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Dionysius Ang

Aerospace Engineering at Nanyang Technological University

28 Apr 2021

CPF

Investing CPF-OA vs Transfering to SA

Hello everyone from Seedly, this questions has been lingering on my mind for quite a while now, whether to invest CPF-OA (through Endowus, or through FSMOne) or just to transfer my OA into my SA. This is also the amount that would be left over after paying for the mortgage of my BTO.

Here are the points of my consideration.
1. Fees
The expense ratio of the funds that are available through Endowus along with their platform's management fees would be around 1%. I'm not exactly sure of the options available for FSMOne (and they don't give clear definitions of what we can use to invest through their platform as well).

  1. Opportunity Cost
    The relatively high-cost of investments through these two platforms would mean that the underlying assets would need to perform at a rate of 4% + 1% = 5% to match what CPF-SA has to offer.

If that's the case, is there a even more low-cost way that I can invest the CPF-OA with? :)

Thank you in advance for helping with my question.

Discussion (5)

What are your thoughts?

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What i did is first transfer OA to SA first. Because this is relatively "safer". Whatever OA balance I have above the first $20k, then I will look for investments.

I have given up trying to understand FSM platform and fee structure.

Whether to choose endowus or other banks or other advisories, for me, depends on

1) lump sum or DCA (endowus might be more expensive if DCA over long term)

2) advised portfolio or pick and choose funds (endowus might be better for an advised portfolio)

Another thing to take note is the bank agent fees. just by holding incurs quarterly bank charge of $2 or $2.50. if your investment amount is only $1000, the bank charges is already 1%.

hope this helps.

Tan Choong Hwee

28 Apr 2021

Investor/Trader at Home

  1. Fees:

Lets make an apple-to-apple comparison. Endowus invests in unit trusts. So we compare with the fees for unit trust investment via FSM.

Do note that fund level fees (total expense ratio which includes fund management fees and other fees) varies depending on specific unit trust. So we assume investing in the same set of unit trusts for both Endowus and FSM, and we only look at fees specific to each.

Endowus charges access fees of 0.4% for CPF OA investment, but they have trailer fees rebates. The trailer fees is a kick back to fund distributers and is taken from the fund level fees. The rebates help to reduce the cost of investing in Endowus. In some unit trusts, the trailer fees rebates is even greater than 0.4%, so the net cost can be negative.

FSM is zero fees for CPF OA investment, no sales charges, no platform fees, no switching fees.

  1. Opportunity Cost:

Fund level fees are embedded in the unit trust NAV, so the returns you achieve from unit trusts is already net returns taking into account of fund level fees. So the opportunity cost is just the cost to the platforms.

In other words, you have to overcome 4% + net cost to platform by a risk premium for a worthwhile CPF OA investment over a risk-free 4% interest rates by transfering from OA to SA.​​​

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