MBH/A35 alternatives

[MrClubbie]

is the mbh corporate fund a good buy currently compared to t bills and sgs bonds?

 

[reddevil0728]

is the mbh corporate fund a good buy currently compared to t bills and sgs bonds?

very different tenure and risk profile leh.

so what's ur profile like?

 

[MrClubbie]

very different tenure and risk profile leh.

so what's ur profile like?

5 yrs

 

[s0crates]

5 yrs

You want absolute certainty of outcome? Go buy a 5 year SGS bond.

You want more returns? Get a bit more credit risk with a bond fund, preferably with a fixed duration mandate that is not more than 5years, SGD -hedged.

Not aware of any other products that are higher yield and somewhat risk free, since endowments funds are either very short term or very long term.

 

[BBCWatcher]

5 yrs

MBH isn’t really appropriate for a 5 year lumpy spending goal, such as a university tuition payment you expect in 5 years. Not by itself anyway. MBH is really best designed as the bond portion of a long-term portfolio supporting retirement in Singapore.

Is this spending objective 5 years from now a Singapore dollar spending objective, or will the expense be in some other currency? A wedding in France paid in euro, for example?

 

[Nesplex]

MBH isn’t really appropriate for a 5 year lumpy spending goal, such as a university tuition payment you expect in 5 years. Not by itself anyway. MBH is really best designed as the bond portion of a long-term portfolio supporting retirement in Singapore.

Is this spending objective 5 years from now a Singapore dollar spending objective, or will the expense be in some other currency? A wedding in France paid in euro, for example?

Hi BBCWatcher, for a retiree in his 60s with a CPF OA amount of about $400k, is he better off leaving those money in his CPF OA or would it be better for him to withdraw them to buy bond funds like MBH to beat CPF's 2.5%pa?

 

[BBCWatcher]

Hi BBCWatcher, for a retiree in his 60s with a CPF OA amount of about $400k, is he better off leaving those money in his CPF OA or would it be better for him to withdraw them to buy bond funds like MBH to beat CPF's 2.5%pa?

Well, it depends on what those Singapore dollars are going to be used for, and when. If for example S$400K will be spent next year on a fabulous around-the-world cruise then CPF OA's 2.5% interest rate might be OK, although a 12 month T-bill would probably be even better. CPF OA, MA, SA, and RA are all well protected against creditors and adverse court judgments, and sometimes that protection is valuable.

Of course CPF RA is an option for every CPF member age 55+, at least to some degree. The Enhanced Retirement Sum (ERS) will be raised significantly in early 2025. CPF RA is currently earning 4.08% interest and feeds into very attractive life annuity income.

FWIW there's one spouse in my household age 55+, and that spouse is/will be maxing out both RA and MA. Residual OA dollars will be withdrawn every month and reinvested in long-term investments. Although some OA dollars might be kept in OA to the extent OA beats ordinary bank account interest rates (since OA dollars are like a saving account at that point, easy to tap for day-to-day expenses). When the other spouse reaches age 55 the same approach is likely (keep putting the maximum allowed in RA and MA, withdraw OA and reinvest except to the extent OA is useful as a day-to-day savings account).

 

[DevilPlate]

Well, it depends on what those Singapore dollars are going to be used for, and when. If for example S$400K will be spent next year on a fabulous around-the-world cruise then CPF OA's 2.5% interest rate might be OK, although a 12 month T-bill would probably be even better. CPF OA, MA, SA, and RA are all well protected against creditors and adverse court judgments, and sometimes that protection is valuable.

Of course CPF RA is an option for every CPF member age 55+, at least to some degree. The Enhanced Retirement Sum (ERS) will be raised significantly in early 2025. CPF RA is currently earning 4.08% interest and feeds into very attractive life annuity income.

FWIW there's one spouse in my household age 55+, and that spouse will be maxing out both RA and MA. Residual OA dollars will be withdrawn every month and reinvested in long-term investments. Although some OA dollars might be kept in OA to the extent OA beats ordinary bank account interest rates (since OA dollars are like a saving account at that point, easy to tap for day to day expenses). When the other spouse reaches age 55 the same approach is likely (keep putting the maximum allowed in RA and MA, withdraw OA and reinvest except to the extent OA is useful as a day-to-day savings account).

