Beating CPF's extra 1% and its regulations

If you do not know, from 1 April 2008, you will not be able to invest the first $20,000 in your Ordinary Account. (See here) This rule is because of the additional 1% government is offering us.

The extra 1% will only push up the net returns to 3.5%, probably half of what one can get in a 20 year MSCI world stock index (assuming it's 7%). It seems that the government is forcing the younger adults with long time horizon to miss out on higher returns in long term investing, rather than letting the young adults to choose themselves (in other words, having an opt-out option for the extra 1% in OA).

And not to mention that the 3.5% return is lower than the current CPI inflation rate.

As the April 2008 falls nearer, I have decided to utilize the bulk of my CPFOA to buy some stocks, especially in the current bargains galore season. The chosen stocks will be those with P/NTA less than 1 and property owning companies (to safeguard against inflation).

Currently, possible candidates so far are Orchard Parade, Singapore Land and Hotel Grand Central.

Hopefully (and likely), in five years time, the return from the above candidates would beat the 3.5% handily.


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