Many CPF investors get their fingers burnt

[bellboy]

Many CPF investors get their fingers burnt

 

MOST investors who use Central Provident Fund (CPF) savings to invest would have been better off leaving their money in their Ordinary Accounts, according to the CPF Investment Scheme's (CPFIS) annual profit and loss report.

 

This is despite the good performance of investment funds included in the scheme.

 

In the financial year ended Sept 30 last year, 902,300 investors sold their CPFIS investments.

 

Only 15 per cent of them made a profit larger than the guaranteed annual 2.5 per cent interest rate for Ordinary Account savings. Another 45 per cent made profits of up to 2.5 per cent. The remaining 40 per cent made a loss.

 

Under the scheme, members can invest in CPFIS-included funds such as approved unit trusts and equity funds, as well as other investment products such as stocks and shares.

 

The CPFIS-included funds themselves have performed well.

 

They posted an average return of 5.17 per cent in the first three months of this year, according to a report by research firm Lipper last month.

 

The funds have grown by about 29 per cent over the past three years. But individual investors may perform poorly as a result of investing in riskier instruments instead of CPFIS-included funds, said experts.

 

The gap could reflect a difference in financial knowledge, investment skills and discipline, said Mr Lance Tay, chief executive officer of Tokio Marine Life Insurance Singapore.

 

"This can be improved with increased financial literacy and discipline, or with guidance from financial advisers," he added.

Barclays senior economist Leong Wai Ho noted that stocks and shares were subject to many more market fluctuations.

"It's better that people stick to professionally guided products like approved funds," he said. "That's more appropriate for something that's supposed to be a person's store of value, their life savings."

 

Earlier this year, Institute of Policy Studies research fellow Christopher Gee argued that the default risk-return balance on CPF savings is good enough for most members.

 

"A lack of adequate financial literacy among CPF members and potential retirees may result in sub-optimal decision-making," he noted.

 

On the one hand, fewer CPFIS investors are making losses now compared with the past decade. From 2004 to 2013, 47 per cent of them incurred realised losses, more than the 40 per cent who made a loss last year.

 

On the other hand, more investors used to earn profits above the 2.5 per cent Ordinary Account interest rate.

From 2004 to 2013, 18 per cent of investors did better, compared with 15 per cent in the last financial year. More than 25 per cent did from 1993 to 2004.

 

- See more at: http://business.asiaone.com/news/many-cpf-investors-get-their-fingers-burnt#sthash.QvQulhsB.dpuf

 

Edited June 15, 2015 by bellboy

[The_Bear]

Financial Literacy: You think you know

Financial Advisors: They think they know

Sub-optimal decision making: They know sh1t

 

Moral of the story: Dun Piak with CPF

[Pinobii]

I am not a risks taker

 

I think the interest rate for Cpf is so much better than bank and it makes sense to just leave the money in there and earn interests

 

Investment always comes with risk, need to be prepared to lose if it can't earn

[Throttle2]

Financial Literacy: You think you know

Financial Advisors: They think they know

Sub-optimal decision making: They know sh1t

 

Moral of the story: Dun Piak with CPF

Thumbs up

[Kopites]

I am not a risks taker

 

I think the interest rate for Cpf is so much better than bank and it makes sense to just leave the money in there and earn interests

 

Investment always comes with risk, need to be prepared to lose if it can't earn

You forgotten one very important point. Bank let you feel/touch the dollar notes. Cpf can only enlighten you to your wealth through the statement or your pc monitor screen.

 

Hahaha

[Joseph22]

In before people saying..

Gahmen propaganda to make u don't touch cpf mola

[Blackyv]

Just thinking, if I have extra 200k cash on hand rotting in bank and no use at all, does it make sense I place it in cpf, oa account? Just leave it there for 10yrs until I reach 55 then take it out depending I go with small, medium or large retirement sum. Earn 2.6% better than bank mah... Make sense?..

[Joseph22]

Just thinking, if I have extra 200k cash on hand rotting in bank and no use at all, does it make sense I place it in cpf, oa account? Just leave it there for 10yrs until I reach 55 then take it out depending I go with small, medium or large retirement sum. Earn 2.6% better than bank mah... Make sense?..

problem is we don't know if they will raise the min sum to how much.

[Blackyv]

problem is we don't know if they will raise the min sum to how much.

Ummm... Good point... But the money is still there until I kick the bucket and pass on to my family mah.... I might not enjoy the fruit of the interest but my family will... Hehehe..... Anyway, I think that's a bad idea overall... Hehe..

problem is we don't know if they will raise the min sum to how much.

Ummm... Good point... But the money is still there until I kick the bucket and pass on to my family mah.... I might not enjoy the fruit of the interest but my family will... Hehehe..... Anyway, I think that's a bad idea overall... Hehe..

[Joseph22]

Ummm... Good point... But the money is still there until I kick the bucket and pass on to my family mah.... I might not enjoy the fruit of the interest but my family will... Hehehe..... Anyway, I think that's a bad idea overall... Hehe..

