Feb 2021 Dividend/Interest Update

As many know I've set a goal for interest/dividend gain for the year.. around SGD3.3k is my goal for 2021. My own accounting actually ends the financial year in April.. but this goal actually sits in my Milestone excel.. so a different system. I will use the blog as a tracker for myself. 

On another note, I only recognize the dividend once I'm paid so not following Ex Date. 

YTD Gain: SGD364.13

Month Gain: SGD359.3

Ascott Residence Trust (SGX:HMN) 

Ex Date: 3 Feb 2021

Record Date: 4 Feb 2021

Payment Date: 26 Feb 2021

Total Payout per Stock: SGD 0.01986 (1.891% yield, based on Ex Date closed SGD1.05) 

SPDR Straits Times Index ETF (SGX:SI)

Ex Date: 9 Feb 2021

Record Date: 10 Feb 2021

Payment Date: 24 Feb 2021

Total Payout per Stock: SGD 0.04 (1.36% yield, based on Ex Date closed SGD2.94)

Ascendas Real Estate Inv Trust (SGX:A17U)

Ex Date: 9 Feb 2021

Record Date: 10 Feb 2021

Payment Date 9 Mar 2021

Total Payout per Stock: SGD 0.01678 (1.891% yield, based on Ex Date closed SGD1.05)

Investing with your CPF-SA (CPFIS)

This has been a topic that I've been thinking about for quite some time.. and I'd just thought of writing about my thoughts. Inb4 I get flamed by financial advisors/CPF investment platforms.

Basically, CPF has a scheme where it allows you to invest using your SA/OA monies, read more about it here. TLDR; you can invest anything above the first SGD20k in OA and SGD40k in SA, ultimately you can just take a look on the CPF platform to see how much you can invest under the "Investment" tab. 

Ultimately, this scheme enables financial-savvy you to maximize your retirement amount rather than just earning the basic CPF interests. However, there are very limited things you can invest in as the CPF board tries to limit the investment varieties to the safer ones 

This post is actually targeted to spread some awareness for people who are thinking of using your CPF to invest, and there's no one right answer. Different strategies suit different people, but I hope to point out something to make sure most people avoid these!

Bonds and Fixed-Deposit (FD)

In the current low-interest-rate environment, you'll be crazy if you invest in low-yielding instruments such as Singapore government bonds or fixed deposits and forgo your current minimum 2.5% yield. 

Equities and Gold

For the more savvy peeps, you'll likely look at equities or even gold to hedge out inflation. Maybe buy DBS and hope it will go up even more in 10 years so you get capital gains along with dividends. 

Unit Trusts and ETF

If you're not keen to self-pick, look at unit trusts/ETF that might be performing or has potential.. you will earn gains from payout as well as capital appreciation. This will give you access to invest in instruments that are not available directly to you in CPFIS but you'll be paying very low management/fund fees to the respective unit trust or ETF managers.

Investment-linked Insurance Products (ILP) and Endowment

This is where I want to highlight, insurance products offered by insurance agents/financial advisors..

Honestly, I've not much exposure nor knowledge of this space.. but mostly my take on these. I've friends who taken up normal ILP or endowment plans, and my 2cent after hearing such policies. 

While ILP works similarly to normal funds provided by fund managers.. most of such underlying funds in Insurance firms have other fund managers' funds as an underlying component.. which means you're better off investing in the individual funds directly. For example, AIA Global Balance Fund charges you 1.5%pa for you to invest indirectly in; PineBridge (US Large Cap Research Enhanced Fund, International Funds - Singapore Bond Fund), Nikko AM (Shenton Japan Fund), Capital Group (European Growth and Income Fund (Lux)), Legg Mason (Western Asset Global Bond Trust), and Aberdeen Standard (Pacific Equity Fund). 

On another note.. Endowment plan's returns are very low mainly because it also has an insurance component.. in my own opinion, one should not mix the two products and such products usually give you half-baked products in both fields. 

Endowment plans are actually structured in a very smart way where they give you 2 figures in the investment component; guaranteed return and non-guaranteed return. Usually, these guaranteed returns can be pathetic ~2%pa rate or even worst while the non-guaranteed returns can go up to ~5% or even more... While I personally know some fund managers in insurance firms and they work hard to maximize returns to you.. there's a limitation; investment mandate, market condition, etc, etc..

That's why we've been seeing news on endowment plans holder receive peanuts at the end of the journey. 

Summary

For myself.. I look at SA as a safe retirement tool.. ignoring the step-up on the first SGD40k.. you earn a risk-free rate of 4%. Why take the risk of investing even in the safest instrument tool (even the safest tool fail in the worst market), and just let it grow safely in your CPF.

