Endowus CPF Portfolio 2020 Full-Year Review

When Endowus launched their CPF portfolios as the first (and still only) robo-advisor in the market for CPF monies, I researched deeply into their investment philosophy, fee structure and revenue model – and liked it a lot.

Now, obviously this review is going to sound a little biased – I was an early user of their product and remember signing up for their mailing list for early notifications of product launches and since then, they have gone on to launch a whole suite of products from cash/SRS portfolios to cash management products and a new mobile app.

But I think that’s what makes for a legitimate review from a user/retail investor point of review. Other financial bloggers like Turtle Investor, Financial Horse, and Risk n Returns have written really solid reviews about their range of investment products, and you can also read user reviews from Seedly.

Without further ado, let’s dive into the review.

Why Endowus for CPF?

Investing your CPF through Endowus has been a very powerful value proposition because that’s a market segment that’s not only difficult to replicate by yourself, but you’re limited by the number of choices available in the market to invest your CPF both in a diversified manner and at a low cost.

Unlike cash investments, which can be done by any broker (low-cost, traditional, Robo), CPF investments can only be administered by local banks through the CPF Investment Scheme, which means only regulated entities that partner with our local banks can do so – in Endowus’ case, they’ve partnered with UOB and UOB Kay Hian to make it possible.

Investing your CPF monies that are not fully utilised can bring you long-term financial success just based on the 1) power of stock markets (equities command risk premium over cash) and 2) the long-term compounding effects of returns.

CPF monies are a huge part of personal wealth

37% of our salary goes into CPF if we sum both employee and employer contributions. Of this 37%, a huge portion goes into your CPF OA – this % changes with age.

CPF contributions. Source: CPF

Over the course of a lifetime, this can translate to huge amount of potential capital which could have been harnessed to grow your retirement sum.

If we leave it in your CPF OA alone, which earns an interest rate of 2.5%, a $25K investment with $1000 monthly contributions would grow to $584K after 30 years, (e.g. 25 years old to 55 years old).

However, investing this amount into a balanced portfolio with 6% annualised returns with fees would give you almost $1.11M – $532K more just for taking more risk for money you can’t touch anyway.

Modelling returns for CPF

Current industry solutions can be costly

Most CPF investment products in the market are expensive – they have high annual fees hidden within the hundred-page prospectus of their products.

For example, Investment-linked Insurance Products that can be invested by using CPF OA monies can cost up to 2%-3% annually, inclusive of product-level fees (entry, surrender, insurance, admin) and fund-level fees (e.g. annual fund management fees).

Fees and charges for ILP

Aside from fees, CPF investment products (list available here) may not be diversified enough, meaning you don’t get to reliably build your wealth over many years (without the risk of losing it all).

If you are stock picking, buying annuities or buying fixed deposits with your CPF monies, you aren’t optimising your cash based on the available investment opportunity set and time horizon.

In contrast, buying into an Endowus CPF portfolio with a semi-conservative allocation based on your own individual risk appetite may prove to be more effective in generating long-term investment returns.

CPF 60/40 portfolio performance (2020)

I ran a full-year experiment with Endowus for their CPF portfolios using my mum’s CPF OA (initial review), and with the year coming to an end, I thought maybe I should publish a follow-up to the earlier review (and COVID-19 update).

In January 2020, we set up a 60/40 stocks/bonds portfolio with Endowus under their advised portfolio and had a $15K initial deposit with a $2K recurring deposit.

Endowus 60/40 CPF portfolio growth. Green dots represent deposits.

For clarity, the sub-funds in the portfolio include the S&P 500 – wrapped by LionGlobal which feeds into a Vanguard U.S. 500 Stock Index Fund – and a global stock index fund. Not all funds in their CPF portfolios are passively managed.

Funds in CPF 60/40 portfolio

Investment returns for the 60/40 CPF portfolio have been stellar this year, generating close to 9.5% returns (TWR: 7.35%) for the full-year, slightly above long-term averages.

Endowus also rebates trailer fees from the funds every quarter and reinvests all dividends it receives, so you can be sure that compounding effects work in your favour.

Trailer fee rebates received

A total of $48.52 of access fees were charged, and $29.10 of trailer fee rebates were received.

Overall, the experience has been really positive and the returns helped generate ~3X the returns compared to leaving money in your CPF OA and not doing anything – note that future returns are not guaranteed but can be modelled based on expected outcomes.

You can become a CPF millionaire too

Mr Loo Cheng Chuan, Founder of the 1M65 movement, has been sharing his strategy on becoming a CPF multi-millionaire through CPF top ups, compounding effects and diversification outside of property investments.

For those who are interested, you can watch the video and feel inspired about the possibilities of growing your retirement nest egg with some CPF optimisations.

A better investing experience

I think CPF investing can be potentially game-changing for many Singaporeans, and especially with platforms like Endowus who have made it possible to invest CPF monies at lower cost.

You can check out these model portfolios from Endowus to simulate portfolio returns based on their investment science backed by research on evidence-based investing.

Returns from CPF portfolios are not guaranteed as mentioned above, and your portfolio is exposed to volatility (see dips in the chart above).

However, if you choose an appropriate portfolio for your risk tolerance, and invest for the long haul, you can expect much higher growth for your CPF till retirement.

New clients who use this exclusive link and fund their cash management account with at least S$10,000 will earn S$100 worth of Lion-Global Investors All Seasons Fund (Growth) credited into their account by 30 April 2021.

Endowus is also offering a limited time minimum investment amount of S$888 (usual: S$10,000) until end of March.


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