Is it a good choice to invest S&P 500 with our CPF OA?

Nope, the concept of accrued interest do not apply for CPF investing. All proceeds of any sale of CPFIS investments will return back to your CPF account.

It does not make sense to invest in only the S&P500 with your CPF because we cannot be sure that the US market will carry on it's outperformance. It is instead better to be globally diversified and look beyond just the S&P 500 (and the big tech stocks that are driving outperformance) to invest long term.

You can read more about this here about how the Japanese market (consequently the US market) has underperformed.

https://endowus.com/insights/index-investing-3-...

You need to know OA 2.5% Is risk free guaranteed return. ETF is subjected to market volatility and returns are not guaranteed hence risk premium make returns higher. So if you use the funds to invest in the etf you need returns more than 2.5% to make sense. A return on your etf of 4% p.a means you only gain extra return of 4% less 2.5%. If your investment only return 1% p.a your gain is considered loss of 1 - 2.5 = -1.5% . Etf goes up and down hence you need to consider the returns average out in per annum.