T-Bills vs. Dividend Stocks: Why a 25-Year-Old Should Be Taking More Risk in 2026

The Smart Investor05-26

It is no surprise that many are looking at Singapore Treasury-Bills (T-Bills) especially with the market keeping everyone on their toes. But if you’re a 25-year-old investor, playing it too safe may ...

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cash-like instruments means you’re missing out on decades of compounding.\n\nLet’s look at why you might want to swap some T-Bill for dividend stocks.\n\nWhy T-Bills Have Become Popular Again\nIn a lower but visible interest rate environment, T-Bills become incredibly attractive for individual investors.\n\nJust like hugging your favourite pillow, the guaranteed, government-backed return with virtually no volatility provides a sense of security.\n\nYour initial capital is completely protected from market losses.\n\nT-Bills also provide predictable returns, letting you know exactly what you are getting from day one.\n\nWhat Makes Dividend Stocks Different?\nUnlike T-bills where you are lending money, you actually own a slice of a business when you buy a dividend stock.\n\nReturns from fixed-income instruments are stickily capped, but high-quality dividend stocks offer a three-in-one deal.\n\n1. Growing dividend income: As companies grow their earnings, they are likely to increase their payouts.\n\n2. Capital appreciation: Stock prices will grow over time as the business expands.\n\n3. Uncapped compounding: The sky is the limit when it comes to how much a successful business can grow.\n\nThe Key Advantage Young Investors Have: Time\nThe most valuable asset that we, young investors, have right now is time.\n\nWhen you have a long investment horizon, short-term market volatility matters less.\n\nPlus, having time on your side allows you to take your hands off the wheel and let compounding do the heavy lifting.\n\nThe Hidden Risk of Playing Too Safe\nAt 25, inflation is your ultimate nemesis.  \n\nSometimes, a T-bill’s yield looks great, but if inflation rises near or above that yield, your purchasing power gets quietly eaten away. \n\nTo make matters worse, while you can sell your T-bills on the secondary market before maturity, trading volumes are low and you may have to accept a price below what you originally paid.  \n\nFurthermore, you’ll miss out on the long-term equity growth.  \n\nOver the last few years, T-bill yields have fluctuated wildly, peaking around 4.4% in late 2022 before falling back around 1.4% in 2026 (and recovering slightly to 1.45% in the May 21 auction). \n\nHowever, compared to the Straits Times Index (SGX: ^STI), those numbers are negligible.The STI produced a massive 31% total return over the past year and an almost 62% return over the last five years. \n\nOver a 30- to 40-year runway, playing it too safe isn’t just costing you a few dollars; it can add up to hundreds of thousands of dollars in lost wealth.\n\nWhy Dividend Stocks Can Be Powerful for Young Investors\nIn our 20s, there aren’t as many rigid financial commitments as those faced by investors in their 30s – such as paying off housing mortgages or managing the expenses that come with raising children.\n\nTherefore, when dividend stocks pay out, you can always reinvest those funds to buy more shares. \n\nOwning more shares means more dividends, which can then be used to buy even more shares. It’s a massive snowball effect!\n\nNot to mention, high-quality businesses offer capital appreciation and dividend growth, giving a massive upper hand compared to T-Bills.\n\nDo keep in mind that when a company pays a dividend, its share price will naturally adjust downward on the ex-dividend date to reflect the cash leaving the business – this is a normal mechanical adjustment, not market volatility.\n\nCompanies like DBS Group (SGX: D05) or ST Engineering (SGX: S63) have a solid history of paying steady dividends.\n\n\nWith strong economic moats and industry dominance – and in the case of ST Engineering, massive order books – these companies provide incredibly resilient income streams.\n\nAdditionally, these companies actively increase payouts as they expand or as earnings grow.\n\nEven better, when corporate profits are exceptionally high, there might even be extra “special dividends” paid out to reward shareholders.\n\nAutomatically rolling these payouts back into the stock allows you to grow your holdings exponentially without touching your monthly salary.\n\nDiversification is vital to managing over-concentration risk, which is why many investors include real estate investment trusts (REITs) like CapitaLand Integrated Commercial Trust (SGX: C38U), or CICT, in their portfolios. \n\nWith the legal criteria requiring Singapore REITs to distribute at least 90% of their taxable income to enjoy tax transparency, owning CICT provides a highly reliable income stream generated from both retail and office rentals. \n\nFurthermore, CICT’s leases often include inflation-protection clauses.\n\nThis way, investors get returns that can comfortably beat inflation over time.\n\nWhen T-Bills Still Make Sense for Young Investors\nBut hold on, this doesn’t mean that you should completely ignore T-Bills.\n\nThey are a great place to store your emergency funds, short-term savings goals, or any capital you might need within the next few years.\n\nNot only does this add diversification and stability to your portfolio, but holding T-Bills also helps with risk management during uncertain global periods.\n\nA Smarter Approach: Balance Safety and Growth\nT-Bills and dividend stocks do not have to be mutually exclusive.\n\nA smart 25-year-old investor will use T-Bills to protect short-term cash needs, while maintaining heavy long-term equity exposure to build real wealth. \n\nAt the end of the day, your asset allocation should reflect your personal time horizon and goals. \n\nTilting your portfolio toward growth is historically the game-winning move.\n\nCommon Mistakes Young Investors Make\nWhile chasing the guaranteed returns of T-Bills when you get spooked by scary news headlines is comforting, you underestimate the massive power of compounding. \n\nOr even worse, selling equities to buy T-Bills during a market downturn locks in your losses and ensures you miss the inevitable market recovery.\n\nHigh-quality dividend stocks are not static. \n\nThey have the potential to grow their payouts and underlying stock price by double digits over the next decade. \n\nT-Bills returns won’t look that important anymore once you look at long-term total return potential.\n\nGet Smart: Risk it for the Growth\nSafety is comforting, but at 25, growth matters more. \n\nWhile T-Bills are great when it comes to protecting the money you have today, dividend stocks are what really build the wealth you need tomorrow.\n\nWant to achieve financial freedom? \n\nYou’ll need to make full use of time and have the conviction and stomach to take on the right kind of equity risk.\n\nWhat if the current “market turmoil” isn’t a crisis… but a setup?\n\nHistory shows most pullbacks don’t become crashes. The real edge is knowing how to act early. Our FREE report reveals the framework smart investors use. Download it now.\n\nFollow us on Facebook, Instagram and Telegram for the latest investing news and analyses!\n\nDisclosure: Charlyn T. owns shares of DBS.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":false,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":1,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"isLaohu8Offline":false,"tenantId":"TBGLOBAL","deviceId":"web-server-community-laohu8-v3","version":"4.44.1","shortVersion":"4.44.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2638563594","isCrawlerRequest":true}