5 Things You Need to Know When Investing Your CPF

1. Investing your CPF should be seen as a medium to long term investment. In that way, better returns can be expected. Successful investment is not purely luck. It's about consistency and staying invested.
   

   
   Do you know that contrary to public perception, investing in unit trusts has been more profitable than leaving your money in CPF accounts? (source: Straits Times, Year 2005)
   
   Over the past seven to 10 years, nearly 75 per cent of all unit trusts have outperformed CPF returns. The average annual return on equity and bond funds was 6 per cent, compared with CPF interest earned of 2.5% to 4%.

   
   
2. Preferably, you should set aside part of your CPF for your house loans or your kids education loan. That way, you will not worry unnecessarily about your investment in the short-term.
   
   
3. The fund management fee. Usually equities funds charge a higher management fee, however you may wish to check if the management fee is justified. If the performance of the fund is so-so only, you may wish to look for another alternative.
   
   
4. The funds performance. Find out how the funds have performed over the last 3 to 5 years. Although past performance is not indicative of future perfomance, it can still serve as a benchmark.
   
   
5. Ultimately, the fund(s) that you choose should be based on your:

• Time Horizon;
• Asset Allocation;
• Diversification;
  
• Expectations (of returns and inflation)