Know how lower fees affect your CPF-IS returns in the long term

One of the more popular options for investing our CPF Ordinary Account (CPF OA) is to top up our CPF Special Account (CPF SA) to get a 4% return, or to invest in the STI ETFs through CPF Investment Scheme (CPFIS) for diversification.

As someone who previously worked in a Temasek Linked Company, with a significant portion of my salary in variable bonus, I didn’t want any more exposure to the Singapore market. I searched for options to invest my CPF OA funds where I could have global stock market exposure and was disappointed with the options that were available to an individual investor like myself.

The costs involved in unit trust investments for CPFIS are complicated. The more I read, the more confused I got. Upfront sales charges and/or trade costs, platform fees, wrap fees... I began thinking that it would just better to put it into my CPF SA and get it over and done with.

The way Endowus prices its fees is much simpler. All we need to know is that we are paying a 0.4% wrap fee to Endowus - this is an all-in fee that Endowus charges. At the fund level, which is the fees charged by the fund managers, it is net 0.58% for a balanced 60:40 equity bond portfolio. Trailer fees, which are fees usually paid to distributors by the fund managers, are fully rebated back to Endowus' clients.

With Endowus, people who want to globally diversify their portfolios have a simple, transparent and cost-effective option. You can see the chart below on how Endowus has reduced the costs of investing in unit trusts for CPFIS for an advised portfolio.

Even so, are those all the charges that we have to bear? We still have to pay Agent Bank charges for the investment and management of the funds.

Why do you pay lower CPFIS fees on Endowus?

Endowus is working with an approved CPF Investment Administrator, UOB Kay Hian, for greater cost efficiency and consequently lower agent bank charges. For the same $10,000 investment made into the 7 funds curated by Endowus, you will be saving $63.50. For me, that is almost 3 months’ worth of weekly Filet-o-fish Extra Value Meals!

Note: Dollar values are excluding GST. Different Agent Banks have different charges, from $2 per 1,000 units to a maximum of $20 per transaction, to $2.5 per 1,000 units to a maximum of $25. The example above considers $2.50 per 1,000 units to a maximum of $25 per transaction. Information is correct as of 28 Nov 2019.

For example, if we were to switch our risk profile which leads to a purchase in equity funds and a sale in bond funds, there will be no Agent Bank charges through the Endowus setup.

Maximising your CPFIS returns, at the lowest fees possible

At Endowus, we pride ourselves for structuring investment solutions right so that our customers do not spend unnecessarily and get the best possible returns. The total cost of investing in diversified funds for our retirement should be similar to what we can do with our cash account.

To be fully transparent, in my CPF investment strategy, I have invested half of my CPF investable sum with Endowus and am looking to invest the rest by the end of March 2020 to maximise my investment horizon as a young working adult. Spreading my investments out help me manage my emotions better and gain confidence in my investing decisions.

And we'll be here for you whenever you're ready to make that decision, helping you invest better to live easier today, and better tomorrow.