Investing your CPF money, really?

There was a period of time earlier this year that I contemplated on using my CPF money to invest. I sought some advice from my financial adviser back then on how the process is like and what options were available. The idea of using money that has to be locked away for a long, long time and not having to consider much “risk” with using cash on hand was a tantalizing thought indeed.

But the idea didn’t last long with me.

If you’re not that familiar with how you can use your CPF money to invest, here’s a quick crash course. Firstly, you would have to open a CPF Investment Scheme (CPFIS) account under one of the three major banks in Singapore, namely DBS, OCBC or UOB. Then you can start trading using that account as like you would with your cash.

There is also a limit to how much you can use. For the OA, the first $20,000 is untouchable as the minimum sum required and you can invest 35% in stock and 10% in gold of whatever available above the $20,000. And as for the SA, the minimum doubles at $40,000 but there is no need to open any account. CPFIS-SA is also only limited to these product providers.

As with the recommendation of my financial adviser, it was to place some OA money into a managed fund. Here’s the catch. 3% of your investment would be charged by the fund managers before you even start investing. That of course, did not sound very appealing to me, considering that I would have effectively lost 5.5% of interest if my investment didn’t make anything on the first year. That’s $550 for every $10,000 invested!

Needless to say, the drawbacks get worse if I were to use the money in my SA instead. That loss increases to a great 7%. I wouldn’t even go near elaborating on how devastating that could impact my portfolio returns.

I should mention also (and again) that the returns are not guaranteed and “risk-free” like the default interest rates provided by CPF. I was still very new to investing, but I could understand the opportunity cost should I go through with this method. It was too distasteful for my liking.

Not to forget, the annual fees for the fund managers themselves that would be charged too, although I do not have the exact figures of that up till this point.

I know many who have taken this option. The thought of having to use money that you can’t see and handing it over to someone who you think might be able to generate better returns than you somehow seems sane. Sure, I’ve been there myself. And sometimes, not knowing the real truth about investing can be a “bliss” for them, since they probably would not know how much they have lost, or could have gained, anyway.

As with the recent article from The Business Times that show that funds under the CPFIS average returns increased 5.1% in Q1, perhaps my next question would be if those are the net returns? It is not surprising that they would do well since it has been a decent year for the SGX in 2017, and if the funds are diversified enough the overall returns would emulate something similar to the returns of the STI ETF. Data can be selective.

If you’re planning to do the same, I hope you find yourself lucky enough that you’ve read this post to be wise. Maybe even choosing to take the same CPF money and DIY yourself with lower fees could be a smarter decision – wait, it probably IS.

Thanks for reading!

Miss Niao xoxo

Author: Miss Niao

Hello! I blog about financial matters and things that average people can do to have a better retirement. I want to inspire people to take control of their money and have a better understanding about it. If you are interested to know more, follow me @! :)

18 thoughts on “Investing your CPF money, really?”

  1. Hi again,

    If you are talking about investing in funds, avoid banks at all cost. Use POEMS SG/Dollardex. Avoid FSM as well (bloody bloodsucker with their quarterly platform fees). Both POEMS SG/Dollardex do not have any upfront service charge or quarterly platform fees which means your full SGD10,000 will be invested. 😀

    If you are using POEMS SG/Dollardex I don’t know where did you get such figure “3% of your investment would be charged by the fund managers before you even start investing.”

    Please note that “annual fees for the fund managers themselves that would be charged too” range in 1.5-2%. What this means is if a fund make a 10% return, your actual return is 11.5-12%. However you need not worry yourself about the fees as it’s already calculated into the NAV (what you see is what you pay, there’s no sudden surprise).

    Before you fire me and say active funds cannot beat ETF (like what most bloggers said), well let me enlighten you on how to pick funds:
    1) Pick a fund which consistently beat the index. By beating the index, it’s basically beating the ETF which tracks it (even after adding the managements fees – see bid to bid returns as it compares the index using NAV)
    2) Pick the best performing fund in the same region (if it can beat the ETF + beat it’s peers), it’s a keeper.
    3) Determine if you are comfortable with how high the volatility of the fund (SD). Sometimes, it’s better to pick a lower volatility fund.
    4) Check their performance every year.

    I use FSM Fund Selector ( for screening the funds and FSM Chart Centre ( to make comparison with my fund of choice and it’s peers and buy from POEMS SG (bypassing FSM quaterly platform fees :P)

    Now, can a fund really beat CPF returns? You betcha.
    CPF OA -2.5% p.a
    CPF SA – 4-5%p.a
    First State Dividend Advantage – annualized 6.40%p.a over 10 years period

    Keep in mind that First State Dividend Advantage is not the best fund but still a decent fund.

