Older generation's negative perception towards CPF Investment schemes?

Hi Zi Kai,

The opportunity cost of the 2.5% interest rate from CPF OA is something that is very real. In my opinion, any investment returns have to have a good chance of doing better than 2.5% before one make the commitment to invest in their CPF OA.

Some other factors that may also make them averse includes:

1. Shorter investment horizon

Because they have a shorter investment time frame, if the markets were to do badly in the short term, they may not be able to hold on until the market recovers

2. Perception that OA will soon be withdrawal/can be be withdrawn

Nearing the age of 55, they may perceive that they will soon get a windfall of money which they have never been able to utilise and feel before. They may not want to risk losing it.

3. Poor experiences with investing through CPF-OA

In the past the industry average 1st year total fees for investing in funds is 6.85% (including sales charges of 3%). In Oct'18, due to government intervention, this has been reduced to 3.92%, (including sales charge of 1.5%). As you can imagine, when the cost of investing is so high, the chances of success is extremely low.

Without knowing the personal profile of the older person, it would be impossible to understand if CPF investing is appropriate for them. I would encourage those interested in investing in their CPF to find out more about us through our events and giving us a call.

Do read up our latest article: http://bit.ly/38a2GDx​​​

Before we decide to invest with Endowus, it will be valued to understand how it works exactly, as well as the potential risk associated with it.

As with all investments, the returns are non-guaranteed. Accordingly, one key question will be: what if the market is bad and I need to retire today?

By keeping the money in the CPF Ordianry account, it guarantees a base interest rate of 2.5% while Special Account yields a base interest rate of 4%. When our money is already earning a decent rate of guaranteed return, there needs to have a bigger and sensible reason for anyone to take it out to put into places with non-guaranteed return that may be lower or higher than these rates.

This is where financial education comes into play, alongside with proper investment strategies and risk management techniques. It is only when we are investing our money the right way, with proper strategies with proven track records, then it makes sense to discuss whether we should use these available funds.

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