Hi! Good day, everyone. I’ve hit another milestone in my
financial journey, and I’m thrilled to share that I’ve officially closed my CPF Investment
Scheme (CPFIS) account. ( Also means Uncle reached 55 years old
liao 😊 . Turning 55 feels like crossing a major
finish line, and it’s a milestone that comes with reflection.
After years of navigating the stock market with my CPF
Ordinary Account (OA) funds, I’ve walked away with a tidy 11.2% return.
That’s a solid win, especially when you stack it against the CPF OA’s
guaranteed 2.5% interest rate. I’m not here to brag, though, but more to
reflect on what this means and why I’m cautiously waving the flag for others thinking about
diving into the market with their CPF savings.
A Win, But Not
Without Caveats
Let’s get one thing straight: beating the CPF OA’s 2.5%
interest rate feels great, but it’s not a walk in the park. That 2.5% is a risk-free return, a cosy safety
net that grows your money without you breaking a sweat. When you dip your toes
into the stock market via CPFIS, you’re essentially giving up that guaranteed
return for a shot at something higher. That’s the opportunity cost, and it’s no
small thing. As I’ve said before in my post, *Investing Not for Everyone* <link>,
the market isn’t a golden ticket for everyone. My 11.2% return didn’t come from
being a genius or having a crystal ball, but instead it came from discipline,
patience, and, of course, a bit of luck.
Investing with your CPF OA
funds means you’re taking on risk, and the market can be a wild ride.
You’re not just betting on numbers or financial reports; you’re wading into a
sea of human emotions. The market is noisy, driven by people who can be wildly
optimistic one day and downright panicky the next. Sir Isaac Newton, of all
people, nailed it when he said, after losing a fortune in the South Sea Company
bubble, “I can calculate the motions of the heavenly bodies, but not the
madness of people.” That’s the stock market in a nutshell: unpredictable,
emotional, and often irrational.
The Behavioural
Battle of Investing
Investing isn’t just about crunching numbers or having
a high IQ. Sure, you need to understand balance sheets and
market trends, but the real challenge is behavioural. It’s about your
temperament, your ability to stay calm when the market tanks, and your
discipline to stick to a plan when everyone’s screaming about the next hot
stock. Behavioural finance teaches us that humans are their own worst enemies
in the market. We chase trends, panic-sell at the bottom, and get overconfident
when things are going well. Speaking of overconfidence, that’s a big trap. Many
CPFIS investors think they can outsmart the market, but the data tells a
different story.
How
is members' investment performance in the CPF Investment Scheme-Ordinary
Account (CPFIS-OA)? <link>
According to the latest available figures from the CPF Board,
over the last 5 years ( since 2020) only
about 57% of CPFIS-OA investors
managed to beat the 2.5% OA interest rate and if we extend the period longer to available data since
2016, over the last 19 years, the % improve to 71% (this
validate the investing is for long term and if we extend our investment horizon
longer, the probability of wining and have positive returns will increase ).
Still, that means around 29% of investors took a loss,
with many failing to match the risk-free return. These stats are a sobering
reminder: the market doesn’t care how smart you think you are. Overconfidence
can lead you to overestimate your ability to pick winners, and the results
often humble even the sharpest minds.
29% of Members Making losses -
Why CPF-IS
Despite 29% of CPF Investment Scheme (CPFIS-OA) investors
earning less than the 2.5% interest they would have received by keeping their
savings in CPF, the CPF Board continues to allow the scheme. This is because
CPFIS provides flexibility for members who wish to seek potentially higher
returns by investing in approved products like unit trusts, ETFs, and shares.
The CPF Board acknowledges that investment outcomes depend on market
conditions, investor decisions, and risk appetite. While some underperform, others
achieve better-than-CPF interest returns. The scheme's ongoing availability
reflects a balance between offering autonomy and ensuring that only
CPF-approved products and intermediaries are involved, providing safeguards. It
also supports financially literate members in diversifying their retirement
planning beyond the fixed interest of CPF accounts. The Board enhances transparency
by publishing annual performance statistics, helping members make informed
investment decisions based on past CPFIS outcomes. In layman's terms, " Ah
Gong already gave you the 'freedom to choose', don't kpkb (complain ) if you
lost money in using your CPF $ to invest ". 😊
A Word of Caution
If you’re thinking about using your CPF OA to invest, tread
carefully. The 2.5% interest rate is nothing to "show off", but it’s
"almost" guaranteed (of course, subject to change), risk-free, and
compounds nicely over time. Before you jump into stocks, ask yourself: Are you ready to
deal with the market’s mood swings and volatility? Do you have the patience to
hold through downturns? Can you resist the urge to chase every trending stock?
If you’re not sure, it might be better to leave your money in the OA or consider transferring some
to your Special Account for the sweet 4% interest (though that move is irreversible, so think carefully).
Investing through CPFIS can be rewarding, as my 11.2% return
shows, but it’s not for everyone. It takes more than smarts; instead, it takes passion,
patience, discipline, and a stomach for volatility. The market’s
madness, as Newton put it, is real. So, as I celebrate this milestone, I’m also
reminding myself (and you) to stay humble, stay patient, and always weigh the
risks against that reliable 2.5%.
Till next update 😊
Cheers !
STE
P/S:
How do I close my CPF Investment Account under the CPF
Investment Scheme-Ordinary Account?
How do I transfer my shares, bought under the CPF
Investment Scheme (CPFIS), to my Central Depository (CDP) account?
Once
you reach 55 years old and set aside your FRS in your RA, you may proceed to
close your CPF-IS account and transfer your shares to your CDP account. After submitting
your Form, you will receive a notification from CPF on the closure of your CPFIS
account and within 1-2 weeks, you will receive a letter of payment from your
Agent Bank for the payment of share transfer ( a fee of $10+ GST per counter will
be charged). The whole process may take 2-3 weeks.
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