However, most of these investors appear to have an invest-at-all-costs attitude: they would rather lose the money than leave it with the CPF Board earning interest. Ordinary accounts from 1 July 1998 will earn 4.29 per cent, up from 3.48 per cent.

Why are Singaporeans so keen to invest their CPF funds? Put another way, what are the benefits of using CPF funds and not cash for investments?

One reason is the thinking that CPF funds should be made to work, rather than left dormant and withdrawn only when a person reaches the eligible age of 55. The logic of this is undeniable. Many people feel less painful when they make losses on their CPF funds than on cash. But the mindset of treating CPF funds as play money is not the best approach in financial planning. Equal or greater care should be taken with your CPF funds because it is the money that is going to tide you over when you are not working anymore i.e. Retirement.

Another reason why Singaporeans are more keen to part with their CPF savings than cash is that all investments channelled through CPF investment schemes are exempt from income tax.

Also, CPF funds are not as liquid as cash in your pocket: small-time investors may feel that it is money they do not need, or cannot use anyway, and therefore they might as well put it in some CPFIS investment and watch it grow over time.

However, this has lulled many a CPF investor into a false sense of security: they equate the luxury of a longer timeframe with the ability to take higher risks with their CPF funds than they would with cash. But mid to long-term investments, like all other investments, work only if they are the right investments. Otherwise, you are throwing away good money, money you cannot spend now.

Finally, there are those who feel that cash is king in times of economic downturn and prefer to dabble with their CPF funds instead. This is fair enough, but the choice of investment tool is critical.

So, which of the following CPFIS instruments are appropriate investment tools at times like the current regional economic crisis?

The first and foremost step to take is to determine the amount of CPF funds you can use for investment purposes. This is called investible savings and is calculated by taking up to 80 per cent of your CPF balance (including savings withdrawn for housing and education) over and above the minimum sum reserve requirement of $55,000 as at 1 July 1998. Once you are clear on this, you can decide how you want to allocate your investible funds.

ORDINARY/PREFERENCE TRUSTEE SHARES

These are CPFIS-approved shares listed on the Stock Exchange of Singapore's mainboard or Sesdaq and qualify as trustee shares under the Trustees Act.

ORDINARY/PREFERENCE NON-TRUSTEE SHARES

These shares are approved as non-trustee shares under the CPFIS and are listed on the mainboard or Sesdaq. They are subject to a limit of 20 per cent of investible savings.

UNIT TRUSTS

Previously they were restricted to Singapore and the region. Now Singaporeans using CPF funds have access to global markets as well. This is good news as it means fund managers can now diversify your investments and spread your risks.

Unit trusts should not be country or instrument specific. For example, a unit trust investing strictly in bonds or equities. In this way, fund managers will have the flexibility to move your money to where returns are better.

FIXED DEPOSITS

Must be for a minimum of one year.
Very little risk as banks are backed by huge assets.
Returns of about 6 per cent on average, depending on the tenure.
Negotiate for a higher interest rate if you have substantial CPF funds.
Rates may fluctuate, so do your sums. Given the interest rate rise to 4.29 per cent for CPF ordinary account funds, and 5.79 per cent for retiree accounts, make sure your net returns are over and above these rates.
If the yield is only marginally higher, then do not bother with the hassle.

INSURANCE

Endowment insurance policies. These are marketed by insurance companies with fixed rates that are locked in for the next 20 to 30 years depending on length of policy opted for.

Almost risk-free. Works like a long-term fixed deposit with regular payouts.
Returns of about 5 to 6 per cent.
Good for retirees or those who know exactly what their future financial liabilities are; for instance, university fees for child.
A bundle package since it offers returns and provides insurance coverage as well.
Coverage inversely proportionate to returns -- the more coverage opted for, the less returns expected. Investors should choose only necessary coverage like death or critical illness.

INVESTMENT-LINKED POLICIES

These are a hybrid instrument that work like a unit-trust fund but which come with insurance coverage.

Exposed to the same kind of risks as a unit-trust fund. Therefore, avoid an investment-linked policy that buys into the regional markets at the moment. Returns are generally lower than that of ordinary unit trusts because insurance companies will factor in the costs of providing coverage.
Do not commit too large a sum of your CPF funds if you need the money soon for purchasing a home.

S'PORE GOVT BONDS

Depends on your risk profile. This is for you if you are very risk-averse.

Returns are even lower than that of fixed deposits. Historically, returns are about 4 per cent. The price of bonds is inversely proportional to interest rates. When rates go up, bond prices fall, leading to capital depreciation.
Longer term government bonds can range from five to 10 years. Not traded actively.

GOLD

Limited to 10 per cent of investible savings.

FUND MANAGEMENT ACCOUNTS

The minimum investment required is $200,000; not suitable for a person without substantial CPF funds.

Fund manager designs special portfolio catered to investor's financial needs containing a mix of all of the above investments.
No free lunch: a management fee of about 1 per cent is charged.
Good for those who have lots of CPF funds, but do not have the time, or do not have access to first-hand market information.

THE BOTTOM-LINE

There is one more option which is not found under the CPFIS: buying property.

But whatever the investment be it stocks, fixed deposits or unit trusts, you are your best judge as far as appetite for risk, investment timeframes and financial goals go.

When in doubt, avoid anything volatile, like equities, and opt for fixed-income instruments like bonds or fixed deposits. Always consult a professional. The key word is Prudence. Investor should exercise prudence at times like the current Asian economic crisis. Caution and Care are two virtues that cannot be overemphasised.

Do not be tempted by falling stock or property prices because they are cheap. The danger is that they could fall further. You may also not have the holding power you think you have before prices rise again.

At the end of the day, there is no single mode of investment that will guarantee a pay-off. Rather, diversification is the key to survival. As for what the correct mix should be, this will largely be determined by the length of time in which you expect to see returns and your own risk profile.

Other investment opportunities to be considered are Stocks Investment and Fine Wine Investment.