As from April 2013 my Journey in Investing is to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

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Friday, 8 September 2017

See The Effect Of Compounding Interests In CPF OA Through CPFIS Yearly Dividends

Read? Time In The Market, or Timing The Market??

Don't laugh or poke at some Buy and Hold folks for their passive income. Just one time effort on clicking on the Buy button and many years of passive income of dividends, interests on dividends and then interests on interests. 

See the effect of compounding interests in CPF OA through CPFIS's yearly dividends contribution.

Ah Gong's near risk free money in CPF OA as Uncle8888 has read some folks in the cyber world are smiling when they are voluntarily topping up CPF OA for this 2.5% compounding interests. 

How about through CPFIS? 

Better right?

Compounding Interests in CPF OA through CPFIS = Interests on dividends + Interests on interests.

Position 1 : $1.32 on 26 Mar 2004

Compounding interests over 16 years on investment cost = 120% 


Average yearly yield on investment cost = 7%

Total yield with dividends, interests on dividends and interests on interests for 16 years = 599%

Average yearly yield on investment cost = 37%

Position 2 : $3.22 on 18 Sep 2001

Compounding interests over 13 years on investment cost = 81% 


Average yearly yield on investment cost = 5.8%

Total yield with dividends, interests on dividends and interests on interests for 13 years = 256%

Average yearly yield on investment cost = 18%


  1. IMO, those who top up CPF-SA is building their retirement nets... they know it is longterm 'investment' and one-way ticket till age 55. This is one of their 'sure win' investment. And this is true compounding in action.

    You cited a very good example of buy&hold work. It is multi-baggers. You are so lucky that you are in the right place and the right time and take action on it. Bravo!

    However, the % of return is relative to investment size. Compare to one invest $20K and $100K at that time, the absolute return is 5X different. If it is a small position, then it will not has a substantial impact to one's networth and/or cashflow.

  2. Hi Uncle8888,

    Erm ... think you got your XX years tobaleh...

    Position 1: 26 Mar 2004 --- 16 years??

    Position 2: 18 Sep 2001 --- 13 years??

    But I get what you mean ... Timing the market AND time in the market. :)

  3. CPF voluntary contributions appeal to those looking for "safety".

    Some people may not know, or want, to take risk in more active investments.

    Some people just want to build up safety net for future mortgage payments in case long-term unemployment.

    Some people want to secure against creditors / bankruptcy.

    Or simply those people with too much cash (windfall inheritance, Toto 1st prize, own company IPO) & decide to max out their current SA to FRS limit. These people are not concern about reducing income tax with the teeny $7K SA top-up. The current $166K FRS limit may be just 1% or 10% of their investible monies.

    But agree that 2.5% is NOT sufficient to build up adequate retirement savings --- at least for normal people with normal salaries. Even the 4%-5% SA interest is not fantastic, but you can treat it as part of your safe fixed-income portion of your overall portfolio.

    HOWEVER since CPF is considered "risk-free", hence for most people, the ONLY time they should consider using their OA monies for CPFIS is when the Margin Of Safety is very big.

    When is margin of safety very big? During bad recessions when STI has dropped by over -40%. Then & only then can you risk your OA monies. If you want to just buy & forget, then buy systemically important companies (too important to fail, bluest of blue chips). I would go for the local big banks, and maybe the top 1 or 2 property developers.


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