End of love affair with property?

[HitandRun]

The rules are not dumb. People mistake social policies with profit MAXimisation, just like risk with returns (like now people associate properties with high return forgetting the high risk as it is 4X levered). CPF main purpose is to provide retirement CASH FLOWS, which you can't do if it is stuck with the necessary roof over the head.

The rules are dumb precisely because of that! CPF assumes that one will lose money on one's investments because 80% (if I recall correctly) of the dumbos lose money. All the rules are geared to "protect" CPF members. None of CPF rules is helping successful investors maximise their returns.

Imagine if I were minster for education and I have special incentives only for good students. There would be an uproar! So now, while we have good schools for good students, we also have decent schools for the not so academically inclined.

So why can't CPF have rules to help successful investors to maximise their retirement funds?

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P.S. If you never had the problem of trying to maximise the "Amount Available for Stocks" in your CPF Account, I don't think you can appreciate my frustrations.

P.P.S. {In relation to using CPF money to invest in stocks} What % of the profits do you think you can re-invest in stocks?

[specuvestor]

What do you think is the purpose of CPF? Firstly it is a forced saving for retirement. Secondly and maybe more importantly it is to diffuse social obligations to the old that has no income, especially as our population age rapidly.

People confuse this PURPOSE with investment. Investment is a TOOL to achieve purchasing power parity next 30 years. CPF is not created for investment. Like I said probably people need to sign a form that they are sophisticated enough to invest, and that gives them a conscious choice. OTOH SRS, which is also a tax shield, is more for investment purpose. CPF and SRS has vastly different objective though they have similar characteristics.

Stopping people investing using CPF sounds like nanny state, but to answer this question, one just has to answer the opposite: does the state have to step in when the people lose money and have little savings when old? Do we pity those old men who spent thir CPF in batam and was swindled? Do we have to take care of those who had jobs that don't contribute CPF? Do we give aids to those recently in the news that lives in landed but can't pay bills? People who sign the form above should then expect no help from the state, cause if you win, you don't give a single dime back to the state as well. You can easily reference this mentality with the guaranteed products fiasco.

The problem with CPF is that it is considered IDLE money, because most short sighted mortals can't see the purpose 30 years later. This is the main cause of debate if you follow the parliamentary debates through the years. And this "idle money" is like a tsunami when Goh opened the floodgates into properties. IMHO the gates should be tightened and eventually closed, especially for second or investment properties. We have to be clear and identify the original purpose, rather than be caught up with Singapore Inc ie all about MORE money. It is as if HDB stop building for the masses and say you have to pay market price to maximise government returns. Isn't that the issue with our transport system now because they forgot their first principle, as they try to maximise shareholders' value?

[HitandRun]

What do you think is the purpose of CPF? Firstly it is a forced saving for retirement. Secondly and maybe more importantly it is to diffuse social obligations to the old that has no income, especially as our population age rapidly.

People confuse this PURPOSE with investment. Investment is a TOOL to achieve purchasing power parity next 30 years. CPF is not created for investment. Like I said probably people need to sign a form that they are sophisticated enough to invest, and that gives them a conscious choice. OTOH SRS, which is also a tax shield, is more for investment purpose. CPF and SRS has vastly different objective though they have similar characteristics.

There is no confusion in my mind. However, everybody and his dog knows that relying on the CPF minimum sum alone sounds like financial suicide, right? Therefore, doesn't everyone has the right and obligation to maximise his CPF retirement funds?

And for everyone who is successful in maximising his CPF funds, doesn't it reduce the obligations of the government to finance his retirement? And the government can spend that savings in something else.

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P.S. I'll be willing to sign any document if the govt would allow me to invest my CPF OA freely.

[Ben]

There is no confusion in my mind. However, everybody and his dog knows that relying on the CPF minimum sum alone sounds like financial suicide, right? Therefore, doesn't everyone has the right and obligation to maximise his CPF retirement funds?

And for everyone who is successful in maximising his CPF funds, doesn't it reduce the obligations of the government to finance his retirement? And the government can spend that savings in something else.

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P.S. I'll be willing to sign any document if the govt would allow me to invest my CPF OA freely.

What you just said is the ideal idea in an ideal world. How do we differentiate between investments savvy people from a novice? Even if there is a way to identify the investment gurus from the pack, having two different standards within a system is not going to be well received by the public. What is worrying is that they are a lot of people who may think that they are an investment expert, when in actual fact they are far from it. The real expert will somehow find a way to maximise their returns, using CPF or not. Also, since there is a cap on CPF contribution ($5K of salary), you can still use your balance salary to invest. And I am incline to think that those who are expert in investing tends to draw relatively higher salary, and so there should be more left over after contributing CPF for investing purposes.

And to your point on govt obligation to finance one’s retirement, I am puzzle is it govt responsibility to finance our retirement?

[Bibi]

P.S. I'll be willing to sign any document if the govt would allow me to invest my CPF OA freely.

Can. You can request for a document from govt to give up your Spore citizenship. You can get money not only from OA, but SA as well. Then you can do whatever you want with the money .

[HitandRun]

What you just said is the ideal idea in an ideal world. How do we differentiate between investments savvy people from a novice? Even if there is a way to identify the investment gurus from the pack, having two different standards within a system is not going to be well received by the public.

