I won't get any CPF contributions in my pay, how can I properly invest my first salary to equal or better the returns of CPF in order to pay for a house, have more passive income and retire in future? - Seedly
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AMA First Investment

Anonymous

Asked on 31 Jan 2019

I won't get any CPF contributions in my pay, how can I properly invest my first salary to equal or better the returns of CPF in order to pay for a house, have more passive income and retire in future?

My employment contract is not entered in Singapore as I work offshore. Hence my employer is not required to contribute to my CPF. Is it better to still make personal contributions to CPF or what should I do as my first investment?

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Save the same amount intended for CPF contributions to a fixed savings account, create your own "CPF contribution" first.

6 months down the road, the money will thank you :)

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šŸ‘ 1

Firstly, we need to have a complete understanding on our cashflow. Through this process, we will understand our earning ability and spending habit. Here is a guide to help you: https://www.blog.pzl.sg/understanding-your-personal-cash-flow/

Next, do some further research on whether the Singapore's CPF system is one that you are comfortable parking your money into for the long term. If yes, then you should contribute at least 20% of your salary to mimic the effect of CPF contribution.

If you are uncertain on whether to park your money into CPF for the long term, then you should create a proper budget that is capable of helping you save at least the same amount of money. The best way to do this is via automation and this is how I do mine: https://www.blog.pzl.sg/how-to-create-a-monthly-budget/

If you are looking at investing your money, it will be best to understand your objective before you start. Here are some questions to help you:

  1. What is your capital?

  2. How will you want to invest your capital? E.g. lump sum or an amount on a regular basis

  3. How long will you want to stay invested? E.g. 10 years

  4. What is your risk appetite? E.g. How do you feel about short-term volatility?

  5. What is your objective for investing?

When in doubt, sspeak with a professional who is capable on sharing ideas with you on how you should plan for your future while maintaining the liquidity that you will need. The more open the discussion, the more benefits you receive.

Here is everything about me and what I do best.

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šŸ‘ 1

It depends on the tax structure.

Are you OK with CPF being illiquid (for OA only a few uses like education and housing?)

Are you able to beat the 3.5% / 5% returns for the first 60k of CPF (low hanging fruit and pretty risk free except for political risk).?

Can you stomach the volatility (will you lose sleep if your asset drop 10% suddenly, but will rise back up in 2 years time?)

Can you also stomach the fact that if you do not take risk, your returns will be mediocre?

If not, what else can we do? It got to do with mindset and knowing what you want a lot. I will follow up with more only if you know what's your end goal.

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šŸ‘ 1

I think you should contribute to CPF for two reasons

1) tax reductions

2) 2.5 % guaranteed interest in OA if you transfer to Sa thats 4 %

the money can be used for buying a house later too if you keep in OA. That's a better idea if you don't have immediate investment plans

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šŸ‘ 0

Hi Anon,

That's a very good question actually. I think there are instruments available for you to achieve what you have in mind. I think 1 question I have is, do you need the cash to be as liquid as possible? Also currently without CPF, are you saving before you spend your salary?

I think with this answered then better advice can be given

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šŸ‘ 0