Sounds too good to be true? It is, to a certain extent.
Due to strict CPF-OA (Ordinary Account) rules allowing only certain locally listed shares, it is almost impossible to use these funds to invest in major US large cap stocks. While direct ownership is unavailable, indirect investment is possible through unit trusts (UTs) or investment-linked insurance policy (ILP) funds, which may include foreign securities like Apple depending on the funds’ investment mandate.
UTs and ILPs are categorised as Professionally Managed Products (PMP) under the CPF investment scheme, and they have a higher threshold for allowed CPF-OA investible funds compared to shares and gold.
While I shall not touch on the insurance component of ILPs as they are individualised products, their funds within share similar properties to that of UT’s. A common gripe about UTs is the deemed higher expense ratios vis-à-vis their exchange traded fund counterparts. However, in view of the CPF-OA investing rules, the choice of investment vehicles available, and the higher PMP investible limit, UTs are probably the main way to go if one wants to go beyond the 35% stock and 10% gold limits.
Before going along this path, one needs to consider a few points before putting his/her CPF-OA to work. I had written two blogposts (here and here) to assist in the decision.
Disclosure
The Bedokian is vested in Apple, and invested in unit trusts via a robo-advisor with CPF-OA funds.
No comments:
Post a Comment