CPFIS Guidance Please

[Traumfanger]

Hi,

Recently I chanced upon CPFIS and read their latest (simplified) report. I have a few questions:

I feel that this is a better choice for my girlfriend's father than the current WLP he is having. He says he has trouble saving and thus use this to force himself to save. Then I chance upon this and thought it would be a better way to 'force' him to save too, rather than to feed his money to the Agents and Insurance company.

1. From the above report, it's Unit Trust and ILP that are listed. Can anyone share with me which UT or ILP are worth looking at?

2. Other than UT and ILP, we can't channel CPF monies to other investment products like, ETF?

3. Any sad stories of this investment method (CPFIS)? I ask this because, for every successful people, there are dozens more failures.

Thanks in advance.

EDIT: for POSB, I see that we can invest in quite a number of things. So investing through Bank using CPF provides more variety ?

[Temperament]

For me, i am waiting to use fund from CPIFS to invest in "STI ETF" for the long term when market's condition is more favorable. Don't ask me about market's condition because everyone of us will have different criteria.

[freedom]

from my limited understanding, CPFIS is just a scheme for you to invest your CPF money. There are all kinds of product available for CPF investment such as gold, etf, insurance product, saving product etc.

available for CPFIS does not make a product better than other or less risky than other.

[d.o.g.]

CPFIS merely refers to the use of CPF money to invest. It is not something you put money into, it is merely a channel to invest, just like your stock brokerage account is not something you invest INTO, it is something you USE to invest. In terms of WHAT you can invest in and HOW MUCH you can use, OA has more flexibility than SA.

1. Fund Selection

Try asking on Fundsupermart's forums. There are many more people there who look at funds and you may get better insights there. The Topic "Asia ex Japan Markets " has 8000+ posts, surely there is something useful there. 10+ years ago when I was looking at funds, the better managers in terms of track record seemed to be Schroders and Aberdeen.

However, Schroders lost their star manager (Ng Soo Nam) a long time ago so the product today is not the same - like the way the Chicago Bulls NBA team no longer has Michael Jordan so they are clearly a different team.

As for Aberdeen, it is still led by Hugh Young, possibly one of the rare value investors who is running a fund available to retail investors. However you must understand that the Aberdeen funds sometimes buy huge stakes in companies e.g. they own 11% of ST Engineering, 19% of City Developments, 10% of Eu Yan Sang, 8% of WBL etc.

Aberdeen's stakes are enormous relative to trading volume, which means that there is no way that Aberdeen can sell without destroying the share price. Economically, they have "married" these companies with no possibility of divorce. If you buy into Aberdeen's funds, recognize that you will be owning such companies forever. Good if the underlying economies are in a terrible recession (you are getting these companies cheap), bad if they are booming (you are buying the same companies at expensive prices). FWIW Asia does not appear to be in a bad recession yet.

2. Investment Choices

CPF can be used to buy stocks, ETFs/Unit Trusts/ILPs, property, single premium insurance policies, and gold. The actual amount usable depends on category - gold is 10% of OA I think, stocks are 35%, ETFs/UTs/ILPs 100%, property 100%. These are after the first $20k lockup which cannot be invested (not sure if property is subject to the $20k lockup). If you log in to your CPF account they will tell you the actual dollar amount you can use - it is recalculated only once a month, so be careful if you are near your limit.

3. Sad Stories

According to past reports in the media and by the CPF itself, most of the people who invested directly in the stock market using their CPF lost money. Hence the restrictions (only a small percentage of the funds, and no withdrawal of profits).

Previously the amount allowed was higher and people were allowed to withdraw profits. This was at/near the dotcom boom period so a lot of people rushed into the stock market and got badly burnt. The government realized that if too many people lost all their CPF it would become the government's problem, so they drastically restricted the use of CPF in the stock market. The UTs apparently lost less money, so people were allowed to continue investing 100% of their OA into them.

[Muck]

Hi Traumfanger,

Wish to highlight that the opportunity cost of investing using Cpf OA is a nearly risk-free return of 2.5%.

If I may be blunt, the qns you have posed offer the impression that you may not be too familiar with investments. Whilst it is certainly not my business, may I suggest you refrain from proffering any investment advice to your gf's father as that would not be a responsible thing to do if it is indeed true that you are not familiar with investments.