    Don’t limit yourself to fund which invest in SG only but also explore other regions. The world is big place.

    No, I am not a seller of unit trust nor am I a worker of POEMS SG/Dollardex.

    Avoid ILP at all cost. Trust no one especially financial adviser. I never trust any of those people.


    1. I’m sorry I missed your comment earlier, John! The comment went to spam, probably with the links and all.
      It would be more useful to me (and my readers) if you could share your returns with active funds and the investment period.
      I got the 3% from my financial adviser, and she mentioned that this charge is across the board for all financial providers (aka the more famous insurance companies).
      I am still skeptical though. I’m sure you’ve heard about this famous bet?


  2. Hi missniao,

    STI ETF (ES3) was up 10.39% for Q1… So the funds grossly underperformed the STI ETF.

    While there are risks involved when you invest using CPFIS, personally I would recommend buying STI ETF using CPF-OA when the price falls to a point where the dividend yield is at least 3.5%.
    In such a case, not only do you still enjoy 1% extra returns above the first $20k in CPF-OA (2.5% +1% is also 3.5%), you also get to enjoy some capital appreciation from the markets, albeit with some risks.

    During market boom, the dividend yield of STI ETF tend to hover around 2.5%. Buying at 3.5% dividend yield also has good margin of safety as the price would have fallen some 30% from the peak.

    Investing with CPF-SA is not recommended as the 4% risk-free return is too difficult to beat consistently by the product providers.



    1. Yes, especially also if you’re going for the long term, the investment period could negate out some of the volatility. The SA would also have a chance to get up to 5% if you have very low amounts in your OA!


  3. You are about four decades behind me. I’m retired. Let me give you a heads up.

    The probability of your financial advisor still around by then would be …? All my financial advisor friends whom I bought all my insurance with CPF or cash are now out of my radar screen, too fearful to see me in the eyes, to answer my questions about my abysmal gains or loss in surrendering those stupid and otiose policies they sold me decades ago.

    Then, when these nascent insurance companies recruited unqualified and unscrupulous agents selling policies with intemperance for commission, caused so much damage then, that today, our poor millennial agents suffer from the backlashes. My generations learnt it the hard way. I suggest you stop consulting your financial advisor, read up and research them yourself.

    When you know the consequences, your friends or financial advisors will not be around.


    1. Hi Fred.
      Thank you very much for your comment. Somehow or rather, you remind me very much of my dad. The things you have typed are quite similar to what he might say if he would find out about my blog.
      Anyway, my financial adviser is there because I still have existing H&S plans with her, and she is a close relative. But whether I choose to take her advise or not is clearly up to me. As with the conclusion of this post, you would see that I did not sign up for anything in the end. If you go digging around my blog, you would also know that I am an advocate of Buy Term Invest the Rest.
      BTW, my agent isn’t that “young” either, she’s probably 2/3 of your age 😛 but of course, age is just a number.
      Having to take control of my own finances now would be my personal responsibility, and I cannot blame anyone but myself if I did not do a proper job at managing my money. Even if I have suffered the consequences.


  4. I got returns of 15%+ in less than one year. (started last Sept).I use FSM Malaysia as I am Malaysian (not working/studying in SG but I am investing in SG.) But now I am transferring my portfolio over to SG for higher returns + zero fees. One of my best fund was india focus which return 22%+.

    Liked by 1 person

      1. That’s why people who said unit trust cannot make money, they don’t know how to choose the right and good fund or they bought at the wrong time.


  5. The whole CPF is a giant bond/safe deposit scheme. Transfer OA to SA repeatedly and soon the FRS will be achieved. No need to put in extra cash, unless one used the OA for paying down a home. Not sure why there is still a need to invest the CPF money but as soon as it is invested, one has turned away from the locked in safety to taking risk.


    1. You are absolutely right. Even with a decent income, FRS should not be too difficult to achieve.
      Even with property, also can at least hit BRS. The opportunity cost always has to be considered. Unfortunately, not many people are aware of the effects like you and me.

      Liked by 1 person

      1. We actually take issue with the property pledge. Because that let’s people off lighter than they should be prepared for financially. But the trouble is : people who ironically need help on managing their money want it all back! Sigh.

        Liked by 1 person

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