We are rounding up our exploration into the various options available for the CPF Investment Scheme with the final part of a four-part series.
The options that were covered in the above three parts included endowment policies, ETFs, annuities, government bonds, unit trusts and investment-linked insurance,
We conclude the series by exploring the last two options — CPFIS-approved shares and property funds.
The CPF Investment Scheme offers investors the opportunity to use some of their CPF money to invest in individual shares.
There are over 400 CPFIS-approved shares available for selection.
These shares must meet the list of criteria outlined by the CPF Board. The criteria includes only Mainboard-listed stocks that must not be on SGX’s watch-list.
Stocks that are available to invest, however, are not risk-free.
It is just to ensure that Singaporeans invest and support companies that have originated in Singapore.
Investing in individual stocks gives investors the chance to earn greater returns than other assets such as bonds and annuities.
However, individual companies are also riskier as their share price may fluctuate wildly.
Investors who are looking at this option should assess each stock carefully before making a decision.
Real estate is one of only two asset classes that have outperformed inflation over time, the other being stocks.
Because of this fact, it is no wonder that many Singaporeans choose to invest in properties.
Thankfully, property funds are one option that is available through the CPF Investment Scheme.
A property fund is a professionally managed portfolio of diversified real estate holdings.
These funds can invest either directly into a property or indirectly through real estate investment trusts (REITs).
Investors who are looking for exposure to property can make use of this investment option.
One advantage that a property fund has over REITs is that they are free to make use of profits to grow their portfolio and their asset base.
REITs, on the other hand, usually face limited growth prospects due to the need to distribute at least 90% of their profits in the form of distributions.
Get Smart: A buffet of options, but choose carefully
Investing your hard-earned CPF money should not be a decision that is taken lightly.
It is important that each of us does sufficient due diligence to choose the investment option that suits our personal financial goals, time horizon and risk appetite.
Hopefully, this series of articles helps you to better understand each investment option in the CPF Investment Scheme so you can make better financial decisions in the future.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.