Note 12: Note 12: My CPF Investment Journey – The Conclusion



Roughly 10 years ago, I started my first investment using in the STI ETF funds. I remember that period was the unravelling of the subprime crisis, however, the impact has yet to be felt full blown. You can actually see the price of STI ETF going down in prices as the whole episode runs it’s course. Subsequently, I begin to invest using my CPF over the years when I felt there was enough margin of safety in the blue chips.

The philosophy of using CPF is mainly opportunistic. To be honest, I shouldn’t have done it considering how important CPF is for housing, but the gains outweighs the loss. As at 1st August 2018, I have decided to divest the holdings for my mortgage. As you can see, based on XIRR, the returns are 7.89% (including dividends), which is quite respectable . However, I believed that it could be higher if I have not keep the counters for so long.

Date
 (Monthly Investment)/Received
 Company
 YTD Growth
20/3/2008
 $                             (2,978.26)
 STI

16/7/2008
 $                             (2,968.24)
 STI

30/7/2008
 $                             (2,968.24)
 STI

16/9/2008
 $                             (2,568.03)
 STI

20/11/2008
 $                             (1,727.62)
 STI

23/2/2009
 $                             (1,667.59)
 STI

2/6/2010
 $                             (8,320.96)
 OCBC

18/3/2011
 $                             (5,729.65)
 Singtel

11/1/2018
 $                             (5,519.10)
 UOB

2/8/2018
 $                            63,007.53

7.89%

The next question is will I be keen to do something similar again? My answer is yes, but there are some key learning from which will be quite useful to share with the readers

Lesson 1: You will never know how low is low and how high is high.
When I first bought the STI ETF in 20th August 2008, I didn’t expect the prices to plunge so much in November. I remember that Citibank was having some concerns on it’s loan, but i thought with my lizard brain, that since STI was almost reaching 3700 a few months back, it seems 2900 will be a good time to get your toes wet.

The emotions I have felt after was stomach churning, I was consistently looking for articles to strengthen my belief, and the more it goes down, the more I want to verify my belief. Looking back, that was definitely financially irresponsible. I should have taken a more systematic approach and understand whether is the STI Index undervalued or overvalued still based on the some form of valuation

Lesson 2: Tracking your returns and having a goal in mind
When the market went back up in 2013 onwards, I wasn’t ready to let go of the shares. I have no understanding what my return should be. As such, I begin to invest in other shares when  I should have divest once I hit my intended return. To me, a return of 15% over 7 years which was gained during investing in the dire of times should be probable.

Lesson 3: Play what you can afford to lose IN THE SHORT TERM and win in the long term
Using CPF to invest is a crazy move. CPF is an important retirement tool and things can really go wrong esp when you have a mortgage to pay within 2-3 years. However, if your horizon is more than 10 years, it will be very advantageous if you can invest in a basket of shares , eg STI ETF. I am pretty confident that it will be able to increase in value beyond that 10 years time frame.

Conclusion

All in all, usage of CPF as a form of warchest could be a good way to increase your funds at the worst of times. However, one has to be careful in the way we plunge in. A more systematic approach coupled with an end goal in mind will be a smarter way. 

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