Wednesday, August 23, 2006

CPF Unit Trust Investments

The Straits Times today carried a report on the poor performance on CPF unit trusts in the last quarter. While the information may be helpful, it is actually better to ignore it if we understand what exactly are unit trusts meant for.

Unit trusts are meant for medium to long term investments and a quarter is far too short for most unit trusts to meet their stated goals. Furthermore, most funds seek returns in the medium to long term. Publishing quarterly CPF unit trust information only serves to erroneously inform CPF members and affect their decisions. The weaker investors will be swayed by these reports and end up churning their investments and turn in poorer than expected returns eventually.

It is important to discern the information from the noise in order to make investment decisions that are relevant to our financial situations.

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