 

Ummm... Good point... But the money is still there until I kick the bucket and pass on to my family mah.... I might not enjoy the fruit of the interest but my family will... Hehehe..... Anyway, I think that's a bad idea overall... Hehe..

Yes if u think of it that way. But here the people is not thinking about giving to their children mah.

[Throttle2]

Yes if u think of it that way. But here the people is not thinking about giving to their children mah.

Why not? Most of us are thinking of passing to next gen

[lausai88]

Just thinking, if I have extra 200k cash on hand rotting in bank and no use at all, does it make sense I place it in cpf, oa account? Just leave it there for 10yrs until I reach 55 then take it out depending I go with small, medium or large retirement sum. Earn 2.6% better than bank mah... Make sense?..

 

 

I waiting for this Singapore Savings Bonds, close to CPF interest rate and yet can withdraw anytime.

for details:

http://www.straitstimes.com/news/business/banking/story/singapore-savings-bonds-what-you-should-know-20150331

 

 

[Blackyv]

 

 

I waiting for this Singapore Savings Bonds, close to CPF interest rate and yet can withdraw anytime.

for details:

http://www.straitstimes.com/news/business/banking/story/singapore-savings-bonds-what-you-should-know-20150331

 

 

I also aware of it and waiting...Hehe

[Sabian]

 

 

I waiting for this Singapore Savings Bonds, close to CPF interest rate and yet can withdraw anytime.

for details:

http://www.straitstimes.com/news/business/banking/story/singapore-savings-bonds-what-you-should-know-20150331

 

 

Can't wait for it to be launched. FD rate is like shit.

 

Those on DBS FHR home loan better hope DBS has ample liquidity.

[Joseph22]

Why not? Most of us are thinking of passing to next gen

Because a lot of ppl here always complain only die then can take out money.

[Dumb]

Just thinking, if I have extra 200k cash on hand rotting in bank and no use at all, does it make sense I place it in cpf, oa account? Just leave it there for 10yrs until I reach 55 then take it out depending I go with small, medium or large retirement sum. Earn 2.6% better than bank mah... Make sense?..

You may be willing to put in 200k, but too bad, they wont accept your 200k. Max voluntary contribution is 31,450 per year less contribution from your employment. The VC will go to all 3 accounts and not for you to choose. Even top-up to SA is limited to 155k less what you have in your SA.

 

But there is a way for that if you have used your CPF for housing. You can use your cash to refund the principal amount withdrawn. If you refund accrued interest as well, you can't service any existing outstanding loan with cpf, unless you get a lawyer to reinstate the monthly instalments.

Edited June 21, 2015 by Dumb

[Blackyv]

You may be willing to put in 200k, but too bad, they wont accept your 200k. Max voluntary contribution is 31,450 per year less contribution from your employment. The VC will go to all 3 accounts and not for you to choose. Even top-up to SA is limited to 155k less what you have in your SA.

 

But there is a way for that if you have used your CPF for housing. You can use your cash to refund the principal amount withdrawn. If you refund accrued interest as well, you can't service any existing outstanding loan with cpf, unless you get a lawyer to reinstate the monthly instalments.

Ummm.. Good info... So, 'best' option is to put in every year the max allowable ... Exempt from income tax also right?....

[Dumb]

Best option depends on individuals. Those with extra money and plan to use CPF as one of their retirement plans or investment portfolios is to put as much money in SA beyond the min sum of 155k.

 

It appears the CPF intends to increase the min sum annually by about 3.5%. So if you already have 155k in SA, the annual increase in min sum would not impact you as the interest earned on the SA at 4% will make up for the increase, besides contributions from your employment. That is to say, the SA will outstrip the min sum and the gap gets wider. At age 55, the excess SA over the min sum can be withdrawn if you want to. But if you don't, the excess will remain in the SA and continue to earn 4% assuming they don't reduce the interest rate. Anyway, even if they reduce the rate in future to a rate not to your liking, you can still withdraw the excess anytime.

 

Those with load of CPF at age 55 and beyond and have met the min sum, have the advantage of earning min interest rate 2.5% on OA and 4% on SA and MA - better than any fixed deposits or treasury bills and yet the money can be withdrawn anytime. They also have the advantage to withdraw interest on OA, SA and MA earned up to the month before withdrawal, anytime during the year. Such interest can be substantial if the amount in OA, SA and MA is substantial especially if interest is withdrawn in Dec of each year.

 

Hopefully, the CPF will not try to fix this part of the "advantages".

 

Not too long ago, I was fixed by them. I have been nominated to receive a deceased's CPF comprising OA, SA and MA. In the earlier years, these accounts were earning interest at the respective rates and I choose not to withdraw the CPF. Then not too long ago, they changed the rules and merged all amount in SA and MA with OA. So there is no SA and MA anymore. Not only that, they also introduced rule that if the money is not withdrawn within 7 years from date of death, the amount in OA will cease to earn interest.

Edited June 22, 2015 by Dumb