Surprising news, considering the index is up for the year so far!
The Straits Times
www.straitstimes.com
Published on Aug 30, 2012
CPFIS funds post 4.06% loss in 2nd quarter
By Goh Eng Yeow
Taking money out of the Central Provident Fund (CPF) and investing it in unit trusts and investment-linked insurance products may not be a good idea this year.
According to research firm Lipper, overall performance of CPF Investment Scheme-included funds fell 4.06 per cent for the second quarter.
But if a saver keeps his money in CPF, he will enjoy a 2.5 per cent return in the CPF ordinary account and 4 per cent return in the CPF special account.
The research firm also noted that during the second quarter, funds which invested in "conservative assets' outperformed the riskier ones.
"The best performing asset class was bond funds with an average three-month gain of 0.95 per cent. Equity fund returns fell 5.44 per cent, while returns for mixed asset portfolios declined 3.04 per cent on average," it added.
Over the 12 months to June this year, unit trusts and investment-linked insurance products lost 5.39 per cent on average. But bond funds recorded a gain of 4.79 per cent, outperforming equity offerings which lost 8.48 per cent and mixed asset types which fell 1.96 per cent.
(30-08-2012, 03:42 PM)Musicwhiz Wrote: [ -> ]Surprising news, considering the index is up for the year so far!
CPFIS funds post 4.06% loss in 2nd quarter
STI is down 4.4% for Q2.
(30-08-2012, 04:58 PM)cif5000 Wrote: [ -> ] (30-08-2012, 03:42 PM)Musicwhiz Wrote: [ -> ]Surprising news, considering the index is up for the year so far!
CPFIS funds post 4.06% loss in 2nd quarter
STI is down 4.4% for Q2.
Thanks for the correction. So CPFIS did better than the index!
I do not like to compare to a loser and feel good about it.
Maybe most investors should have put their money in fixed returns.
You should also compare with CPF interest rate. Given that deposit rates are almost zero, this means a 4% loss in CPFIS is equivalent to losing 6.5% in your disposable savings.
I have long ago concluded that it is better to leave CPF money in the account where the essentially riskless return is very attractive relative to putting it in a market risky investment. The only circumstance where I'd break this rule is if there's a big correction (i.e. "sure win") and even then it won't be long term.
Better to buy some stock that yield higher than CPF. It is less risky than putting money with CPF which does not compensate you for inflation. CPF money must be carefully used for investment. If you follow what Ngiam Dong Dow said that CPF should never be used for individual investment in Shares, we could also be in for trouble! Today CPF is probably the only careful money that most ppl dare not anyhow risk and with lock-in triggering higher and higher minimum sum, I too am afraid to NOT park money outside CPF. If you dont do it they will take it away and set a higher minimum sum.
Already the yield on some of the stocks in our local SPore Co. is very high + the fact that Co. strategy has been executing well. Some of these stock remain cheap in valuation (both in PE and NTA). Every time after dividend it drop back on dividend but the next round of dividend (if the businsess sustain) - Co. continue to give generously. So the only risk is not taking risk and getting locked in by CPF.
It goes to show, CPF policy is flawed... In times of crisis, CPF probably make use of your money to make more money!! While, your CPF money help the gov to manage the economy, the reward is only 2+%, and if you locked in long term its only 4% where is the justice if you continue to hold on to your CPF and get taken away by minimum sum policy.
I think the HK gov did the samething, when Asia crisis struck. The gov use its fund (what fund??)to buy up all the stock and locked it away and when the economic recovery came, property prices and stock head north leaving the provident fund holders with little gain, but down the road inflation heading higher and higher. Effectively, the provident fund ability to guarantee your retirement is wiped out, as inflation eat away your CPF.
I do not have much CPF, when I looked back that I did not invest in property - as it is really just savings until I realised very late that they keep raising the minimum sum. Then in the last 10yrs, I started to invest the CPF and realised the gain in crisis buy is the only way.
It is never wrong to use CPF in crisis to buy good Co. for yield.
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.
Just as a eg. I decided 1 day after looking at Cortina and see the business is pretty stable with just enough dividend higher than CPF. I just bought it a few years back at 46cts. Today the EPS is hitting 12cts, NTA 70cts and Co. give 3.55cts dividend. I will still continue to hold on to it, and hopefully with the Sincere deal on Patek and Rolex out, Cortina will make more money! I didnt know a Patek start at 50k? Wow!
Thanks to those Civic servants that continue to advocate that there must be some liberty in that CPF member should be given a chance to manage our own money. Otherwise you leave it to the gov and who is the gov? Look at GIC and Tamasek (who are the ppl behind it?) to take the money to invest, we could be in trouble faster. The result of collective consesus driven by the top has some very unintended consequences that w We may NOT have the same reach or strength as a sovereign wealth fund, BUT thank goodness we had the sensibility that individual sound decision prevails.
Lets return to the roots of small SMEs where the individual CEO who found a niche and grow that niche into a public listed, be fair to minority public investor.
May be we should start to Rank which Co. CEO is the fairest in terms of sharing profit and remunaration?
Notice the SWFs report their performance on a long term basis but the CPFIS funds is reported on a quarterly basis. Why not report CPFIS performance over 3-year/5-year to see the gains of those who invested in the aftermath of GFC?
Special Account can earn up to 5% risk-free. So I don't touch.
Ordinary Account only earns 2.5-3.5%, so I think I can do better with a little bit of risk.
I have put almost all of my investible OA into REITs and dividend stocks since 2004. Averaging 6% yield, even through the 08 GFC. So I think I'm better off that way. And I don't care about price fluctuations, as long as the dividends are stable. If I looked at prices, I was down some 30% based on capital loss during the trough of the GFC, but this does not matter to me as long as the underlying asset is still secure (i.e. for REITS, the building is not collapsed or repossessed).
"Asset is secure" also means:
- debt is manageable so default is not likely
- tenancy are med to long term and tenants businesses are stable / solvent