03-09-2014, 07:25 PM
Ok, on a serious note, you have set aside 30% of your total fund as cash.
I presume this 30% hard cash is for emergency purpose, or opportunity fund should the 2009 worldwide stock market crisis should appeared again.
So this portion of cash should be as liquid as possible, even though it is earning miserable interest rate at our local banks.
In my opinion, if this portion of cash is parked into CPF, which carries many restrictions and uncertainties, it can never be considered as hard cash anymore. And therefore it contradict your original purpose of keeping 30% of your portforlio as cash !
Even Warren Buffett is setting aside a big portion of his funds as hard cash. I'm sure we have something to learn from him.
I presume this 30% hard cash is for emergency purpose, or opportunity fund should the 2009 worldwide stock market crisis should appeared again.
So this portion of cash should be as liquid as possible, even though it is earning miserable interest rate at our local banks.
In my opinion, if this portion of cash is parked into CPF, which carries many restrictions and uncertainties, it can never be considered as hard cash anymore. And therefore it contradict your original purpose of keeping 30% of your portforlio as cash !
Even Warren Buffett is setting aside a big portion of his funds as hard cash. I'm sure we have something to learn from him.
(03-09-2014, 04:17 PM)gzbkel Wrote: Hello Layman
I am currently also vested in some REITs and pref stock.
I am taking about moving the cash part of my portfolio from Fixed D to CPF after 55. (I do not intend to top-up before 55)
Since you can withdraw from CPF at least once a year after 55, interest rate risk is not a problem I think.
My main concern is change of CPF policy, and how fast the MA minimum sum will grow (since you are force to top up MA before each withdrawal.
(03-09-2014, 02:36 PM)Layman A Wrote: No offence, but I find it difficult to understand why you want to use CPF as an FD instrument , as much as why people want to invest in zero coupon convertible bond in a junk company .
The similarity :
Your case :
1. You earn peanut difference in the interest rate, but risk locking up the whole entire sum when there is major change in policy.
2. Maybe tomorrow when you wake up from you dream, you find that interest rate already start ticking up, and may be in a year or two the interest rate offer by the bank could well beat the miserable 2.5% by CPF board .
The zero coupon convertible bond case :
There is nothing to gain except risk risk and risk. Default risk, company wind up risk etc.
In conclusion :
You are taking on overwhelming risk just to gain the miserable interest difference. Is it worthwhile ?
And since you are toying with the idea :
1. I presume you are reaching 55 soon.
2. I presume you are cash rich CPF rich uncle who could easily beat the minimum sum set by the CPF board.
For me, I park a portion of my cash in bank preference share, Genting perpeptual 5.125%, and REITs .
( yes REIT. Since I'm taking risk, I might as well going for the highest interest possible in the market ! )
On the other hand, if this a just a technical TCSS scenario just for discussion purposes, then it's a different story !