additional  SGD$20,000 to  SGD$50,000 in annual net profit, which, when capitalized at an industry multiple, can add significant value to the business’s eventual exit valuation.

Wrap Up

Treat your business with the same financial discipline you apply to your stock portfolio. By optimising its financial operations, you’re not just saving money—you’re actively generating alpha. Plugging these cash leaks is a proactive investment strategy that increases the annual return and long-term valuation of a key asset in your portfolio.

The potential ability to earn a tax-free capital gain on US stocks is a powerful tool in the Singaporean investor’s business portfolio. So, by focusing on growth stocks and maintaining a long-term perspective. It can help you maximize the benefits of this unique tax situation that you are in. 

Although you need to remember that when you are investing, it always carries a risk factor, so while the tax benefits are quite attractive, they shouldn’t be the only factor in your investment decisions.