For some reason, I bought the latest issue of a financial magazine. i felt like i wasted $5.50 that i will not get back. Under the pseudonym Commonsense Investor, the writer goes on to argue the folly of having all your money in equities. He said, without citing sources, that "several studies have shown that a 100% equities allocation perform no better than a 80/20 (20 being in fixed income). That is if i read him correctly.
I do not know which are the studies he read and I have to admit upfront that I am an equities fan at the moment. Unless I have enough liquidity to purchase corporate bonds, Singapore Government Securities, only seem to do slightly better than if I left it in the CPF OA or SA.
My point is simple. Try not to touch the money in your CPF. When you grow your retirement nest egg, use only money that you can afford to lose into common stock. I have not the minimum sum that I can start investing using CPF funds, but I would assure you that I will not use them other than for public housing or education purposes. There is a reason why CPF is called social security.
Of course some will counter that this is not maximising the returns on your assets. But the question remains, to what ends should should my asset grow to. You can easily calculate how much money you need to life comfortably after your retire with a personal finance calculator on line. If you do not provide a proper estimate to how long you live after retirement, your CPF funds might run out and then you might have to do a reverse mortgage.
What about money set aside for emergency expenses? I am not properly trained to tell you, but i believe keeping that money set aside for expenses, housing loans and medical emergencies in the event of of retrenchment or unemployment in a term deposit, money market fund , gives you a slight edge against the silent killer known as inflation. Please don't use it to buy gold!
Why am I not for bonds? Reiterated, they are not attractive when you consider that there is sufficient spare cash on the sidelines that you have been forced to save and that you should not touch.
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