[Traumfanger]

Thanks d.o.g. and others for sharing. I will take a look around at fundsupermart.

Hi Traumfanger,

Wish to highlight that the opportunity cost of investing using Cpf OA is a nearly risk-free return of 2.5%.

If I may be blunt, the qns you have posed offer the impression that you may not be too familiar with investments. Whilst it is certainly not my business, may I suggest you refrain from proffering any investment advice to your gf's father as that would not be a responsible thing to do if it is indeed true that you are not familiar with investments.

My knowledge of investment is neither zero nor on the high side, below average I would say. I am very willing to learn, and I am very glad there are people around here to share. Thank you for advising me, but I think you have misunderstood me.

The current WLP that her Dad have does not serve his purpose to save for retirement. I have read sufficiently on insurance from here, HWZ, TKL blog, etc. and done up a calculations base on his BI and it is really not a sensible one. I did not enforce that they have to redraw their investment, I am merely showing them the stuff the Agents don't show them.

EDIT: Thought I would share this to those interested or in the beginner phase like me. It's about CPF Returns.
http://mycpf.cpf.gov.sg/NR/rdonlyres/9BA...duMat2.pdf

[BlackCat]

Traumfanger, pls be careful. I think that young people offering old people advice is usually not taken well, even if well intentioned. Money and finances are personal. You need to be extremely tactful. I cannot imagine how I would approach such a conversation.

Also, if something goes wrong with whatever you suggest (e.g.: you buy a mutual fund and there is a recession after that), it may spoil your relationship for good.

[Temperament]

Traumfanger, pls be careful. I think that young people offering old people advice is usually not taken well, even if well intentioned. Money and finances are personal. You need to be extremely tactful. I cannot imagine how I would approach such a conversation.

Also, if something goes wrong with whatever you suggest (e.g.: you buy a mutual fund and there is a recession after that), it may spoil your relationship for good.

Yes! please be careful.
In investing even the Nobel Prize winners like in "Long-Term Capital Management" had been wrong.
There is no 100% in investment calculations or "judgment of an investment".
i have been investing for more than 23 years, yet i will hesitate to sell my ideas to anyone-especially relatives.
Because sometimes i profited and sometimes i lost.
And how we look at investment & money is a very personal matter.
No one look at it the same.

[Traumfanger]

Traumfanger, pls be careful. I think that young people offering old people advice is usually not taken well, even if well intentioned. Money and finances are personal. You need to be extremely tactful. I cannot imagine how I would approach such a conversation.

Also, if something goes wrong with whatever you suggest (e.g.: you buy a mutual fund and there is a recession after that), it may spoil your relationship for good.

Traumfanger, pls be careful. I think that young people offering old people advice is usually not taken well, even if well intentioned. Money and finances are personal. You need to be extremely tactful. I cannot imagine how I would approach such a conversation.

Also, if something goes wrong with whatever you suggest (e.g.: you buy a mutual fund and there is a recession after that), it may spoil your relationship for good.

Yes! please be careful.
In investing even the Nobel Prize winners like in "Long-Term Capital Management" had been wrong.
There is no 100% in investment calculations or "judgment of an investment".
i have been investing for more than 23 years, yet i will hesitate to sell my ideas to anyone-especially relatives.
Because sometimes i profited and sometimes i lost.
And how we look at investment & money is a very personal matter.
No one look at it the same.

Thanks for every word. I see where you guys stand. I agree too. That's why when my gf says she wants to help her sis and dad to manage the finance, I insistently tell her not to. Because, money can really make things ugly.

However I think placing the money to grow at CPF with 2.5% riskfree is still better than placing in that WLP he have. The effect of deduction is ridiculous and he bought it 3 years ago. He can't redraw anytime before 30 years, which is already way beyond his retirement. If he wants to leave an asset for children, he might as well get Term and channel the excess he paid for the WLP to the CPF - Passive investing at a fund/company that is fundamentally sound

[Muck]

Sorry Traumfanger if I made you feel misunderstood. I think it laudable for you to be researching and finding up more info so as to be better equipped to offer alternative views to ur loved ones. My concerns are same as BlackCat and Temperament in that we all need to tread v carefully when discussing such issues, as we won't want to spoil relationships over money.