Sharp readers from BIGS forum and this blog have raised an issue on my last article which claimed that the CPF was equivalent to a 60:40 fund. The readers were rightfully incredulous. How can the CPF program which returned a fixed amount of 2.5%-4.0% be the equivalent of a 60/40 fund?

I went back to trace the origins of the reference and found this link. You can take a crack at reading this paper.

As it turns out the readers were right. The original paper was full of spurious assumptions that do not gel with our observed reality.

  • Singapore cash rates to be as high as 4% from 2014 – 2024.
  • Singapore government bond yields to be high as 5.3% over the same period of time.
  • Global equities to return 5% above inflation over that same period of time.

The collective effect of these assumptions was that it overestimates returns of cash rates