20 things I learnt from Endowus event - The future of your CPF in 2020?
Yes, this is the event that happened back on 20th Jan 2020. I went there after my lessons. Before the event, I had some spare time, so I settled my dinner at a cafe nearby.
Little did I know, there was a buffet spread! The setting for the event was impressive, and SGX auditorium is a beautiful place. It was also littered with many stock quotes, making it feel as if you were right in Wall Street. As I already had lunch, I took a seat in the auditorium and waited for the event to start.
The speakers were Sam Rhee (Chief Investment Officer, Endowus), Mr Loo Cheng Chuan (1M65 movement), Chiam Sheng Shi (Endowus), followed by panel speakers - Lyndon Wong (Theory of Constraints) & Kenneth (Seedly).
Things I took away from the night
1. One amazing fact I took away was that even if you invest at peak levels of S&P 500, you still achieve an annual return of ~8% to date. You don't have to be good at timing the markets to achieve good returns (8%) according to historical S&P 500 performance.
2. However, this is not true for STI, STI has not recovered since the peaks before GFC as shared by another speaker. Well, true, because STI is still now hovering around 3,200 levels.
3. Even during a recession, S&P 500 is still returning 3.5%. However, the rebound is fast. This was presented to us as S&P returns before market crash, during and after a market crash, where it is evident that it is silly to miss out of the bull after a market crash. Simply, by waiting for the crash to be over.
Well, should we apply this to Wuhan? Buy the dips and wait for the big rebound?
4. Endowus is the only CPF allowed investment that gives access to Vanguard funds. Whatever you invest is owned by you, not commingled funds.
5. From the booths, I learnt that Endowus investments is customisable according to your risk appetite. I believe this is similar to other robo-advisors where you could determine how much to put into stocks or bonds etc.
The key differentiator is that Endowus has a Financial advisers license from MAS, and they mentioned they have coffee at their office. Worth a visit?
6. A part of the talk was revolving around CPF OA 2.5% vs Endowus. Endowus is also SRS applicable. Well, this is contradicting to the next portion of the talk by Mr Loo. Hint: "Special account of CPF is offering 4%!"
7. Loo Cheng Chuan
He is Mr CPF, coined by Singsaver. 1M65 means, getting $1m in CPF by age 65. Wow!
8. This is the formula he taught us
(130,000x1.04^35) x2 = $1m
We multiply by 2 because it is from a couple's context. $130,000 is the amount to have in CPF special account, and assuming no additional top-ups from salaries or whatnot, you will get $1m as a couple by 65.
9. Hitting $130,000 SA balance by age 30 possible?
Personally, I feel you do not need the whole $130,000. By factoring Salary top-ups to SA as you work, you would need a much lower amount.
However, this really inspired me to do cash top-ups to CPF SA account as my salary hit a higher tax bracket in future.
10. Only invest in stocks after you have a financial safety net, the 1m. He mentioned that he pumped his money at every financial downturn, namely the GFC, Euro debt crisis.
I agree, with the $1m set for your retirement, you can invest in stocks with a stronger mindset and not be swayed by price movements.
11. Mr Loo was joking that everytime people protest at Hong Lim park about CPF, the interest rate seems to rise by 1%. Well, should we all join the protests? (*In a legal and peaceful manner*)
12. Oh no, CPF has Political risks? Well, Mr Loo advised that it is still probably lower compared to other instrument's risks. Everything has risk.
13. A participant asked, "How to get the younger generation to be interested in retirement?"
ShengShi felt they can join more of such events.
Lyndon: Wait till they have to make first big decision in life. He himself got woke at age 33.
Sheng Shi added that it really does not take much, with the digital age, retirement preparation or investment takes a few clicks. However, the younger generation should still take charge of their own financial decisions and stay committed to it.
14. Should you put money in OA or invest in Endowus?
It depends on the stage of your life. It really depends. I was admired by Mr Lyndon Wong's courage, where he shared that he is paying for his house using cash instead of his CPF OA.
Where is his CPF OA? He mentioned that it is being invested.
He also mentioned 1M30 for his children. This is because if you can top up to your children's CPF, they have a greater timeline for the money to be compounded. Hence, they can reach the million dollar mark way earlier than the average.
15. Personal question I had - Should you still invest in Endowus if you are going to pay for mortgage.
I would still pay for my house first, and probably aim not to zeroise my CPF OA.
16. More attention on CPF is needed by people in the economic gig!
Government is giving the 4% returns through SA. Are the people driving Grab, delivering Foodpanda missing out on this retirement scheme? Will they even have enough after they retire?
17. STI is limited and lacking in growth. It is only 30 companies and capital weighted. Hence, it is made up largely of banks.
Unlike S&P 500, where it has a large scope of growth and blue-chip companies.
18. Looking at funds, the session also presented data where Funds performance are related to Funds expense ratio too. The lower the expense ratio, the better the fund performance over the long-run.
19. From the event there was a discussion on CPF hacks. I learnt that SRS top up of $1 is good. Overall, SRS is more applicable to people of the higher income brackets. By itself, SRS gives 0.05% of interest, and it depends on you to act invest the SRS account to achieve returns higher than 4% (CPF SA).
By topping up the $1, it locks the withdrawal age for you.
20. Last, but not least, will CPF lower its interest rates?
From past history, CPF interest rates has only risen so far. For example, the government is giving up to 5% (or 3.5% for OA) for first $60,000 of CPF combined balance.
Lowering interest rates at any point in time will cause unhappiness among Singaporeans. To look further, one can determine if government payouts are sustainable.
Once again, I would like to thank Shengshi for inviting me to the talk. I learnt a great deal from the above pointers I took away from the session.
Will I invest in Endowus? Yes, if I have a larger amount of CPF balance. I have come to a consensus with Shengshi that I am not part of the target market of Endowus. However, who knows? A few years down the road, I could become one.
Endowus requires minimum sum of $10,000. The thing is that it invests into big names like Dimension and PIMCO funds. They enjoy lower fund fees as they invest as a corporate. By buying mutual funds as an individual, you would pay higher management fees.
I like how Endowus removes conflict of interest and are transparent. They tell you outright that they earn from the 0.4% annual fees (CPF) and 0.25-0.6% (cash) from you directly.
They do not take any fees from the mutual fund companies, hence, are likely to act in your benefit.
That's all for now~