(30-08-2012, 08:59 PM)tanjm Wrote: [ -> ]We keep returning to this idea that CPF interest rate is too low. Actually for an essentially riskless investment (inflation not counted since it affects all investments - it is not a market risk), it is a great return at present if you don't want to take market risk. You can only go for a better return by taking risk - and the GFC proved there is no such thing as a riskless stock investment ! :-)
When comparing investment choices, you should compare equivalently risky choices. The ideas of Markowitz, while fairly flawed in a real world as a specific application, is generally applicable in the broad stroke.
I agree. I'd compare the CPF returns against the yield of the longest maturity SG securities (equal risk) available, which is the 30-yr. Given the current depressed yield of between 2.3 - 2.4% of the 30-yr, I think the current CPF returns, at the floor rate, are ok. I disagree with the govt's stand of linking CPF rate to the 10-yr though. We are lending our funds for a far longer tenure.
(30-08-2012, 08:59 PM)tanjm Wrote: [ -> ]We keep returning to this idea that CPF interest rate is too low. Actually for an essentially riskless investment (inflation not counted since it affects all investments - it is not a market risk), it is a great return at present if you don't want to take market risk. You can only go for a better return by taking risk - and the GFC proved there is no such thing as a riskless stock investment ! :-)
I think a person can go for a better return by picking up the right knowledge and developing the right attitude towards investing. Leaving money in the CPF itself is a risk.
While losing a few percentage point in ONE QUARTER may look bad, it is the final outcome that counts. What was the return for Q1?
To invert, would you borrow at
2.5% with no repayment schedule to invest? I would but unfortunately there's a cap. Side: many had already pour theirs into properties.
Those who had learn the tricks of investing will not have difficulties beating 2.5%. Those who had even a slightest sense of self-doubt, I agree, should just leave the money in the CPF.
(31-08-2012, 02:12 PM)snowcap Wrote: [ -> ]I have put almost all of my investible OA into REITs and dividend stocks since 2004. Averaging 6% yield, even through the 08 GFC.
I congratulate you then for picking the right reit.
Let me ask you : supposing you had invested all your OA in a reit. Then GFC struck and the reit issued rights to raise money, and you hit your investible limit in CPF to pick up the rights issue. You would then suffer dilution and loss of capital through liquidity risk. Many Reits raised money around GFC.
If you make 6% on 90% of your money, but lose 50% on the other 10% of your money. What is your net P&L? About zero. Could that happen while invested in reits during GFC ? - yes.
The magic of percentages and selective amnesia!
You can boast you make 100% this year; but if you lost 50% last year - it simply means you made 0% for 2 whole years of huffing and puffing. Now CPF 2.5% not so bad afterall. LOL!
Sweeping statements are the most dangerous - invest in index funds, invest in blue-chips, invest in REITs, invest in property, and so on.
It's never about the vehicle. It's always about the driver
(01-09-2012, 10:54 AM)Jared Seah Wrote: [ -> ]It's never about the vehicle. It's always about the driver
No wonder lousy golfers keep changing their Drivers!
Most times, it's never about the Driver, it's always about the Golfer ie. YOURSELF...
Good one KopiKat!
I'll copy with pride and use your version on my crazy friend who plays golf
Given 2.5% for doing nothing is good money for "riskless" investment. CPF is like a bottom line protection and in housing. If i need to access or borrow from CPF to invest, we have some other career issue to concern with here. My point is that saving in bank (or outside CPF) is many times what we have in CPF SA. Thus our primary focus can and should be on the main for more riskier investment.
I do agree on what Jared says. Is not one year return but over the years investment returns. Doing both yearly and lifetime XIRR measure will helps to tell.
GFC - I held on to Kim Eng. Even when it went up and down. In fact some stock I bought is still underwater, eg. Guthrie. But thankfully, dividend over the years more than compensate for the down. Now Guthrie NTA is above my 73cts price, only 2lots. Just tikam. Kim Eng in Asia crisis drop to as low as 90cts and yet I didnt sell. Held on - year after year more dividend.
