CPF on FIRE: The 10 Commandments you must follow before investing your CPF money

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After the analysis I’ve been doing on the STI ETF and the findings that came from that analysis, it’s been making me wonder if we should be investing our CPF OA monies in the STI ETF for the better returns.

If you’re not yet aware, as part of the CPF Investment Scheme (CPFIS), the Singapore Government allows CPF members to invest their CPF Ordinary Account (OA) and Special Account (SA) monies into a set of government-approved investment vehicles instead of leaving it in the account to earn the risk-free interest. Included in the list of the approved vehicles are the SPDR STI ETF and the Nikko AM STI ETF, so you can choose either to invest in, but should you?

Since the STI ETF has demonstrate such high returns over the last 11 years, for both DCA and Lump Sum, it’s easy to see why it might be attractive to forego the guaranteed-but-small returns of the CPF OA and instead park it into the STI instead.

Update [24-Apr-2023]: Endowus now offers relatively low cost access for your CPF OA investment to global index funds such as Amundi Index MSCI World Fund. Given this, I would recommend going for that instead of the STI ETF for low-cost global equities exposure!

However, there are many things you need to consider before jumping to invest your hard-earned CPF money as there are other things you can use it for. Plus, risk-free returns is nothing to sneeze at. So when should you consider investing your CPF? Does it ever make sense?

After a bit of thinking and looking through all the options, I found that there are 10 conditions that you must meet before thinking about investing the CPF money, I even have the clickbaity title to go with it. So as you go through these conditions, check to see if you meet the criteria.

Here are the 10 Commandments you must meet before you consider investing your CPF money:

Commandment #1: Thou shall be more than 18 years old

The first conditions are simple, you are not allowed to invest your CPF money using the CPFIS until you are older than 18 years old. Only start looking at investing the CPF money after you turn 19.

Commandment #2: Thou shall have more than S$20,000 in your CPF OA

Another condition to qualify for CPFIS, you are only able to invest CPF OA money that is above the first S$20,000. If you have yet to reach this level of CPF OA balance, forget about investing it.

Commandment #3: Thou shall have reached the Full Retirement Sum in your CPF SA

The last condition to qualify for CPFIS is the amount in your CPF SA. The minimum amount required in your CPF SA is any amount above S$40,000, however you have to also be mindful of the Full Retirement Sum. Previously, I wrote about how to optimally handle your CPF LIFE with the conclusion that in order to make full use of the CPF LIFE, you should try to reach the Full Retirement Sum as quickly as possible to enjoy the benefits of the payout when you reach the age of 65.

So if you haven’t already reached your Full Retirement Sum in your CPF SA, you have no reason to be considering investing your CPF money.

Commandment #4: Thou shall only invest your CPF OA monies

Although you are allowed to invest both your CPF OA and SA, the money in the CPF SA earns a much higher risk-free return (4%) than CPF OA does (2.5%) – for amounts past the bonus interest. You should be taking full advantage of that before starting any investment.

If you are following these commandments exactly, then you’d be trying to get to the Full Retirement Sum as per commandment #3. After that, any money that would have gone into the CPF SA will be diverted to the CPF OA, which gives a much lower interest. That can potentially justify you investing the money instead in an attempt to earn a higher return.

Commandment #5: Thou shall not need the CPF money for housing

For the amounts of money within your CPF OA, you are allowed to use this money to purchase a home. The several uses in this regard are:

  1. Pay for the down payment on the property.
  2. Pay for the monthly instalment of the mortgage on the property.

If you have a plan to purchase a home or getting a mortgage to purchase a property, you should make use of the CPF money for this purpose first or else you will end up having to fork over money from outside your CPF to pay for your down payment and mortgage instalment.

There’s really no point to try to invest your CPF money but you end up having to use cash to pay for a mortgage. Only start investing your CPF if you already have your mortgages and down payment covered by your CPF.

Important Note: This does not mean that you should use your CPF OA to repay your mortgage early! Mortgages are the lowest interest loan that you can possibly get because the loan is backed by the value of your property. The interest rate is almost always lower than the CPF OA interest rate and if you use your CPF OA to pay your mortgage (let’s say it’s at 2%), you are converting a 2% mortgage into a 2.5% CPF OA loan (and you lose the 2.5% interest from the government on that amount, a double whammy!) So only use your CPF OA to repay exactly the monthly mortgage payment amount. Use it instead of paying the mortgage in cash so you can use your cash to invest outside of the CPF in options with better returns (like building your 3-Fund Portfolio.)