I have also suggested to my peers/relatives >55yo to use spare cash in OA to top up their RA.
However most of them say crazy ar…..money trap inside cannot take out!!!
*Their spare cash but still…..

 

[BBCWatcher]

I have also suggested to my peers/relatives >55yo to use spare cash in OA to top up their RA.
However most of them say crazy ar…..money trap inside cannot take out!!!
*Their spare cash but still…..

Yes, because it's well-known fact that life ends for everyone at age 66, and retirees cannot possibly spend S$2,500 per month instead of S$1,800 per month (for example).

....No, I don't understand the "logic" either. These are often the same people sitting on hundreds of thousands, or even millions, of highly illiquid home equity, correct? Somehow that wasn't a problem, yet tossing S$20K (or whatever) into CPF RA is a bridge too far? Huh?

 

[highsulphur]

Well, it depends on what those Singapore dollars are going to be used for, and when. If for example S$400K will be spent next year on a fabulous around-the-world cruise then CPF OA's 2.5% interest rate might be OK, although a 12 month T-bill would probably be even better. CPF OA, MA, SA, and RA are all well protected against creditors and adverse court judgments, and sometimes that protection is valuable.

Of course CPF RA is an option for every CPF member age 55+, at least to some degree. The Enhanced Retirement Sum (ERS) will be raised significantly in early 2025. CPF RA is currently earning 4.08% interest and feeds into very attractive life annuity income.

FWIW there's one spouse in my household age 55+, and that spouse is/will be maxing out both RA and MA. Residual OA dollars will be withdrawn every month and reinvested in long-term investments. Although some OA dollars might be kept in OA to the extent OA beats ordinary bank account interest rates (since OA dollars are like a saving account at that point, easy to tap for day-to-day expenses). When the other spouse reaches age 55 the same approach is likely (keep putting the maximum allowed in RA and MA, withdraw OA and reinvest except to the extent OA is useful as a day-to-day savings account).

for someone who is below 55%, wouldn't investing OA into MBH at current price point better than leaving it inside OA untouched (assuming not buying T bills)?

 

[BBCWatcher]

for someone who is below 55%, wouldn't investing OA into MBH at current price point better than leaving it inside OA untouched (assuming not buying T bills)?

If you're below age 55 then you could transfer OA dollars into your own SA (if your SA is below the Full Retirement Sum). Regardless of age you may be able to transfer OA dollars to a family member's SA or RA.

If you've run out of SA/RA opportunities then other long-term investment options are available. They need not be MBH specifically, although MBH is a good choice if you're looking for a Singapore dollar bond fund.

 

[s0crates]

Hi BBCWatcher, for a retiree in his 60s with a CPF OA amount of about $400k, is he better off leaving those money in his CPF OA or would it be better for him to withdraw them to buy bond funds like MBH to beat CPF's 2.5%pa?

money taken out of CPF OA cant be easily deposited back into CPF. Sure you can have better options using cash, and dont have to pay the retarded agent bank fees when you invest cash, but when interest rates tank and the 2.5% looks especially good, you would hate youself.

You can consider the BBGA index fund instead of MBH since it is CPF included, offers greater diversification, and dont have the annoying dividend payout that stops your wealth from compounding

 

[BBCWatcher]

money taken out of CPF OA cant be easily deposited back into CPF.

Every fully retired CPF member can deposit up to $37,740 in CPF per year. 100% of that amount lands in OA (from early 2025) when RA and MA are “full.”

MBH is available within the CPF Investment Scheme if you prefer to buy MBH that way.

You can consider the BBGA index fund instead of MBH since it is CPF included, offers greater diversification, and dont have the annoying dividend payout that stops your wealth from compounding

It’s not clear which specific unit trust you’re talking about, or how you’re suggesting to purchase it. “BBGA index” presumably stands for “Bloomberg Global Aggregate Index.” That’s an index of bonds denominated in many different currencies. MBH holds only bonds denominated in Singapore dollars. While a global bond index fund holding bonds in many different currencies might be an interesting vehicle for some long-term investors, it’s a different investment proposition than a Singapore dollar bond index fund.

