frugal

My thoughts on Roboadvisors (Part 1 – Stashaway)

With the rise of the fintech scene in Singapore, there is an increasing interest in putting your money in roboadvisors, so that they can manage your money for you. Although I believe it is a very wrong statement to believe in (because no one cares more about your money than you), it is still a fuss-free and easy way to park your money for some form of growth.

I will be launching a three-part series about my thoughts on three roboadvisors in Singapore, Stashaway, Syfe and Endowus. At the end, I will conclude with some of my suggestions. The series will be released every other day.

Stashaway

Management

Surprisingly, Stashaway’s CEO (Michele Ferrario) was the CEO of Zalora Group. Although he does not have a finance background, he does have some experience in wealth management. Also, I believe that his background in Zalora helps the company in terms of its user interface. Many users have remarked Stashaway’s services to be the easiest to use because of its simplified interface, something that being in Zalora definitely helped.

Alongside him are two very capable leaders as well, Stashaway’s CIO and CTO both have vast amounts of experience in their respective fields of expertise.

Stashaway’s investing philosophy mostly revolves around passive investing. This means that they mostly involve themselves with selecting the best ETFs, using equities for growth and bonds as a hedge against volatility. They also offer free and automated portfolio rebalancing services. This is a commonly recommended step that many passive investors miss out on. It is nice that Stashaway stayed through to their passive investments.

In addition, Stashaway mentioned that they utilise the Economic Regime-based Asset Allocation (ERAA) which is built on top of the Modern Portfolio Theory (a very popular theory based on many academic studies). I will not look into the details in the strategy, however it claims to manage the risk through identifying macroeconomic indicators and reacting correspondingly.

Fundamentally, I believe passive index investing should form the bulk of every investor’s portfolio (at least 50%). For me, Stashaway seems like the good choice.

Products

Stashaway offers a few products, namely “General Investing”, “Goal-based Investing”, “Income Portfolio” as well as “Stashaway Simple”.

Personally, I believe that the “General Investing” and “Goal-based Investing” are very similar. This is because “Goal-based Investing” merely requires you to state your goal and Stashaway will adjust their “risk” accordingly.

General Investing

From what I have used, “General Investing” mainly invests in Global ETFs to insure that you are well-diversified. They make use of bonds and even gold as hedge against volatility. When I first used it, it was really simple and easy. Just deposit your cash from your bank account, within a few days, the Stashaway account will register your deposit and then convert your money into USD and purchase the respective ETFs.

Income Portfolio

For “Income Portfolio”, the “risk” is fixed. You can only have a fixed risk of 12%, which would mean that there is a 1% chance in losing more than 12% of your portfolio in any year. It mainly invests in REIT ETFs, and it is heavily based in Singapore’s Lion-Phillip REIT ETF. Also, it is heavily invested in bonds as well. This is more suitable for someone who wants to go a safer route and can stomach lesser volatility. However, I believe that growth prospects for this portfolio would not be as great because they are not heavily invested in equity.

Stashaway Simple

Lastly, Stashaway also offers a cash management service. This service is basically a platform for investors to park their excess cash. It has a projected rate of approximately 1.9%, which is pretty decent. This gives investors an additional choice to park their funds. However, I would recommend most people to max out their Singlife accounts first (2.5%) and then maybe consider this. Also, the withdrawal process isn’t instant. So it may not be as liquid as you think. Therefore, it is always good to keep some money in bank accounts, such as Standard Chartered’s Jumpstart (1%), for liquidity, and maybe you can withdraw the funds from Stashaway Simple to “re-fund” that account.

Stashaway Simple invests 50% of your money into a money market fund and the other half into a short term bond fund. Both are relatively safe options, which is why they can “guarantee” the return. However, with any kind of investments, there is bound to be volatility.

Fees

Stashaway prides itself on its clean fee structure, which I will strongly agree with. The fee structure is very clear on their page.

Total investment (SGD)Annual fee rate (incl. GST)
First $25,0000.8%
Any additional amount above $25,000, up to $50,0000.7%
Any additional amount above $50,000, up to $100,0000.6%
Any additional amount above $100,000, up to $250,0000.5%
Any additional amount above $250,000, up to $500,0000.4%
Any additional amount above $500,000, up to $1,000,0000.3%
Any additional amount above $1,000,0000.2%

The above table is their pricing structure for all their services, except Stashaway Simple (Stashaway Simple is free). The fees are relatively enticing, as they can go as low as 0.2%, which is even lower than the expense ratio of the STI ETF. However, to be completely realistic, it is unlikely that people with $1,000,000 will invest in Stashaway. It is more likely that beginners use roboadvisory services, this would mean that most investors would be charged a fee of 0.6% or higher.

Considering that forex fees and rebalancing costs are already factored in, it is actually reasonable, after all, they are still a for-profit company.

Of course, if you are confident in investing in ETFs yourself, you can enjoy lower fees.

User Interface

Stashaway has a very clean user interface. I used to use Stashaway (Future article about why I decided to withdraw from Stashaway soon). It’s user interface is definitely not one of the problems. It has one of the best user interfaces of any kind of mobile application. Its website is also fully functional and easy to use.

It is very easy to deposit and withdraw money, as well as see the performances of your investments. I have no qualms about its usability.

Thoughts

Stashaway is a really good product by a capable team. I really want them to succeed. It has a very good user interface which has managed to draw in many beginner investors, which is their target audience.

However, for investors who are more confident of what they are doing, you might be able enjoy lower costs through investing in ETFs yourself. Then again, you get the peace of mind of Stashaway handling your investments. Seeing their past performance, they have actually done pretty well to tide through this crisis. Their investments also do not completely consist of VOO as there are other sectors the Stashaway team bets on, such as Chinese Internet ETF (NYSEARCA: KWEB).

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