What is fixed income?
13-02-2013, 10:13 AM
Money market funds invest in short term fixed income or their derivAtives so not sure what you mean by complicated.
Cpf is technically fixed income i suppose, with a flat yield curve. 
13-02-2013, 10:40 AM
(This post was last modified: 13-02-2013, 10:41 AM by Temperament.)
Exactly the derivatives is not so safe anymore. The derivatives can be so "complicated" that it can be like the famous housing sub-prime loan packaged into CDO securities that sold to the world and caused 2008/2009 fiasco. So buying into market fund in US is not like what you think as before as safe as fixed income. In Singapore, i not sure what the money market fund's invested derivatives are.
i think CPF is only technically a fixed income if you leave it alone until you are 62 or whatever the future withdrawing age.
WB:-
1) Rule # 1, do not lose money. 2) Rule # 2, refer to # 1. 3) Not until you can manage your emotions, you can manage your money. Truism of Investments. A) Buying a security is buying RISK not Return B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return. NB:- My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
13-02-2013, 10:58 AM
fair pt re derivatives. it might look very safe but contain a significant tail risk. although I would like to emphasise that money market funds are the most liquid/and no returns, pretty much like cash. why do corporates put their cash into these? because it's safer than bank deposits, where you take bank counterparty risk beyond the basic insurance.
there is almost no convexity/duration risk involved in money market funds because they buy very short term paper. CPF imo is not a very good bond. 4% singapore gov risk but with severe constraints on liquidity, etc. But it was not built as a debt instrument, more like a minimum safety net for some people... which may not be a good thing. it's like a spoilt speedometer leading to some people thinking they have enough for retirement - if they had no speedometer they might try to save more and learn more about retirement planning.
13-02-2013, 02:49 PM
CPF can can be better than and replace as a bond holding as it is not bank interest rate sensitive. It is very useful as a "Haven" for parking your money after 55 for investment in the stock market, earning minimum 2.5%. And yet you can withdraw as if your money is in the bank, without any penalty or lost of interest.
For people who are not yet 55, it is a great source of capital for investing in the stock market if you have not depleted it on basic housing (HDB).
WB:-
1) Rule # 1, do not lose money. 2) Rule # 2, refer to # 1. 3) Not until you can manage your emotions, you can manage your money. Truism of Investments. A) Buying a security is buying RISK not Return B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return. NB:- My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
13-02-2013, 07:39 PM
(13-02-2013, 02:49 PM)Temperament Wrote: CPF can can be better than and replace as a bond holding as it is not bank interest rate sensitive. It is very useful as a "Haven" for parking your money after 55 for investment in the stock market, earning minimum 2.5%. And yet you can withdraw as if your money is in the bank, without any penalty or lost of interest. Besides bond, corporate preference shares is also a form of fixed income. How about insurance？ Can life insurance be considered as fixed income?
13-02-2013, 09:44 PM
(13-02-2013, 07:39 PM)zhangwuji Wrote:(13-02-2013, 02:49 PM)Temperament Wrote: CPF can can be better than and replace as a bond holding as it is not bank interest rate sensitive. It is very useful as a "Haven" for parking your money after 55 for investment in the stock market, earning minimum 2.5%. And yet you can withdraw as if your money is in the bank, without any penalty or lost of interest. For me if you don't mind the low returns even after all the years of paying insurance premium, it can be considered fixed income with growing cash value for life insurance and nothing for term insurance. i also think one time premium life insurance can be a fixed income (a legacy income in fact) for business-man who only has a lot of money but no time to invest in the stock market. Or not interested but only his own businesses. Of course return is not attractive too if you live too long. If i am such a businessman, i will consider. NB:- i am not an insurance agent just my imo only.
WB:-
1) Rule # 1, do not lose money. 2) Rule # 2, refer to # 1. 3) Not until you can manage your emotions, you can manage your money. Truism of Investments. A) Buying a security is buying RISK not Return B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return. NB:- My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore. 
14-02-2013, 08:40 AM
Life insurance is both an expense and saving, portion of the money goes to premium expense. That's why the common argument of "pay term invest the rest". However it is the same risk I alluded in my previous post: Counterparty Risk. Think AIG. So best to spread out the insurance portfolio over few counterparties.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward
Think Asset-Business-Structure (ABS) |
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