Is it wise to include cpf as part of my portfolio? I am 30 and I have 51% in stocks, 40% in cpf (oa, sa, ma) and 9% cash. ? - Seedly

Investments

CPF

Retirement

Asked by Andrew Kwek

Asked on 13 Apr 2019

Is it wise to include cpf as part of my portfolio? I am 30 and I have 51% in stocks, 40% in cpf (oa, sa, ma) and 9% cash. ?

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Lin ML
Lin ML
Level 2. Rookie
Updated on 07 Jun 2019

Great question about CPF as part of investment portfolio. Let's talk about the CPF Ordinary Account (OA). Note that the OA is a risk-free way to net up to 3.5% interest (2.5% plus additional 1% on combined OA, SA & MA balance up to $60,000).

The CPF OA is a good way to earn a little interest, but why not make it work harder for you?

I use my CPF OA to invest in relatively stable and "safer" stocks on the SIngapore Exchange. Here are a few criteria I look for in stocks when using my CPF OA:

  1. Dividend yield above 4% (My OA balance only gets excited to leave CPF if it can reap more than 3.5%)

  2. Low dividend payout ratio - this is to ensure that the company can continue to pay out and even raise dividends sustainably.

  3. Solid balance sheet

  4. Strong track record

I also deployed my OA funds like an "opportunity fund". This means that the OA monies were only triggered on rare occasions to invest in stocks on my watch list that were depressed or under-valued for whatever reasons.

With this method, I invested in ST Engineering and OCBC Bank successfully and reaped returns higher than the promised 3.5%.

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Andrew Kwek
Andrew Kwek

16 Apr 2019

Thanks for your answer Lin, it's great to make it work more than 3.5%. I think that it's really quite high and not quite worth the risk to try to make it above that, if I am thinking long term I would transfer the funds from oa to sa. However, I'm quite excited about the FIRE movement and I'm thinking of being FI when I'm 35. Which means my portfolio needs to last 30 years before I can get my hands on my cpf at 65.
Lin ML
Lin ML

19 Apr 2019

Thanks for your reply Andrew. I'll love to be FI soon too! You're right that with 3.5% in OA or even 4% in SA, there is little reason to dabble with CPF. I had a different priority that caused me to make my OA work harder >.< I hope you find smth that works for you!
Yong Kah Hwee
Yong Kah Hwee
Level 6. Master
Updated on 07 Jun 2019

It really depends on you. I consider my CPF as a long-term bond.

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Andrew Kwek
Andrew Kwek

15 Apr 2019

If you have 7k to spare would you top up your sa account or purchase a bond?
Yong Kah Hwee
Yong Kah Hwee

15 Apr 2019

I would put it in a short term bond because I forsee myself needing the money in the near future. If I do not need the money, and I cannot get a bond that gives more than 4%, I would go top up my SA.