Should I copy what EPF invests in?

[miho]

As most of the people knows that EPF’s 9 months YoY earning rose 7.7% in 2021. Also, EPF has also been able to give us a somewhat consistent dividend return of around 6% over the span of 10 years. However, I’m also aware that EPF did states that their guaranteed dividend return is ~2.5%.

With that said, do you guys think it is smart to invest exactly what EPF is investing in, as in 100% copying/imitate EPF current investment portfolio. While it may sound absurd, but is this a viable way to do so?

Now, I’m also aware that sufficient self study must be made before doing any sort of investment, but I’m just genuinely curious about how it will be if someone actually did that.

 

[peacefulrestlessness]

@miho This is an interesting question.

Technically you can copy EPF current investment portfolio by using ETFs. Based on KWSP Q3 record, 43% in equities, 51% in bond and money market and 6% in real estate. ETF translation will look like this:

VT (Vanguard Total World Stock ETF): 43%

BND (Vanguard Total Bond Market ETF): 51%

REET (iShares Global REIT ETF): 6%

I have backtested these ETFs and here is the results. The test period was from January 2015 to January 2022, with a CAGR of 7% (similar to EPF returns), maximum -10% drawback, and a standard deviation of 7%.

Hope this answer your question. =)

P/S: Past performance is no guarantee of future results

P/SS: Quarter rebalance will yield slightly better return.

 

[georgiew]

@miho When you say "copy", you mean copy what individual stocks they buy? If so you're in for a bad time.

EPF's portfolio is large enough that their winning trades can compensate for their losing trades. Do you plan to copy every of their trades in the same proportion?

Also, the way these institutional players trade is very different from us plebs. They may exit a position only to re-enter within a short span, sometimes in the same day.

You can make an argument that you wanna ride on the research that these institutional players have done. The truth is that they don't have a clue either. If they do we wouldn't have declining EPF dividends.

 

[resjudicata]

@miho Just invest in EPF ~ Additional contribution rate or voluntary self-contribution (Maximum per year: RM 60,000)

Easy, no need to think. Their portfolio is wisely diversified over many assets classes, including overseas stocks which might be somewhat hard for a normal Malaysian to invest in.

 

[blurredcontours]

@resjudicata Assume he want's to keep his money "liquid" and can with draw "anytime" instead of being locked in until 60.

 

[jtra5]

@resjudicata EPF puts 50% assets in fixed income and money market, that dampens the returns from equities.

 

[blurredcontours]

@miho How do you know what exactly EPF is investing in?

Also EPF is a fucking large pension fund which mostly purchases bonds. These bonds are probably not within the realm of purchase for a normal individual investor. Maybe they are not sold on the open market or they are way too expensive and have a (very high) minimum to invest.

To add to the above EPF dabbles in safe investments (i.e. bonds) because they are a retirement fund. I assume you already have money in EPF, why would you want to double up that safe investment? Better use your money for something a bit riskier with more to gain.

Gains from EPF are also tax free.

 

[thaonhipili123]

@miho EPF isn't infallible. EPF invested heavily into Serba and only exited quite late when the share price had fell a lot. Would you have done the same and see 50% of your invested money go poof?

 

[miho]

Thanks for the comments! Just genuinely curious about it but of course I won’t actually do this IRL.

 

[mehgyn]

@miho EPF holds a lot of different equity so it'd be hard to copy it I think. Fees and spreads will eat you alive, unless you're rich. But maybe theres a way, feel free to correct me.

Assuming you can, you might still be better off diversifying your portfolio so that you are not overly exposed to a single country's performance. You can definitely reduce your risk without sacrificing returns, if you are not diversified yet.