MM warns of 'dark side' despite economic boomAllow me to take issue with these statements on several counts.
'We never invested the CPF money in shares or bonds. We always invested the CPF money in Singapore Government bonds where the Singapore Government guarantees a fixed return and you're always going to get it,' said Mr Lee, who is the GIC chairman.
'In other words, you will never lose. And if anybody thinks he can do better, he's welcome to take his money and go to a fund manager and try and do better.
MM Lee is claiming that the best possible return for one's retirement savings is a 3.5% risk-free return. i.e. he is saying that it is unwise for people to invest their monies in assets other than SGS bonds, and that equities, real estate and other investments are bad.
Well, I think that for anybody who has any basic understanding of investments, the absurdity of this claim is clear. In fact, I can just fly southeast to Australia and I can open a bank account and get 5.5% return risk free on Aussie dollar deposits. Plus, the Aussie dollar is appreciating against the Singapore dollar so I would get the benefit of the currency appreciation. On top of that, I get to withdraw the money when I need it, in case of emergency. Furthermore, I dare say that the Aussie economy is more resilient than the Singapore economy.
The 3.5% return on my CPF gives me none of these benefits.
In any case, even if people want to invest in risky assets for the benefit of greater return, I do not see why this is a worse alternative to leaving your money in fixed-return securities. In fact, it is widely regarded that a long term investment in the stock indexes is far superior to bonds. Just ask Jeremy Siegel, or Burton Malkiel, or any other expert on investment economics. It is disappointing to hear MM Lee, chairman of GIC, make such ill-informed statements.
Finally, yes, I think I can do better than SGS bonds. And yes, I would like to take my CPF monies and manage it myself. However, MM Lee, his son, and his cabinet have made the CPF compulsory by law. Yet he dares to say,
And if anybody thinks he can do better, he's welcome to take his money and go to a fund manager and try and do better.MM Lee challenges us to find a more competent fund manager without allowing us the option to withdraw our CPF monies. That's like shackling a person's hands and challenging him to a boxing match. Not only is this statement hypocritical, it is cowardly and tantamount to hitting below the belt.
Well, well, MM Lee, if you really think you are so good at managing people's retirement savings, then I challenge you and your cabinet to make the CPF optional and allow Singaporeans the choice of withdrawing their CPF monies for their own management. If you are really as good as you claim, then people will naturally choose the government to manage their savings over alternative fund managers.
And if you're not willing to liberalise the CPF, I suggest you make less of such bold statements.
Update: See "The Mathematics of Pension Fund Returns" by Lucky Tan for more on this issue.