Commandment #6: Thou shall not need the CPF money for education

Aside from housing you can also make use of CPF to pay for education expenses for yourself, your spouse, children or siblings with the CPF Education Scheme. Although it is a loan and you must pay back the principle plus the interest after you graduate, with the bank’s prime rate hovering between 5.2% and 5.4% in the last 10 years (and this is as low as it’s ever been), the 2.5% interest rate of the CPF OA is a steal.

One big caveat however, the CPF start calculating interest immediately after you withdraw from the account, however bank education loans tend to be interest-free up until 6 months after graduation – giving you more time to find a job and start paying back the loan before interest starts piling up. I’ve calculated the breakeven between CPF Education Scheme and bank education loans (2.5% interest vs 5.2% interest respectively) to be about 3 years. So if you can pay back your loan within 3 years of graduation, taking a bank loan is better than CPF, otherwise if you take longer to pay back the loan, the CPF Education Scheme is the way to go.

So if you or your spouse and children are looking to further your studies, you should figure out if you should use your CPF OA monies for that first before looking to investing it.

Commandment #7: Thou shall not need to top up your parents or spouse’s CPF SA

In addition to topping up your own CPF SA to earn higher interest rate and reach the Full Retirement Sum faster, you are also able to use your CPF OA to topup the CPF SA of your parents or spouse to help them build up their Retirement Sum. As their CPF SA also receive the higher 4%-5% interest, you may want to first contribute to that to help them out before considering to invest the money in your OA.

If you are certain that you won’t need to help out your parents or spouse, you can look to the next commandment.

Important Note: In terms of tax relief, if you wish to help out your parents or spouse, you should use cash topup instead of transferring your CPF OA money as you get a tax reduction on the cash topup amount (which you do not get when you transfer your CPF OA since that’s already been tax exempted.)

Commandment #8: Thou shall only invest in the STI ETF or not at all

Update [24-Apr-2023]: Endowus now offers relatively low cost access for your CPF OA investment to global index funds such as Amundi Index MSCI World Fund. Given this, I would recommend going for that instead of the STI ETF for low-cost global equities exposure!

The only time that you should consider investing your CPF OA monies is when you can make a better return on your investment to sufficiently out perform the 2.5% interest enough to make up for the risk you are taking. With that kind of criteria, the only investment vehicle in the government-approved list is the STI ETF, and here’s why:

  1. It has a low expense ratio. With the expense ratio of only 0.30% and 0.34% (for SPDR STI ETF and Nikki AM STI ETF respectively) it has lower expense ratio than all the available Unit Trusts (which starts around 0.60% and goes as high as 1.75%.) As we all know, the best predictor of future returns is the expense ratio of a fund. The higher the expense ratio, the lower the future returns. As Unit Trusts are actively managed, they cannot compete with the expense ratio of the passively managed STI ETF.
  2. It is passively managed. Although some actively managed funds do outperform the market, past performance does not predict their future returns and your chances of selecting a fund today that will outperform the market tomorrow is slim to none. Taken in aggregate, actively managed funds underperform passively managed funds after accounting for fees, you will be better served to ignore all Unit Trusts and Managed Funds in favour of a passively managed fund that tracks the performance of the market like the STI ETF instead. This article from Market Watch breaks this down quite well.
  3. It is more diversified. Comprising of 30 of the biggest Singapore-listed companies, the STI ETF provides a more diversified portfolio of shares that roughly represents the performance of Singapore’s economy. This will provide lower risk than things like the available Gold ETF and you are investing in companies which are actively working to provide you with better performance and returns – commodities do not have this characteristic.
  4. It provides a better risk-adjusted return. Lastly, we must compare the returns of the investment vehicles against the returns of the CPF OA. Given that the CPF OA provides a risk-free return of 2.5%, any investment vehicle we consider must provide a higher return than this. Taking this lease, we can forget about any Fixed Deposit, Treasury Bills, Singapore Government Bonds or any other bonds for that matter. This includes the ABF Singapore Bond Fund. Why? Based on the fund’s fact sheet, the fund only provided 2.58% return p.a. since inception, which is not much better than the CPA OA, and is likely negative when you adjust for risk. Compare this to the 6.58% p.a. return since inception of the SPDR STI ETF and you can clearly see that the STI ETF is a much better choice in terms of potential returns. If you want to invest in the ABF Bond Index Fund or the any other low-risk-low-return vehicles mentioned, you’re better off keeping the money in your CPF OA instead.

