Asked on 13 Jan 2020
assuming doing a balance of 60/40. 60% in stock, 40% in bonds. Can I consider CPF SA as a bond component?
You cannot rebalance it, so it's really annoying. Purely from a portfolio rebalancing angle it has to be taken aside.
But we should take it as part of portfolio, else we may have too many bond like holdings. I am holding 65-35 including cpf SA and MA, with whatever I can invest in OA invested.
Thanks for all the responses received so far! I think whether to regards SA as a bond component have too many consideration with the main fact highlighted by Hariz, we cannot rebalance SA.
The whole idea of rebalancing for me is when market is down, increase Bond %, when market is back, get back to Equity.
I will need to think deeper if I should start exposing to Bonds....
14 Jan 2020
14 Jan 2020
Before we decide on using CPF SA as a bond component in your financial portfolio, we will need further information about you, including your investment objectives.
In most cases, I will not consider all the money in my CPF SA as a bond component since I cannot draw all the money out from it.
On the other hand, I may consider a fraction of it to form my portfolio if I am confident to be able to withdraw the money when the needs arise.
Therefore, it will depend on your entire financial planning and how we use each tool to help you achieve your goals.
Here is everything about me and what I do best.
I considered it as a pseduo/proxy to long-term maturing bond, with the interest being automatically re-invested as nil cost.
No you shouldn't. CPF is not a bond. It doesn't give you any correlation to your equity portfolio and doesn't behave like a bond. CPF should be treated as a separate resource because you also can't rebalance CPF.