 

[s0crates]

Every fully retired CPF member can deposit up to $37,740 in CPF per year. 100% of that amount lands in OA (from early 2025) when RA and MA are “full.”

MBH is available within the CPF Investment Scheme if you prefer to buy MBH that way.

It’s not clear which specific unit trust you’re talking about, or how you’re suggesting to purchase it. “BBGA index” presumably stands for “Bloomberg Global Aggregate Index.” That’s an index of bonds denominated in many different currencies. MBH holds only bonds denominated in Singapore dollars. While a global bond index fund holding bonds in many different currencies might be an interesting vehicle for some long-term investors, it’s a different investment proposition than a Singapore dollar bond index fund.

There is only one fund available within CPFIS that gives exposure to bbga, and it also conveniently sgd hedged.

https://endowus.com/investment-funds-list/amundi-index-global-aggregate-fund-LU2420246212

Getting some additional credit risk and returns should be something that more people look into.

 

[BBCWatcher]

There is only one fund available within CPFIS that gives exposure to bbga, and it also conveniently sgd hedged.
https://endowus.com/investment-funds-list/amundi-index-global-agg-500m-LU2420245834

That page says it's USD hedged. So does the Factsheet. That fund also has an annual net expense ratio of 50 basis points (Endowus CPF fee plus fund fee) which isn't great.

 

[s0crates]

That page says it's USD hedged. So does the Factsheet. That fund also has an annual net expense ratio of 50 basis points (Endowus CPF fee plus fund fee) which isn't great.

My bad, wrong link

https://endowus.com/investment-funds-list/amundi-index-global-aggregate-fund-LU2420246212

This one only has TER of 0.1%. with endowus fee it's just 0.4%p.a..

Sure, MBH is cheaper on an annualised basis, but is paying 10+ basis point worth it for more diversification and a more convenient user experience (no need to reinvest dividends, lower agent bank fees, can invest in a fractionalised manner)?

Not having the 3+% dividend pay out compounding might cause you more. That's the reality that people gonna face if they buy a non accumulating fund.

 

[DevilPlate]

My bad, wrong link

https://endowus.com/investment-funds-list/amundi-index-global-aggregate-fund-LU2420246212

This one only has TER of 0.1%. with endowus fee it's just 0.4%p.a..

Sure, MBH is cheaper on an annualised basis, but is paying 10+ basis point worth it for more diversification and a more convenient user experience (no need to reinvest dividends, lower agent bank fees, can invest in a fractionalised manner)?

Not having the 3+% dividend pay out compounding might cause you more. That's the reality that people gonna face if they buy a non accumulating fund.

For retirees, MBH better because of payout dividends and for someone else like u accumulating fund definitely better.

 

[s0crates]

For retirees, MBH better because of payout dividends and for someone else like u accumulating fund definitely better.

We are talking about cpf investing here. Dividends are a pain in the butt, the cash flow generated can't be used anyway

 

[DevilPlate]

We are talking about cpf investing here. Dividends are a pain in the butt, the cash flow generated can't be used anyway

I was refering to above case study of retiree in 60s

 

[Listopad]

My bad, wrong link

https://endowus.com/investment-funds-list/amundi-index-global-aggregate-fund-LU2420246212

This one only has TER of 0.1%. with endowus fee it's just 0.4%p.a..

Sure, MBH is cheaper on an annualised basis, but is paying 10+ basis point worth it for more diversification and a more convenient user experience (no need to reinvest dividends, lower agent bank fees, can invest in a fractionalised manner)?

Not having the 3+% dividend pay out compounding might cause you more. That's the reality that people gonna face if they buy a non accumulating fund.

there's a new fund in the recent weeks. Dimensional Global Core Fixed Income Fund (hedged to SGD). Have you had a look in this fund?