Ah... we are making some progress here. We could have rules like if one has more than the minimum sum in the Special Account, one can invest all his Ordinary Account in stocks or gold.

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And to your point on govt obligation to finance one’s retirement, I am puzzle is it govt responsibility to finance our retirement?

I was jumping too quickly here. If a significant part of the retiring electorate (since we are an aging nation, this portion of the electorate can only become bigger) runs out of money, surely they will pressurize the govt to subsidize more transport, healthcare, more GST goodies, etc? No?

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Can. You can request for a document from govt to give up your Spore citizenship. You can get money not only from OA, but SA as well. Then you can do whatever you want with the money .

But if I become a M'sian, Singapore govt will still not allow me to withdraw my money.

[yeokiwi]

But if I become a M'sian, Singapore govt will still not allow me to withdraw my money.

Why not? Just declare that you will never come back to Singapore and West Malaysia.

[specuvestor]

What do you think is the purpose of CPF? Firstly it is a forced saving for retirement. Secondly and maybe more importantly it is to diffuse social obligations to the old that has no income, especially as our population age rapidly.

People confuse this PURPOSE with investment. Investment is a TOOL to achieve purchasing power parity next 30 years. CPF is not created for investment. Like I said probably people need to sign a form that they are sophisticated enough to invest, and that gives them a conscious choice. OTOH SRS, which is also a tax shield, is more for investment purpose. CPF and SRS has vastly different objective though they have similar characteristics.

There is no confusion in my mind. However, everybody and his dog knows that relying on the CPF minimum sum alone sounds like financial suicide, right? Therefore, doesn't everyone has the right and obligation to maximise his CPF retirement funds?

And for everyone who is successful in maximising his CPF funds, doesn't it reduce the obligations of the government to finance his retirement? And the government can spend that savings in something else.

---

P.S. I'll be willing to sign any document if the govt would allow me to invest my CPF OA freely.

It is financial suicide when we analyse the figures. The minimum sum actually only gives you bare minimum to survive. And people grumble that's too much. From a financial planning point of view our life is split 30-30-30 years, 30 years of "human capital investment", 30 years of accumulation and 30 years of retirement spending. Effectively what it means is every year of earnings is supposed to last us TWO years. Ironically this problem is brought about by longevity. It was less an issue in the past because it was more like 15-15-15 just a century ago.

So the CPF scheme has no margin of error. Yet you project a most optimistic scenario. As value investors we are always concern about downside which is why we demand a margin of safety. Your empowerment scenario will have devastating impact on the last 30 years of the population in aggregate, especially when we see from CPF figures that on aggregate, CPF investors lose money. And policy makers have to look at aggregate impact, because resourceful individuals will find a way out.

[HitandRun]

So the CPF scheme has no margin of error. Yet you project a most optimistic scenario. As value investors we are always concern about downside which is why we demand a margin of safety. Your empowerment scenario will have devastating impact on the last 30 years of the population in aggregate, especially when we see from CPF figures that on aggregate, CPF investors lose money. And policy makers have to look at aggregate impact, because resourceful individuals will find a way out.

I have no argument with that. There will always be dumb investment decisions (myself included) and the government needs to protect these people from their own money (or is it the other way round?) lest they come crying for more handouts. But why should it be a zero-sum game? Having protected / preserve the minimum sum, shouldn't the government allow more successful CPF members to chart their own future?

The current CPF rules allows members to invest 100% of their OA in property on LEVERAGE. Any profits (less imputed interest) can be withdrawn, tax free. Members cannot do that for stocks! From a investment point of view, shouldn't the government be more agnostic or at least treat all types of investments equally?

Do other valuebuddies not try to maximise the amount they can invest in stock using CPF? If a member has $100k in the OA. Let's say he invested $35k in a stock at $5. Within a year, the stock climbed to $10, i.e. he has almost $70k in stocks. However, if he so decide to sell his stocks away to take profit, he will realise that he can only maintain a much smaller portfolio. Bottomline => member gets punished (with a smaller portfolio) for being successful.

On the other hand, if one loses money on the stock investments, let's say the stocks value get halved, i.e. portfolio has shrunk to $17.5k. I suspect that once the member sells his investments at say $17.5k, he would be able to use almost $29k for stocks investments again. Bottomline => member gets "rewarded" (with a bigger portfolio) for being a bad investor.

Don't you think the rules are crazy?

[egghead]

If a member has $100k in the OA. Let's say he invested $35k in a stock at $5. Within a year, the stock climbed to $10, i.e. he has almost $70k in stocks. However, if he so decide to sell his stocks away to take profit, he will realise that he can only maintain a much smaller portfolio. Bottomline => member gets punished (with a smaller portfolio) for being successful.

On the other hand, if one loses money on the stock investments, let's say the stocks value get halved, i.e. portfolio has shrunk to $17.5k. I suspect that once the member sells his investments at say $17.5k, he would be able to use almost $29k for stocks investments again. Bottomline => member gets "rewarded" (with a bigger portfolio) for being a bad investor.

I don't quite get the above. For the former, if he sells, shouldn't he end up with $135k and therefore $47.25k for investment?