On another hand, for OA.. I take it as my means to pay for a mortgage.. as I rather invest/trade with my readily available cash which I can reap the benefit immediately instead of waiting for god knows how old to withdraw my CPF gains. Sure.. you have accrued interest to pay back CPF.. but if you plan to stay in your home forever.. you will not sell down your property thus no need to pay back the 2.5%.

All-in-all, my belief is when you invest.. it must give you a good return for you to take up the risk.. why give up the safe 4% on your SA and bet on some unreliable endowment plan.. but this is the way of our economy.. to re-package and market the product as something new. 

I'd say just leave your CPF alone.. at most I'm moving my OA to SA to make sure I reap more returns. I will also be looking to do voluntary contributions to reduce income tax in the near future when I get paid more.. 

This is a very brief round-up of such products.. please read up more before taking up any investment schemes and if you have questions or will like me to cover more topics~ shoot it away in the comments

Cheers!

CPF EOY 2020

My thoughts on CPF might not click with many regular Singaporeans, but on the other hand, I also don’t agree with many financial bloggers who include their CPF in their net-worth since you don’t have liquidity on it (but still it belongs to you, and you need to optimize it for the best performance).

Personally I view CPF as these;

• MA is a bonus saving for medical emergencies as well as covering some insurance premium
• OA helps with mortgage in the future, however no real point to keep a large sum here
• SA best retirement platform which gives yourself a good bonus once you hit 55/65

While many Singaporeans complain about their money being locked up in the CPF, but to be honest, it is the best “force saving” platform that the government has given us along with the amazing interest rate. I also understand the reason why the Government require us to keep a minimum amount to draw out for the rest of our life rather than giving us everything. We can only blame black sheep who can’t manage their finance well in that case (imagine these black sheep draw out all their money, and finish it, it’s us who need to pay for them in the future).

On the other hand, I strongly believe that we should view CPF as a surplus or a bonus rather than it being our net-worth unlike other bloggers because as much as you don’t have access to it, you don’t really own it now (fight me, kidding).

Interest

The key to optimize your CPF starts with understanding the interest rate you’re entitled upon each and every sub accounts. I only plan to go through the “Under 55 Year Old” interest rate, since if you’re above 55, I don’t think there’s much room for you to optimize it.

As many of you know, the interest rate for the following sub accounts are; 2.5%pa for OA, 4%pa for both SA and MA.

There’s an extra 1% on the first $60k balance, this only applies to the first $20k in OA so effectively you can only gain 3.5% on the first $20k and the excess interest actually gets credit into your SA/RA. While the remaining $40k will gain 5%pa can be from your SA and MA (in this exact order).

CPF Plan

CPF Balance
EOY	OA SGD	SA SGD	MA SGD	Total SGD	PSEA	YoY
2018	$    1,095.85	$        352.26	$    1,369.26	$  10,097.01	$      7,279.64	0.000%
2019	$  12,942.01	$    2,742.92	$    6,139.91	$  29,104.48	$      7,279.64	188.249%
2020	$  19,550.62	$  17,411.76	$  11,774.80	$  56,558.18	$      7,821.00	94.328%

CPF as of 3rd Jan 2021

As you can see my CPF started building up in year 2019 because that’s the year I started working, and we can expect YoY growth to slow down. I’ve made a transfer of $10k from my SA to OA which I’ll go through later. In addition, I’ve not touched my PSEA account, so I will be looking forward to it getting transferred to my OA in 2-3 years time.

5 Year Plan

Currently I plan to go along with this plan for the next 5 year as I have my BTO coming in late 2022. As I’ve mentioned I view CPF as a bonus, I plan to continue transferring from my OA to SA to tap on the risk-free higher interest rate (first goal is to hit $40k, but also plan to continue after since 4%>3.5% on the first $20k on OA). I will maintain OA’s balance under $20k for now just to prep my 2nd down-payment for BTO and also future mortgages. In addition, I have the PSEA fund that will be coming soon, which is the main reason why I don’t see a need to maintain a high OA balance.

Aside from this, CPF allocation to OA will always be much higher so you have to manually do the adjustment. Do look at the table below for allocation.

https://www.cpf.gov.sg/Assets/Employers/Documents/Item2w_FAQs.pdf

This plan might change in the future, most probably after 5 years once my MOP is up and thinking of upgrading to a bigger unit, or even a better location.

Do let me hear about your CPF plan, and if you have any feedback on my strategy/view. In addition, by all means, this only applies to people who are employed with CPF contribution, and I can’t comment for those free-lance people.

As usual, I try to be brief.. if anything you might want to hear more in-depth, feel free to shout out and I might make another post.