In a cheat sheet table format, here are the reasons why each of the investment products aren’t as good as the STI ETF for CPF investment:

Investment ProductsDrawbacks
Unit Trusts (UTs)High fees. Active investment.
Investment Linked Products (ILPs)High costs. Active investment. Essentially worse versions of the UTs (SG Budget Babe’s reason why she canceled her ILPs).
AnnuitiesIs not as good as CPF LIFE so might as well get that.
Endowment PoliciesEndowments and insurances are horrible investments. They have their uses, but as investments they are not good often due to high fees & low returns.
Singapore Government Bonds (SGBs)Low returns. Might as well keep the money in CPF OA.
Treasury Bills (T-Bills)Low returns. Might as well keep the money in CPF OA.
Funds Management AccountsHigh fees. Active investment.
Fixed Deposits (FDs)Low returns. Might as well keep the money in CPF OA.
Statutory Board BondsLow returns. Might as well keep the money in CPF OA.
Bonds Guaranteed by the Singapore GovernmentLow returns. Might as well keep the money in CPF OA.
ABF Singapore Bond FundLow returns. Might as well keep the money in CPF OA.
SharesLow diversification & high risk.
Property FundsLow diversification & high risk.
Corporate BondsLow diversification & high risk. At a minimum of A2 rating requirement, the returns will likely be lower (but higher than T-Bills, SGBs, and FDs). But still better leave the money in CPF OA.
Gold ETFsLow diversification & high risk. Commodities are inflation hedges, not investments.
Other Gold ETFsLow diversification & high risk. Commodities are inflation hedges, not investments.

Commandment #9: Thou shall not need the CPF money for at least 10 years

Investing is risky and the short term returns are never guaranteed. The returns of index investing, no matter which index you follow is only going to trend positive over a long term, in this case the length of time is likely going to be around 10 years.

You can refer to my 4 part series on the returns of the STI ETF for a better understanding of the rate of returns in the last 11 years. In the short term the rate of returns is extremely volatile and only trends towards less volatility as the time horizon increases. You’re more likely to have a positive return – a return higher than the CPF OA – if you hold on to the investment for a longer period. So make sure you won’t need this money for anything else in the above commandments before even considering to invest this money. If you do need it, you may be forced to sell your investment when the timing is not favourable and end up losing money.

Of course if you are investing already, remember to also reinvest your dividends.

Commandment #10: Thou shall have a high tolerance for risk

Before doing any investments, you must understand your own risk tolerance. All investments involve risk and it’s possible that your investment tanks 50% over night. You must have the mental fortitude to handle this kind of drop without panicking and selling your investments if you want to park your hard-earned money into equities. Even though investing in index funds like the STI ETF lowers the risk due to diversification, if Singapore or the global economy enters a recession, then a large drop like in 2008-2009 is not impossible. By investing into an index fund like the STI ETF, you are ensuring that your holdings never goes to 0 unlikely investing in individual companies (which can go bankrupt.) Of course if the STI ETF goes to 0, we all probably has much bigger things to worry about.

In order to understand your risk tolerance, you can take the Risk Tolerance Questionnaire provided by the CPF Board before investing your funds. If you finish the questionnaire with a high risk tolerance then you may be able to handle the risk involved in investing your CPF monies in the STI ETF.


So how did you do? If you’re like me, you’d find that you’re far from ready to invest your CPF dollars. I currently haven’t met the requirements for Commandments 3 and 5 and likely won’t meet that for a long time.

Your situation may be different so assess it thoroughly based on your circumstances and the contents in this article should not be taken as investment advice. However, I believe the criteria above are quite stringent and there isn’t going to be a lot of people who will be able to meet all of the requirements. This leads me to a conclusion that for most people, investing your CPF money will likely be a bad idea.

What do you think about the 10 Commandments? Do you agree or disagree or have anything to add to this list? As always, I’d love to hear your feedback and comments. Feel free to leave it down below or message me on Twitter @firepathlion.

Until next time!


11 thoughts on “CPF on FIRE: The 10 Commandments you must follow before investing your CPF money”

  1. Excellent Post, summarizing all the points to consider. I thought, I knew fairly well about CPF, but learnt something totally new from this article. That, when your total sum in CPF SA matches prevailing FRS amount, any contributions after will be diverted to CPF OA account. Thanks for that useful info.

