Saturday, January 16, 2010

Why It Makes No Sense to Invest

Okay, the title of this posting might be a bit misleading.

It actually reads: "Why it makes no sense to invest your CPF-SA money"

As most of us know, the Special Account in our CPF or CPF-SA earns an interest of 4% per annum. Till the end of 2010, the first $60,000 in our CPF accounts also earn an additional 1% interest. For most of us, that means our money in the CPF-SA account is earning like 5% interest per year.

This is guaranteed and is entirely risk free!

As such, it makes little sense to invest your CPF-SA money unless you are able to find an investment which gives you returns at greater than 5%. Considering that one cannot invest their CPF-SA into high risk funds, it is difficult (in a certain sense) to be able to achieve returns of greater than 5%

As such, it makes a lot of sense to just keep your money in your CPF-SA for the time being unless you are able to find an investment that gives you greater than 5% per year.

Food for thought.


  1. Hi FF,

    Just to add on to what you've said about CPF-SA, there are also restrictions on what one can invest in for SA, compared to OA, so this severely limits your choices.

    Since it's so hard to beat 5% on a consistent basis with this limited array of investment choices, one should just let the balance sit there.


  2. We don't need to invest every cents that we have. It is wise not to touch CPF-SA

  3. Before investing a totally risk free return of 2.5% and 4% respectively in CPF OA and SA, you must ensure that your investment can return at least 3-4 times than the return of CPF OA and SA.

  4. CPF OA perhaps still got chance to beat.

    CPF-SA the returns stands at 5% till year end. that is risk free.

    Very difficult to find 5% returns in today's market.

    What's more with fund investing, there is usually a sales charge which eats into your investment right away. So you will need a much higher rate of return than 5% to justify investing your CPF SA

  5. I haven't touch my CPF SA but I try to invest every cents in CPF OA when it becomes available.

  6. Yep. That makes sense since the interest for the CPF-OA account is lower at 2.5%. In addition, till end 2010, there is an additional 1% interest on the first $60,000 in your CPF accounts and up to the first $20,000 in your CPF-OA.

    You however cannot touch your first $20,000 in your CPF-OA. So that is "wasted" in a sense since it is literally stuck in a 3.5% interest account up till 2010 and then 2.5% for the rest of your life. The 2.5% however is a minimum cap based on CPF act and it could be possible that future interest rates will go up.


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