(Caution: this is my personal investment style and opinion. I am not encouraging readers to follow as this requires skills and it is extremely risky if ones are not well trained.)
There is a group of investors who always like the concept of ‘guaranteed return’ and ‘tax saving’. At this period of time, they will think hard how to save tax by contributing to CPF/SRS and/or to earn that perceived ‘risk free’ (in CPF) return in addition to tax saving.
However, I am not a fan of such ‘guaranteed return’ and ‘tax saving’. These are the 2 reasons –
CPF Interest Rate won’t make me rich
One can argue 2.5/4%/5% interest rate that the CPF members can earn, is risk free. However in my opinion, it comes with a huge trade off. From an investor’s perspective (myself), with an investment horizon of 30 years, and looking at the return of merely 2.5%/4% in my opinion, is over conservative that will do me more harm than good from the wealth accumulation perspective. In stock market, there are plenty of opportunities that can deliver much better result than this by taking calculated risk. It is just a matter of whether one knows how to do it and knowing what he is doing or not. To make investment return that is higher than 4%, is not really that difficult to achieve if you ask an experienced stock investor.
Flexibility is key
There is very little flexibility (SRS) or arguably no flexibility (CPF) how the members can mobilize their capital in SRS and CPF; there is plenty of limitation on how one can invest with those capital. For CPF, only maximum of 35% in OA is allowed to be invested in some Singapore listed stock. Then what shall we do with the rest of the 65%? If members really want to invest the rest of the 65%, they can only invest in those CPFIS approved unit trusts which I am not a fan of it either. Other than CPFIS approved funds, stock, and gold, investor can only use it to invest in a property! (I am no longer a fan of property investment).
Having the capital being locked, means that we will lose the opportunity to buy an investment asset (i.e. stock, property, business) when the price is depressed. When great opportunities present, with long investment horizon, it is not difficult to make more than the one-time tax saving (i.e. highest as 22%)
Keen to find out how you can include Stock into your Investment Portfolio? Feel free to drop me an email [email protected] or call me at +65-91880356 for an non-obligatory discussion now.
Reference – http://www.straitstimes.com/singapore/most-members-in-cpf-investment-scheme-made-a-profit-in-2016