  2. On the point about using CPF OA vs Cash for repaying home loan, its hotly debated with pros and cons with each option depending on each individual. As you highlighted, one way is to use CPF OA for home loan and use the equivalent cash to invest and higher interest. Using CPF OA, we lose 2.5% interest and top of that, we need to top it up, effectively its 5% and a double whammy as you referred in your post. That would mean that our investment should make 6 to 8%(achievable in the long term based on boglehead lazy portfolio). Alternatively, what is your opinion of using cash to repay housing loan and use CPF OA to invest in STI ETF. There is no accrued interest by CPF in this case(unlike for money used for home loan) and a return of even 5 to 6% in long term is equivalent to cash invested(as in first option) and earning 8 to 9%.

    • Hi Krishnan! Thank you for reading and I’m glad you enjoyed the post!

      On investing using the OA instead and using cash for the mortgage payments, this really depends on how well you believe the Singapore market will perform compared to the Global Market and how liquid/flexible you’d like your investments to be.

      Based on my analysis of the performance of the STI ETF over the last 11 years and found that its returns trends towards 7-8% nominal returns while investing in Global Markets could net about 9-10% average nominal returns. By removing 2.5% penalty that we have to pay ourselves by using OA to pay mortgage, the net return from using cash to buy Global Market would be around 6.5-7.5%, which is quite close to the 7-8% return from using OA to buy STI, but with more liquidity/flexibility (you can sell and take the money to use before 65, unlike the CPF OA) so for me the flexibility might trump the returns here.

      Also you’re only on the hook for the 2.5% interest in the event of selling your property where the capital appreciation of the property should handily cover the interest portion on your OA.

      On the other hand, if you use your cash to pay for property, your cash is locked in the property and at the same time your CPF cannot be accessed until 65.

  3. Hello!

    I thought as long as you satisfy $20,000 in your OA, you would be able to invest. You wouldnt need to satisfy both $20k in OA and $40k in SA requirement right?

    I was thinking, if one had the $20k spare cash on hand, would it be advisable to put all the money in CPF OA to meet the $20k requirement for investment and then invest in STI ETF or would it be more advisable to use the $20k spare cash in other stock/etf investments that you wouldn’t be able to invest in the options offered by CPFIS (because CPFIS would only allow you to invest in specific products).

    Thank you!

    • Hey, yes to invest your CPF OA, you need at least S$20,000 in your OA. In order to invest your SA you will need at least S$40,000 in your SA. They are separate pots with separate requirements to start investing 🙂 Hope that clarifies! You don’t need to have both to start investing the OA.

      If you have spare cash outside of your CPF, I’d recommend to keep it outside and invest it outside of the CPF as you have much more options, much higher liquidity. The only reason I’d top up CPF is for the tax deduction and in that case it only works if you top up the SA (OA top up does not get you any tax deduction.) For investment purposes, it’s always best to keep it out of CPF due to the restrictions you mentioned.

  4. Hello FPL,

    I am still confused about the OA Vs SA. Given I have reached OA $20,000 (I now have around $63,000) but has not reached SA $40,000 (I now have around $18,000).

    Based on your commandments above,

    1. What is more advisable – invest the OA $40,000 in STI ETF or only do so when SA has $40,000? By then, I should have a lot more in OA to invest but I have missed out on reaping the higher returns during this period.
    2. What should I be doing next to get to full retirement sum?

  5. Hi FPL

    What are your thoughts on investing our CPF-OA and SRS through EndowUs?

    Due to regulatory limitations, local BogleHeads can only have ES3 as an option for our CPF-OA and SRS. While EndowUs has higher fees, the chances of it outperforming ES3 (which has been stagnating) is much higher.

    This is something I’ve been mulling over.

    • I think if you have funds sitting in CPF OA and don’t need it for housing, I think the best way to invest with it is to use Endowus. I’ve been looking into their service and think it’s a good option to invest our CPF money. Of course you’re taking on more risk and can also lose money unlike the guaranteed return of CPF, so be sure you are in it for the long term – but if you’re a Boglehead, this should be standard advice 😊

      Note I’ve been on their webinar, I’m not sponsored by them, I just think their products are good for CPF and SRS. For funds outside of CPF and SRS, I still think DIY is better given the fees. 😁


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