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ETFs do not fall under the 35% stock limit.Reply
I accidentally deleted your previous comment:
“one more on STI ETF, the procedure is same as buying normal stocks right? but the brokerage firm will request from agent bank to get the funds from CPF, and indicating that the entire 100% investible amount can be used, instead of 35% stock limit.
I am worried that after i execute my trade with broker of say 100,000 STI ETF, knowing my 100% investible is 110,000, they make mistake to ask agent bank/cpf for 35%, and exceed, and i have to pay by cash !!!”
Yes, it’s the same as buying a stock. The backend should be mostly automatic. You can always confirm the trade with your broker to play safe.
Sat, Mar 08, 2008
The Straits Times
IS THERE a better way to calculate the limit for CPF investment accounts that will allow smart investors greater leeway?
Let me illustrate using an example of two investors with contrasting fortunes. Both investors, Albert and Bob, started with $100,000 in their Ordinary Account (OA) and a limit of $35,000, that is, 35 per cent of investable savings, under current rules.
Albert suffers a major loss and liquidates his investments. His Ordinary Account shows a balance of $30,000. So, what is his limit, post-loss? It is still $35,000.
Bob, however, is successful and doubles his OA to $200,000. What is his limit, post-gain? Also $35,000.
The limit was introduced to protect members. But as these cases show, it will not help Albert, who can still risk investing until he is CPF-broke. And it penalises smart Bob, who cannot invest more of his profits.
Shouldn’t the formula be changed to allow smart investors like Bob to exploit the opportunity cost that arises from his substantial gains?
Tan Kok KiamReply
Gee thanks, but according to the article, it is like not possible… duno if its still valid
interesting…… does this work for the reverse way i.e. i have 100k and if i made a profit of 100k from my 35k that i have invested, can i sell the stock and my total OA will have 200k, re-calculating this will give me 70k to invest now ?Reply
That might work, however, it’s best to double check with CPF or your agent bank.
Do take note that you need to wait for the money from the investment account to go back to CPF, and for CPF to recalculate the stock limit. This does not take place immediately.
Also, by doing so, the market value of your stock investment would have dropped from 135k to 70k. This actually reduces your market exposure, not increase it.Reply
Do you know whether the ABF SG Bond ETF falls under the 35% stock limit rule?