Learn about how the founder of the 1M65 movement successfully invested in markets and boosted his OA balance.

CPF investing is often overlooked by many Singaporeans. Or it’s simply treated  as a backup “war chest” to buy stocks or funds cheap when the market is undergoing a deep discount. But is that the right way to look at CPF investing? And what are the risks involved?

0:00 Introductions
3:52 Why you should invest your CPF
7:37 Making extraordinary returns with CPF OA – Loo’s returns
14:05 Capitalising on Covid-19 market volatility in investing
18:11 Kuih Lapis investing strategy – financial safety safety net and taking on more risk
23:00 Financial safety net with 1M65  
28:05 Not all market indices give the same high term returns
35:00 What is the S&P 500 fund that we can buy through CPF OA?
38:48 If you are in your late 20s, would you invest your CPF OA or save them up for BTO
42:26 Should you save all your CPF OA to SA before investing?
49:24 Demo on Endowus
55:28 I only use CPF for insurance linked policy. With a much shorter time frame, what is the best way to "accelerate" $ for retirement?
59:13 For a person age 55, withdraw cash and invest in S&P500? Or retain CPFIS account and invest via Endowus?
1:02:49 $1m65 is absolute number. It's been said age 60 should have 60%bonds 40%equities. Is CPF part of bonds?

What is CPF?

The Central Provident Fund (CPF) is Singapore’s social security system that aims to help its citizens meet their retirement, housing, and healthcare needs.

Both you and your employer will make monthly contributions to your CPF account. Your CPF account is split into three accounts, and each account :

Excerpts from the webinar

Why you should invest your CPF (3:52)

Sam: One of the major reasons why people do not invest their CPF is because of the risks involved in investing. But time has proven that the longer you invest, the more stable your returns get. Since the money we save in CPF is a pool of money that we will save for a very long time, the longer you invest your CPF, the greater your chance of outperforming the CPF OA rate of 2.5%.

Hypothetically, if your investment returns are 7.5%, your wealth in 30 years would have been multiplied by 10 times. If you kept the same amount of money in your CPF OA without investing it, your wealth would have barely doubled in 30 years.

It is also important that the investment strategy for your CPF OA, which is your long-term money, is holistic and diversified, so that you can reach your goals with a high probability of success.

A “kueh-lapis” investment strategy (18:11)

Loo: A “kueh-lapis” is a traditional multi-layered dessert. In this “kueh-lapis” investment strategy, you build layers and layers of your investment portfolio, starting with a secure investment portfolio, then taking on “layers” of riskier portfolios. The sequence of this layering is important - you have to build a firm foundation of a financial safety net before layering on other higher risk assets. Your CPF acts as a very sound and substantial first-layer financial safety net. In times of crisis or market crashes, your top layers (of higher risk investments) might be severely shaken, but your bottom layers would not be affected.

Buying assets during market crashes requires guts of steel, and you cannot do so if you lack a strong financial safety net. Having a strong financial safety net would help you stabilise your emotions, regardless of how the stock market performs.

Not all market indices give the same high term returns (28:05)

Loo: Not all indices can be used for indexing and dollar cost averaging. The S&P500 has proven to be a very robust indexing instrument over a century because it is made up of powerful global companies. Over time, investors can expect high and ever-growing returns. Other indices (e.g., KLSE, STI, FTSE, Hang Seng) have been proven to be less robust, and provide negligible returns over time. These other indices are unable to provide the same high term returns as the S&P500.

Dollar cost averaging or lump sum investing? (29:35)

Loo: You can actually utilise both strategies. Personally, I split the sum of money I want to invest into two portions (not necessarily into equal halves). With one portion of the money, I would consistently engage in dollar cost averaging over time. With the other portion of the money, I would wait for a market crash, then invest a large lump sum of money. Combining both strategies in such a way has given me phenomenal returns.

Sam: Throughout your life, you will always accumulate more money in the form of income or savings. We need to invest long-term to get the best returns, which means we should constantly be dollar cost averaging into the market over time.

Questions and answers from the webinar

If you are in your late 20s, should you invest your CPF OA or save it for a BTO flat? (38:48)

Loo: In my view, basic needs come first. Having a roof over your head is paramount. At this age, most of us would have to use some of our CPF monies as we do not have much cash on hand. But do not channel all your money towards buying a very expensive house and incur large debts. Taking on huge debts would very negatively impact your life.

Additionally, as soon as possible, you should switch your mortgage payment from CPF to cash. You can earn a 2.5% interest on your money in your CPF OA, whereas you can only earn around a 1% interest on your money in banks. Using cash to pay for your outstanding mortgage thus makes more financial sense.

Should you transfer all your CPF OA to SA before investing your OA funds? (42:26)

Loo: You can do both. I personally prefer to hold more money in my SA account and invest less of my OA funds at a younger age. Over time as my financial safety net becomes more substantial, I would start investing more of my OA funds and transfer less money to my SA account.

As a person aged 55, should I withdraw my CPF monies as cash and invest in the S&P500? Or retain my CPFIS account and invest via Endowus? What are the pros and cons? (59:13)

Loo: I encourage everyone to not withdraw your CPF money as much as possible. There are now many instruments that you can invest in using CPF. After investing, if you want to retrieve your profits, the amount will be returned to your CPF account. In your CPF OA account, you can earn a 2.5% risk-free interest rate on your money, backed by the government. This is the best savings account in the world with the best returns, thus I would strongly suggest everyone to not withdraw your CPF balance if you can.

Sam: CPF is not only the best savings account in the world, but also the best and most flexible financial account of any kind - not only can you invest with it, you can also leave your money in there and enjoy the 2.5% interest rate risk-free.

The more important thing is that average life expectancy in Singapore is now 85. At 55, you are going to live for another 30 more years. 30 years is a long time, so it is more the reason you should invest your CPFIS and allow your retirement fund to continue to grow.

$1M65 is an absolute number. It's been said that at age 60 you should have 60% bonds and 40% equities. Is CPF part of bonds? (1:02:49)

Sam: SA, at 4% interest rate, can be considered your risk-free fixed income / bond allocation. If you want to have a balanced portfolio, your OA investment should be 100% equities. You can then actively asset allocate between your OA and SA to create a 60% bonds and 40% equities distribution.

Loo: The weightage of bond and equities is an individual preference and depends on your financial needs. It does not necessarily have to be a 60-40 split.

If you are going to place most of your money in bonds, your returns will be much slower and steadier than if you placed most of your money in equities. However, since bonds are usually counter-cyclical to equities, they can counter the volatility of each other and reduce overall volatility of your portfolio. This would be suitable for people who are unable to stomach high volatility.

Disclaimers: Past performance may not be an accurate or complete indicator of, and does not guarantee, future performance. Investment involves risk. As such, the capital value of investments and the income from them may go down as well as up and may become valueless. You should carefully consider whether any investment views and products/services are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances or seek financial advice via Endowus’ platform. This advertisement has not been reviewed by the Monetary Authority of Singapore.