[GPGT]Low risk, high return

[specuvestor]

Pre 2009 (and pre-97) our inflation rate has roughly been around 2-3% which is how they got the 2.5% base rate

Then again because of CPFIS and properties, most of us do not even have OA savings per se, hence the weighted average of the SSGS yield is 4%.

I agree that they probably need to tweak the OA rate from 2.5% to perhaps somewhere between 3-4% to generate real returns. The scheme of pegging SA to 1% plus SGS 10 years is already in place, just that past few years it has been delayed as the SA rate would have been below 4% if implemented. As I posted elsewhere it remains to be seen which fund could try to beat 4% NET return in SGD (not USD) terms over extended period of a decade or more.

For a prudent investor/ saver, CPF should be a pseudo-bond allocation for retirement. That would give a better balanced portfolio perspective vs our own PA, SRS, house and other fixed income allocation vis a vis our net worth.

I wonder how the picture looks over a longer term period, maybe 7 - 15 years time frame.
2007 - 2012 are not exactly vintage years nor representing how the stock market performs generally.
While I agree that CPF provides a form of safe harbour in times of uncertainty, it certainly is not the most efficient allocation of money either.
Public money and accountability could be the reason, but 2.5% is not exactly compensating for the effects of inflation.

[CY09]

Hi specuvestor,

It seems like you are in the age group of 30-45. In fact, many of the older people I know above 45 have a lot of cpf money parked in oa. An individual I know has about 40% of cpf money in oa. Cpf wealth in the 6 digits. They just enjoy the 2.5% interest and do not invest in cpfis. One reason could be because of the low hdb prices until 1994. Thus my personal view is weighted average of sgss bond is 3.5%.

(Just a personal experience from a 26 yr old)

[specuvestor]

Hi CY09

You guessed right my age group but 4% weighted average is not my view

"The interest rate to be credited to the RA is the weighted average interest rate of the entire portfolio of these SSGS, and adjusted yearly in January. The weighted average interest of the entire portfolio of these SSGS is 4% at the moment, so the interest rate payable to CPF members on their RA balances from 1 January 2014 to 31 December 2014 is 4% per annum, as announced on 13 December 2013"

http://mycpf.cpf.gov.sg/Members/Gen-Info/Int-Rates

Anyway once the older people you know are above 55 bulk of their money will go towards a newly created RA account from OA and SA.

[opmi]

I am in that age group and my CPF OA is invested in 1 stock only. The rest has to be in OA coz no more stock limit.

Hi specuvestor,

It seems like you are in the age group of 30-45. In fact, many of the older people I know above 45 have a lot of cpf money parked in oa. An individual I know has about 40% of cpf money in oa. Cpf wealth in the 6 digits. They just enjoy the 2.5% interest and do not invest in cpfis. One reason could be because of the low hdb prices until 1994. Thus my personal view is weighted average of sgss bond is 3.5%.

(Just a personal experience from a 26 yr old)

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[weijian]

[GPGT]Low risk, high return

Here is the low risk, high return illustration
Low risk high return opportunities do exist. But they are rare. maybe out of 100 opportunities , only 5 are low risk high return. The rest are rubbish :o

Are the returns before/after expense?
Should we really be using std deviation on the x-axis? I thought a graph of returns vs excess returns over its benchmark (also provided in the table) might be more informative. It might look like this then:

Quadrant A: Congrats but you are missing out something
Quadrant B: Huat ah!
Quadrant C: Time to fire my manager
Quadrant D: Bad luck!

[CY09]

Just thinking aloud, what if the SPDR & Niko which tracks the STI are thrown in the bag of the 4 quadrants, where will it stand given the annualized monthly returns/risk under the same time period. How would it perform against this basket of funds