CPF still a foolproof investment scheme, says report

Returns far outweigh risks.

Fixed returns from the Central Provident Fund is still a safe and viable investment scheme for the average Singaporean, a report from the Institute of Policy Studies stated today.

According to IPS, the Government offers CPF members an attractive benefit, given the member is not exposed to downside risk over the long term compared to other investment opportunities available.

The CPF gives members returns of 5.7% per year over 20 years. In monetary terms, this is equivalent to $7 in two decades' time for every $100 held today.

On the other hand, a member who chooses to hold a balanced portfolio made up of 60% stocks and 40% bonds could get returns of 5.9% per year, but the risk to their funds are also much greater.

"CPF members could choose to move to a 60% global equity portfolio and accept the potential downside risk. This choice would depend on the risk appetite and tolerance of the different CPF members. Over shorter time horizons the potential downside outcomes can be materially worse. Unlike the Government, the CPF member does not have the resources to keep extending the time horizon following a downside event," noted the report.