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‘Non-Savvy’ Investor lost $350K CPFOA

Written By: Tiang Chuan on March 29, 2010 2 Comments

A investor claimed he lost $350K of his CPF monies investing in shares in a ministerial dialog. 1 minister was quoted as saying “Most investors lost money because they are not savvy”.

Does this mean that savvy investors don’t lose money? What’s the meaning of being ‘savvy’? The freedictionary.com defines ‘savvy’ as being ‘well informed and perceptive; shrewd; practical understanding’.

I think the real problem is not that investors are not savvy, but that many investors thought that they are savvy when in fact they are not. This is a problem of being over-confident, a common Behavioral Finance bias.

Too many investors are over-confident and feel that they are savvy, or they believe that their friends, stock brokers, advisers, fund managers are savvy. They believe in the so-called stock tip, insider info, the sure-make investment, the next great investment frontier and what have you. All these talk typically come from people who speak confidently, many a times mis-placed. Remember your friend who insisted a stock must rise? An investment sales who guaranteed you super returns?

Perhaps, the first step to be savvy is to admit that you are not savvy and stop being so confident. As the Hokkien saying goes ” kiang tio ho, mai gay kiang”. So stop being ‘gay kiang’.

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2 Responses to “‘Non-Savvy’ Investor lost $350K CPFOA”

  1. Garrett says on: 31 March 2010 at 1:09 AM

    To all not-so-discerning readers, this recent issue of the guy who lost $350k in CPF money is fake!

    One can only use 35% of CPF monies to invest, so this person should have ONE MILLION in his CPF account.

    Do you think that is possible? Most people don’t even have six figures in their CPF account at retirement!

    Nevertheless, the message behind this blog post is correct and I agree with it. Just would like to point out the ridiculousness of this “I lost 350k CPF money”.

  2. Tiang Chuan says on: 31 March 2010 at 3:51 PM

    Hi Garrett,

    Technically, it is possible to lose $350K OA in stocks. The 35% limit is re-calculated every time the invested amount is sold and the money goes back to the Agent bank. If that guy is someone who trades, this 35% limit is recalculated everytime he sells.

    As for the saving of $1mil in OA, although it’s not easy, it is still possible. Note that there was no $5000 cap on the CPF contributions last time and the compounding effect of the OA interest. My colleague has come across someone only in his 40s with more than $1mil in his OA and SA.

    Thanks for visiting my blog.

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