Ask Me Anything: CPF

This month we dive into your questions about CPF. We share what funds you can invest with your CPF, how to choose between funds for your investment and many more.

8 April 2022

Investments, AMA, CPF

Note: It was announced in November 2023 that MoneyOwl will be acquired by Temasek Trust to serve communities under a re-purposed model, and will move away from direct sale of financial products. The article is retained with original information relevant as at the date of the article only, and any mention of products or promotions is retained for reference purposes only.

______________

An exclusive MoneyOwl blog series where you write in with your personal finance questions and our team will be on-hand to assist you. In this special edition of Ask Me Anything, MoneyOwl’s Head of Solutions and Investment Lead Lena Teng answers your pressing questions on CPF.

Question: What are my investment options under MoneyOwl’s CPF portfolio?

“There are three CPF portfolios that you can choose from based on your risk profile. These portfolios are made up of a combination of two funds in different proportions, i.e. LGI Infinity Global Stock Index Fund share class C and the United SGD Fund share class D.

We have chosen these two funds for our CPF portfolios as they combine well to help you achieve the best probability of a successful investment experience, according to your risk, ability and willingness to take risks. We know from decades of data that “active” fund management has had a poor record in equity markets. A much more reliable way to capture equity returns is to invest passively or systematically in a globally diversified, market-based fund, and to combine this with a bond portfolio where there is a need to dampen portfolio volatility.”

“Currently you cannot do SA shielding through MoneyOwl’s CPF portfolios. If you plan to proceed with SA shielding after considering the potential benefits and risks of doing so, these are some of the funds which you may want to consider. United SGD Fund, Nikko AM Shenton Short Term Bond Fund, or LionGlobal Short Duration Bond Fund. As always pls do your own research! For more information on SA shielding, read this article.

Question: Is MSCI the same as IWDA?

“The MSCI World Index represents about 1,500 of the biggest companies by market capitalisation in the developed world. You cannot invest directly in MSCI World Index, rather investors use instruments like IWDA (an ETF listed on London Stock Exchange) or an index fund like Infinity Global Stock Index Fund to replicate the same holdings and exposure, in order to track the index performance less a small fee. It is a passive way of investing without trying to stock pick or market time.”

Question: Is there anything I should consider before investing in my CPF savings?

“The two important considerations before investing your CPF are 1. whether you will need this savings within the next 3-5 years (such as for buying a house, children’s education etc.) and 2. whether you will potentially be able to do better than the risk free rate of 2.5% or 4% (for Special Account). As a guideline, we DO NOT recommend that you invest your SA as the risk free rate is just that hard to beat.

For those who are approaching 55, you may also want to consider the option of transferring your OA savings to SA to earn the higher interest with minimal lock in period and without having to take market risk.”

Question: What would the CPFIS advisory fee be after 2022?

“For 2022, there is no advisory fee for investing your CPF with MoneyOwl. From 2023 onwards, the advisory fee will be no more than 0.4% p.a. of the value of your investments. We will continue to absorb platform fees charged by iFast for both cash and CPF investments for all our clients.

The advisory fee is MoneyOwl’s fee for providing advice to you, in terms of risk profiling, asset allocation, fund selection, rebalancing, performance monitoring and risk coaching. Our advice is delivered through our robo-advisory platform that we maintain at the highest security standards, and through our large team of advisers and investment specialists who are full-time, salaried professionals. We are confident that over time, you will find value in our advice which is not only conflict-free, but among the most holistic you can find in the mass market.”

Have a question of your own? Write in to askmeanything@moneyowl.com.sg and look out for our Moneyowl answers in upcoming months. We also have a live AMA session on Instagram – so follow us now for more updates!