Now in the market there is no more stock broking house listed? In fact as more and more good Co. are taken private, SGX is hollowing out on good value play. I believe slowly SGX will be filled with Crappy Co. that you would think VERY CAREFULLY about putting CPF money at risk!
As warren said, everything about the Co. is actually management. We have good Co. here but mgmt all try to keep the money for themselves. Take New Toyo, good busines, Co but mgmt sucks! Or San Teh, try all means to take private or may be even depressed the share price?? and give way too much dividend in 1 go? Such is the way mgmt behave, you wonder what is their motive.
So in short, if you invest CPF money, they still pay you interest if you withdrawl for investment, so when you return your money to them, be sure that you wont owe CPF interest? Its very complicated, you get cheated you dont even know? But best - make sure you make more money than the interest paid by them and your return on shares exceed their interest cover. Its sort of like using your own money and paying your own interest but the money you make better exceed the interest they already put in. Then whatever is left is yours for them to set aside for minimun sum.
ie. The more you make, the safer the risk of inflation (indirectly hit as your money get locked away) imposed by gov/cpf or if you hate them ever more GIC/TMSK performance deteriorated. Imagine we paid billions to these people and they fail to perform!! Everytime they fail to perform, they find some excuss to put it on account of inflation, and lock more of your CPF away! The system is really terrible, worst than the west pension scheme!! Triple whammy!
Interesting. I didn't know all this. So how much did we actually pay them? How did they under perform? They used inflation as an excuse? When was that? I'm quite certain gic and temasek have no power to lock up our CPF?
(01-09-2012, 04:42 PM)ValueBeliever Wrote: [ -> ]GFC - I held on to Kim Eng. Even when it went up and down. In fact some stock I bought is still underwater, eg. Guthrie. But thankfully, dividend over the years more than compensate for the down. Now Guthrie NTA is above my 73cts price, only 2lots. Just tikam. Kim Eng in Asia crisis drop to as low as 90cts and yet I didnt sell. Held on - year after year more dividend.
Now in the market there is no more stock broking house listed? In fact as more and more good Co. are taken private, SGX is hollowing out on good value play. I believe slowly SGX will be filled with Crappy Co. that you would think VERY CAREFULLY about putting CPF money at risk!
As warren said, everything about the Co. is actually management. We have good Co. here but mgmt all try to keep the money for themselves. Take New Toyo, good busines, Co but mgmt sucks! Or San Teh, try all means to take private or may be even depressed the share price?? and give way too much dividend in 1 go? Such is the way mgmt behave, you wonder what is their motive.
So in short, if you invest CPF money, they still pay you interest if you withdrawl for investment, so when you return your money to them, be sure that you wont owe CPF interest? Its very complicated, you get cheated you dont even know? But best - make sure you make more money than the interest paid by them and your return on shares exceed their interest cover. Its sort of like using your own money and paying your own interest but the money you make better exceed the interest they already put in. Then whatever is left is yours for them to set aside for minimun sum.
ie. The more you make, the safer the risk of inflation (indirectly hit as your money get locked away) imposed by gov/cpf or if you hate them ever more GIC/TMSK performance deteriorated. Imagine we paid billions to these people and they fail to perform!! Everytime they fail to perform, they find some excuss to put it on account of inflation, and lock more of your CPF away! The system is really terrible, worst than the west pension scheme!! Triple whammy!
Almost all the business are like that what do you expect? good things of course they want to keep private for themselves if the business or asset is high risk or highly leveraged just do an IPO and dump it on investors, later when the asset cleaned itself up and becomes good again try to privatize it.
Investing is not so easy, all investing is a risk even the few good ones that you manage to find is also risk at most is only margin of safety. Even CPF is also risk, if they loan money for gic bonds and gic made bad calls in investing and can't pay and need "more time". Minimum age for withdrawal goes up why do you think they keep raising the age?