I have blogged about the advantages of having an SRS account before. Basically, if we are paying income tax, we should think of contributing to our SRS account. It is quite simple.
Now, I am holding a fair bit of cash in my SRS account. Excluding what I will be contributing by the end of this year, the cash portion of my SRS account is about $60,000 now.
Some might wonder why I am not putting the money to work. Even putting the money in a fixed deposit might get me $300 a year in interest income.
Well, I really want to keep the liquidity on hand to take advantage of any deep correction in the stock market which could happen anytime. Could something like this happen in the next 5 years? It could, couldn't it?
So, over a 5 year period, I would "lose" $1,500 for holding on to cash in my SRS account. Can I afford this? I think so. For me, this is the cost of holding on to liquidity.
However, the cost of not having liquidity could be higher since I could potentially make much more money by deploying the cash during a deep correction in the stock market.
The cash portion in my SRS account now forms one of my 4 war chests. The other 3 war chests are money in my savings accounts, money in my CPF-OA and money in my CPF-SA.
1. SRS: A brief analysis.
2. SRS, CPF-OA, CPF-SA. (Note publishing date.)
3. CPF or SGS.
4. Don't see money, won't spend money.