Homing in on investing truths

The original version of this article first appeared in The Business Times.

What makes for a classic song is simply how it stands the test of time.

As Singapore celebrates National Day this week, one iconic song immediately comes to mind. And this year, Home – performed by our very own songbird Kit Chan – gets a fitting remake on its 25th anniversary.

In place of the rousing musical arrangement is a more introspective interpretation of this popular ballad. As the veteran singer Chan told The Straits Times in an interview, the latest version of this classic is meant to be an intimate gift to each Singaporean, reflecting that regardless of ups and downs, Singapore remains home to all of us.

It’s worth reflecting on why this song has endured through the years. The classic reminds us that home is where we find comfort and familiarity (and yes, good food). Even as buildings get torn down and new skyscrapers poke our skyline, we embrace the change in landscape without forgetting what matters – that home is about its people too. That we’re confident in our resilience against troubles – that we’ll find a way to start anew.

We sing a similar song when it comes to raising the bar for investors in Singapore: by homing in on the things that matter.

Homing in on investors’ needs

One way to care about investors is to focus on how we can expand the number of low-cost options for CPF investments.

Savings in our CPF accounts make up a significant part of our retirement pool. Given the long-term nature of such savings, there is always room to consider how the sums can be maximised for greater returns in our sunset years. This concern comes especially amid higher inflation, and as many Singaporeans use CPF Ordinary Account (OA) funds to pay down their mortgages.

As the first digital adviser for investing through the CPF Investment Scheme (CPFIS), we’re committed to broadening access to best-in-class funds for the CPFIS.

As an example, we have just launched the first low-cost, global fixed income passive index fund – the Amundi Index Global Agg 500m Fund. The fund, managed by Amundi, is exclusively available on the Endowus Fund Smart platform for investments using CPF OA savings.

It is now the cheapest fixed-income fund option in the CPFIS, with fund management fees at just 0.1% a year.

Keeping investing costs low is important because costs have a significant impact on returns. The SEC’s Office of Investor Education and Advocacy reviewed how a US$100,000 investment portfolio with a 4% annual return would perform over 20 years – assuming an ongoing annual fee of 0.25% versus 1%. In two decades, 1% in annual fees would reduce portfolio value by nearly US$30,000, as compared to a 0.25% annual fee.

When it comes to CPF investments in particular, time is our greatest ally. But high fees likewise compound and snowball into a large amount over time. Helping more Singaporeans save on overall fees is an important long-term mission.

Standing the test of time

Singapore turns 58 this week, and the latest rendition of Home brings to mind the values of faith and conviction amid volatile and uncertain times.

The situation is similar when it comes to investing. Holding on to a conviction that markets would prevail over the long term can be frightening during market slumps. When global markets tumbled last year, many investors would have been dismayed and anxious over their portfolios’ short-term losses.

Yet global equities, as represented by the MSCI All Country World Index, were up 15% in Singapore dollar terms in the six months ended 30 June 2023. The US equity market, in particular, has roared back to life this year.

In unpredictable times, take faith from lessons throughout history that we are better off staying invested and not timing the markets which is incredibly difficult to do. Data shows that returns can be substantial if you manage to avoid the worst month in a year, but it is especially painful if you miss out on the best month.

Markets are volatile by nature. Investors take on market risk or volatility as they expect to be rewarded over the long term with higher returns.

However, one way to improve the risk-reward equation in our favour is to extend our holding period, which helps to reduce volatility. As data shows, the monthly return is less volatile than the weekly return, and the annual return is typically less volatile than monthly returns. If we invest for 10 years, then the volatility again is significantly reduced compared to the annual returns. Hence, as we take market risk, there is a way to harvest good positive returns over the long term.

Chan’s remake of Home makes us contemplative about what lies ahead for this little red dot amid greater complexities and the unknown.

But the bittersweet rendition also reminds us that every Singaporean’s future is still worth investing in and worth fighting for, in hopes of more fruitful years and decades ahead.

For this is where I know it’s home. Happy 58th birthday, Singapore.

<divider><divider>

To start investing your CPF with Endowus, click here.

Read more:

• How Endowus improved CPF investing in Singapore
• Five things to note before investing your CPF
• Can your CPF savings keep up with high inflation?

<divider><divider>

Investment involves risk. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Past performance is not an indicator nor a guarantee of future performance. Rates of exchange may cause the value of investments to go up or down. Individual stock performance does not represent the return of a fund. 

Any forward-looking statements, prediction, projection or forecast on the economy, stock market, bond market or economic trends of the markets contained in this material are subject to market influences and contingent upon matters outside the control of Endowus Singapore Pte. Ltd. (“Endowus”) and therefore may not be realised in the future. Further, any opinion or estimate is made on a general basis and subject to change without notice. In presenting the information above, none of Endowus, its affiliates, directors, employees, representatives or agents have given any consideration to, nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Therefore, no representation is made as to the completeness and adequacy of the information to make an informed decision. You should carefully consider (i) whether any investment views and products/ services are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances. You may also wish to seek financial advice through a financial advisor or the Endowus platform and independent legal, accounting, regulatory or tax advice, as appropriate.