Sunday, July 22, 2007

Diversify your investment

Dear Mr Tan

Recently I invested part of my CPF fund with AVIVA. It pays 3.5% interest.

I am now thinking of investing all of my CPF funds with it. Is it all right to invest my major savings with a single financial institution? Is there a guideline?

REPLY:

It is generally a good idea to diversify your investments. You should spread you investments, so that the chance of any one failure will not cause you any serious financial distress.

The chance of failure of a highly rated insurance company or bank is very small. It is still a good idea to spread your total savings in two or three of these institutions.
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3 comments:

Thomas Phua's Blog said...

Why not consider to top up to CPFSA for 4% if there is no plans for the CPFOA?

Those who has no other commitments can shift some CPFOA to CPFSA to enjoy the 4%.

But be reminded it is one way transfer only. One way ticket.

- Thomas Phua

July 22, 2007 9:14 PM
Khiat Han Hwee Adrian said...

Topping up to CPFSA is an option.

If we are not in need to use the CPF funds for the next 10-15yrs, it is better to invest them.

You can get around 6% pa returns in a properly diversified fund.

6% over 2.5% with $100k in 10yrs is a difference of around $50k.

July 23, 2007 2:06 AM
Anonymous said...

Thomas's suggestion to shift your CPFOA to your CPFSA to equal the current minimum sum of $99,600 is the most sound advice, to earn a risk free 4%. But this is not much if you have already a substantial amount in your SA account. Whatever left after this top up invest it in a diversified portfolio to get higher return as suggested by Adrain.
It is for retirement? If it is, when? This will determine the portfolio mix and risk of your investment.
Beware of insurance agents who will make you do otherwise.The above is most logical and the best advice to you.

July 23, 2007 10:20 AM

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