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Why Don't We Get 8.4% on Our CPF?

Read this article from Motley Fool about the Straits Times Index EFTs getting an annualised 8.4% over the past 10 years.

While our CPF ordinary account is getting a miserly 2.5% that is getting beat by inflation.

Although we can invest amounts above $20,000 in the CPF ordinary account into approved stocks and unit trust, this rule puts a damper on everyone's CPF accounts, especially those who are starting to work, or those whose pay is low and those who are not investment inclined.

More important is the fact that just the average dividends given by the STI ETF alone will have beat the 2.5% given by the CPF.

The reply by our government that the interest rate is low because our currency is strong is pure hogwash. If you are using the CPF funds to invest all over the world and boasting that you are getting investment returns that is on par or beat that of Warren Buffett's Berkshire Hathaway, that explanation is laughable.

So why not just put all the CPF funds into STI ETFs, get dividends higher than 2.5%, have a more than even chance of getting capital returns with dividend as high as the 8.4% achieve over the last 10 years?

At one stroke, everyone with CPF account is better off, you don't need to hire all those money managers to try to beat the market, avoid fiascos like buying Citibank, Merrill Lynch and dumping their stocks at a huge multi-billion losses.

This is one example of the nanny state trying to be too clever.


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Warren Buffett Ideas on Retirement Investment

Read this article in Yahoo Finance about Warren Buffett's guide to retirement investment.

This was said during his annual letter to the shareholders of Berkshire Hathaway which is becoming something that people in the finance industry takes note of.

It was even collated to form the basis of a book on its own. Hard to imagine any other annual report statement by the Chairperson or CEO being made to a book.

Anyway, back to the article, there was four main themes that the article mentioned that relates to retirement investing.

1. Index funds beats stock pickers

2. Domestic funds beats foreign funds

3. Stocks beats bonds

4. Short term bonds beats long term.

While I tend to agree with all of the above, I believe that even Warren Buffett hedges his bets, for example, he would buy foreign stocks too, even from China. So I'd want to buy foreign index funds to hedge. So I have both S&P500 and STI index funds and dollar average both.

And for him, he doesn't invest in index funds, because he is the best stock picker there is for the last 40-50 years.

So this describes what he views the rest of us should do and what he wants the trustee of his will to do for his wife.

Simple advise that all of us will do well to follow.


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Which Stock Markets Are Cheap Now?

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If you take a look at the Financial Times data which list the PE ratios of the stock markets around the world, you will see that the major markets are relatively cheap compared to say the historical PE ratios which averages around 20.

The major surprise for me is that the Chinese stock markets have fallen to such depths. I remember that they were trending above 30+ just about 2 years ago. Now they are below 10. While Singapore is in the low 10s, indicating that there is room for the market to move up based on historical trends.

I don't look at PE ratios very often, but it provides a good way to gauge if markets are expensive or cheap now.

Time to look at getting into those markets that are undervalued now.

ETFs for the US, Chinese or Singapore stock market anyone?


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Disclaimer

The information contained in this blog is prepared from data believed to be correct and reliable at the time of publication of this report. The authors do not make any guarantee or representation as to the adequacy, accuracy, completeness, reliability of the information contained herein. Neither the authors or any affiliates or related persons shall be liable for any consequences (direct or indirect losses, loss of profits and damages) of any
reliance placed on information provided in the blog.

Shares and financial instruments illustrated in this blog can go down sharply or in certain instruments suffer total loss on the initial investments. Investors are advised to make their own judgment on the information provided and consult their own financial advisors or consultants as to the suitability of the products illustrated to their particular financial needs and objectives before acting on any information contained herein in this blog.