By Chuin Ting Weber, CFP, CFA, CAIA
CEO & Chief Investment Officer, MoneyOwl
This is excellent work by Lianhe Zaobao Associate Business Editor Yuanwen Hu on CPF Ordinary Account investing.
Yuanwen approached me for views after my social media posts in early February about this.
There were strong calls then to invest CPF-OA to beat inflation, including a view that people cannot afford not to invest CPF-OA.
This was also soon after the CPF Special Account closure for 55 year and older members.
I was concerned.
Notwithstanding that MoneyOwl had collaborated with Phillip Securities Pte Ltd for DIY investors to access super low-cost Amundi global indexed funds without platform or advisory charges on POEMS.
Because investing CPF-OA is really not for everyone.
There’s a risk of everyday Singaporeans losing their hard-earned retirement money, as a result of chasing higher headline % return.
A long-enough investment time frame and other pre-conditions must first be present. As contained in the article attached below, and also in MoneyOwl’s article Investing your CPF OA, my decision rubric is as follows:
1. Put aside a sum in your CPF-OA for 6-12 months of mortgage payments in case you lose your job, and funds for property purchases and kids’ education.
2. Consider topping up your CPF Special Account or Retirement Account to at least Full Retirement Sum (FRS).
Jenson Chen, a young educator interviewed in the first few paragraphs of the article, shared that he had achieved FRS before investing his CPF-IS – he’s happy with both!
3. Have 8-10 years investing horizon
4. Have sufficient risk tolerance for a fund that has around 40%-60% equities. This goes hand-in-hand with time horizon. Below this level of equities, you might not get the long-term return at levels that beat CPF-OA’s rate.
5. Consider your strategy: global diversification and staying invested are key.
6. Consider costs of investing. Agent Bank fees make small-quantum investing costly.
Beyond my views, what Yuanwen has achieved is to nail down views from a full range of advisers – ranging from those who serve the mass market to an affluent market adviser to a roboadviser.
Earlier marketing messages notwithstanding, she achieved close to a professional consensus that CPF-OA investing is NOT suitable for EVERYONE.
I especially appreciate 高俊玮 of Financial Alliance highlighting that CPF investing might be only for a minority, because many people don’t understand their real risk appetite.
How apt, given the current volatile market!
Jit Hwee Foo from Providend also makes a good point that just because products are CPF-Investment Scheme approved, does not make them “safe”.
CPF Board spokesperson has also stated that all investments under CPF-IS comes with risk, and members should assess investments against their goals, time horizon and risk tolerance.
Sometimes, I wonder if it is worthwhile to post on social media.
This occasion encourages me that even a simple post can result in broader clarifications from the professional community, for the benefit of the many. ⭐
