Financial Freedom SG

On the 1st of April, the CPF (Central Provident Fund) regulations on investment will change. A lot of investors will be asking if they should put their monies in the CPF and earn the high interest which should be a minimum of 3.5% for the first $20k in the OA (Ordinary Account) and 4% for the Special Account.

This is a 1% increase since the start of the year. It does make a difference, I don't think it makes a big enough difference. At the same time, the restrictions on investment comes in on the 1st of April which more or less says that you must have $20k in your OA before you can invest any surplus. So there goes my dollar cost averaging for buying Aberdeen Pacific Equity (in case you are wondering how much it has earned me- I had dollar cost average in OCBC Greater China and stopped around 2004 before resuming in dollar cost averaging in the same year in Aberdeen's Pacific Equity- it is a whopping 205% for about 8 years. That is 25% per annum. A big difference from a paltry 3.5%.

So for me, I'd invest all my OA money before April's Fool (the whole thing is a joke- they should have a opt out option) even though the market may not be the best to invest right now into a portfolio of unit trusts. However, I will leave about $5k buffer in the OA to tide me through any unforeseen retrenchment or unemployment. The rest I'd invest the whole lot in the OA. What about the SA? That'd be the only fixed deposit(FD) I buy before I hit 50 years old. So I'd leave it alone there, 5% or higher interest on Special Account beats lots of bonds funds out there hands down, plus lots of FD for ridiculous time periods.

However, I'm pretty mad that I'm being forced to buy at this time and that dollar cost averaging for CPF account goes out of the window. I will just accumulate my CPF OA account till it hits 20k a few years later after cutting away the housing loans. And I'd start to dollar cost average again for my CPF account.

Also, I'd increase the dollar cost averaging by using cash to balance what is happening to CPF. Our government is really a nanny state, not trusting us to do what is necessary for our own investments and doing stupid things like this that forces everyone to march in step. Interest paid out is high, but they could do with checking with investors and ordinary folks to see if they could tweak it a little better and get feedback. Maybe they need some sense to be knocked into their thick multi-millionaire head like what the Malaysians did over the weekend.