The one-time transfer of S$100 into my wife’s StashAway Singapore robo-advisor account has been converted to US$ and invested in the various NYSE (US)-listed ETFs. It took a few days for this to happen and I’m wondering whether it gets quicker as we start the regular funds transfers into the account. What I find interesting is that StashAway Singapore has continued to send update emails to us even though I have not signed up.
This seems to be lacking on the Smartly Singapore side as my wife and I have not received any update emails from them for a while. An enquiry email to StashAway Singapore was replied within a day while an enquiry email to Smartly Singapore has gone unanswered for 2 days. As service providers, these are telling signs of the quality of service support you will be getting after purchasing the product. This is definitely an area of improvement for Smartly Singapore as customers tend to make judgments based on your responsiveness to their queries.
A question that I have been getting from readers – Why are we investing with robo-advisors? Instead of replying individually, I might as well elaborate on our reasons here. It would be useful for you to first read some of my past posts to have a better understanding of our personal & financial situation and give context to the discussion.
Monthly cash savings of more than S$5,000
We make automatic investments of S$1,900 with the various bank Monthly Investment Plans (MIPs). After taking into account these investment expenses, our CPF contributions, discretionary and non-discretionary expenses, we have more than S$5,000 of cash savings every month. However, we are not efficient at utilising these cash funds since we don’t deploy them sufficiently during market dips and crashes. And we don’t like the idea of letting our cash balances build up excessively to wait for a bear market before investing.
We reckon it’s better to invest a portion of the monthly cash savings into overseas markets to soak up this excess liquidity. Which is why we are planning to set up another S$600 of regular funds transfer into the robo-advisor accounts. This still leaves us with about S$5,000 of cash savings every month i.e. cash balances continue to increase for significant investments during bear markets. Keeping ourselves vested in the markets is key to knowing when we should ramp up the deployment of our cash funds.
Fees vs brokerage commissions
The fees charged by robo-advisors over the long run should be higher than the brokerage commissions we will end up paying if we were to set up a similar portfolio of the NYSE (US)-listed ETFs and do the rebalancing ourselves. Make no mistake, it is possible for you replicate what the robo-advisors are doing. But you can’t do it with a small amount of cash funds since you will need larger cash balances to be able to invest in the ETFs and rebalance less frequently to avoid incurring high brokerage commissions.
The higher fees we pay to the robo-advisors are to automatically manage the portfolio, re-optimize and rebalance where applicable. This applies for a small account balance that we will start out with, which should grow to a large account balance that we should end up with. We know fees eat into our investment returns. But we are okay with lower investment returns in exchange for the robo-advisors managing the entire process without our manual interventions. Let’s not forget that the fees charged by robo-advisors might decrease over time as they receive more funds.
Support FinTech instead of banks
We work in banks, have MIPs with banks and even do manual investments with banks. You can see why FinTech makes sense as an alternative investment option to us. We wouldn’t want our robo-advisors to be set up by the banks since they will end up custodising most of our financial assets. Besides, we are supportive of the FinTech scene in Singapore and would like to see more development with retail applications in this area.
Convenience of automatic ETF investments
We are not good investors and are lazy in our research and analysis. Have a look at how our stock portfolio has performed. As an example, we bought into oil & gas and telecommunication stocks right before their prices dropped drastically. Which is what prompted the switch into ETFs. What we have is the ability to utilize our human capital to increase earning power. This makes us ideal ETF investors. Think about the nature of equity and bond ETF holdings. It gives you exposure to multiple individual stocks and bonds listed in various countries. Essentially, minimum effort, maximum exposure & diversification and average returns.
As salaried employees and ETF investors, the key consideration for us is our ability to earn more. Since we can only achieve average returns with our investing approach, it’s important that we keep pushing cash funds into our ETF portfolios. The dividend income from a ETF portfolio is not high. Which means it would take a significant investment capital for the dividend income to be self-sustaining. Either as continual re-investments into the ETF portfolio or for our living expenses.
Thanks for the post. I finally understand why u are doing it. Was wondering if its a hype .. This robot advisor thingy…. Makes sense now.
Clarified
Yup, glad it makes more sense now. Still has to be applicable to one’s personal and financial situation before investing with robo-advisors.
FWIW I think your approach is practical & prudent. Dipping your toes & fingers into ETFs, while building up a big war chest with the majority of cash savings.
From personal experience, it’s not just time in the market, but what time you entered that also plays a huge part in outcomes.
For e.g. going in big in 2003 or 2009 when major indices have risen 10% from their lows of -50% or more from the previous cyclical highs; would have been a game changer or even possibly a life-changing event.
By being familiar with the investing process and building up knowledge & confidence in the investment vehicles & platforms, you will have much better psychological frame of mind when the time comes to pull the trigger on $500K or $1M moves into the markets.
Even more so if you use the time now to review market history, performances of various markets & assets, maximum drawdowns, recovery times, etc.
Glad that you agree with my approach! It’s tough knowing when to pull the trigger on big investment moves in the markets even though we understand the timing is important. But continuous investing and keeping ourselves vested with ETFs is a good way of tracking the cyclical highs and lows based on the portfolio performance. Gives us a better sense of when to do the one-time injections of cash funds when the markets are at sufficiently low valuations.
Good insights. But how about the RISK? Do you think the companies like stashaway are safe enough to park our money
Although FinTech companies such as StashAway and Smartly may not be as safe as banks when it comes to parking our money, the risk levels of doing so are still acceptable to us. I would think MAS is keeping a close eye on both of them being the first robo-advisors in Singapore and seek to ensure regulations are being met.
Thank you. I read with interest and agree with your investing thinking. I am now encouraging my son, who is in NS to also start with a small monthly investment in Stashaway.
A small monthly investment in StashAway should compound over the long run and is a good way to start investing when capital, cash savings, work and life experience are not high enough to take more risks.
Thanks for sharing. These Robo- advisors are still new.
How does one get started? Sorry, totally new in this game!
You can first have a read through of the StashAway and Smartly Singapore robo-advisors websites to understand how it works, pricing, FAQs etc. Take your time to go through the material to determine if robo-advisors are suitable for you. If yes, you can get started with them by providing your personal and financial details for them to work out a suitable portfolio and for you to open an account. All the information can be found online. All the best!