How reliable is CPF as an instrument? - Seedly
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Ping Hong

Asked on 02 Mar 2019

How reliable is CPF as an instrument?

CPF is a fund that makes use of other financial instruments to invest as well. What will happen when the CPF management make losses during financial crisis? In a sense, we are still depending on them for growing our wealth?

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There are policy risk associated with CPF. But which other instruments have no risk? be ready to accept some risk if you want to be rich

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Chen Zhirong

Chen Zhirong

Level 5. Genius

Answered on 02 Mar 2019

Yes we are. It is triple AAA grade. Means it has less than 1% chance of defaulting. To put in perspective, the next best insurance company is AA. If cpf loses, our insurance companies will lose more.

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It doesn't matter whether the government makes money or loses money. What matters is the guaranteed rate you get from CPF. As long as the government is able to consistently guarantee a reasonable rate, it will be a good instrument to put money into. But as with all investments, never put all your eggs into one basket. You will still require liquidity in case of emergencies which CPF does not provide.

This is the risk free part. The government essentially removes the investment risk from everyone and takes on that risk. In some other pension funds, the person would take on the investment risk, and these caused issues because if one retires during a prolonged bear market, their retirement pension funds underperforms.

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Yixiong Chang

Yixiong Chang

Level 7. Grand Master

Answered on 02 Mar 2019

Technically, CPF will not lose monies on its investment. The management does not make investment decisions, other than just CPF monies are invested in a special singapore government securities. These securities are fully backed by the Singapore government. The performance of our sovereign wealth funds have no impact on the returns of CPF.

Financial crisis will decrease assets prices, but it will recover at some point. Unless we go back to some dark ages, nuclear war or another war something. Our sovereign did lost billions during the last financial crisis, but it recovered and grew new highs since. You would likely have lost money too if u have invested elsewhere during the crisis.

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Ping Hong

Ping Hong

Level 2. Rookie

Updated on 07 Jun 2019

Lehman brothers used to be classified AAA and was one of the oldest banks as well.. I understand what you guys mean, and CPF is relatively safe, but is it still encouraged to put almost all our eggs into CPF?

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Yixiong Chang
Yixiong Chang

02 Mar 2019

Lehman was rated 'A' by S&P and Moody's, not 'AAA'.
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It is one of the most reliable instrument in the world.

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