Fundsupermart (FSM) recently has an article on investing with the CPF Special Account (SA). I had been investing with my CPF SA so it is nice to read the article and compare notes.
The article is a nice general article that targets no particular investor since this is what they had to do. Here’s my view which agrees generally with theirs.
Before going on, I should state that my view is with respect to my situation alone. The standard caveat of past performance is not indicative of future performance applies.
On the point of investment options, there isn’t really much. It seems
that CFP does not allow investment into equity funds so the only
options are bond and balanced funds. Realistically
speaking, if one just focus on the SA investment alone, there is no
point in investing in bond fund. The return for bond funds are not high
and the risk not diversify. FSM had similar option and went on to
compare the performance of the balanced funds spliting them into Asian
and Global funds.
If one use their fund selector,
it is easy to see that the choice (historically wise) is very
limited indeed.
Firstly, anything that return consistently below 4% is
eliminated since leaving the money in SA already gives 4%. This
selection criteria effectively eliminates bond funds as well as some balanced funds.
Second, to compensate for the risk, I want to look only at those that return consistently above 7%.
AIG Acorns of Asia Balanced Fund is probably the only fund in my opinion worth investing in. PRU Asian Balanced Fund also looks outstanding but since it is also an Asian balanced fund, I would go with AIG’s.
As a more active investor, I prefer not to include global balanced funds into my portfolio at this moment. I believe Asia will outperform the rest of the world in the medium term.
Yes there is more risk, but there is more return. Is it justified to expose SA saving to such risk? Yes, I believe the longer time frame and the active management can counteract the exposure.
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