I had the chance to meet Michele and Rachel from StashAway as well as Kyith (Investment Moats) during the open discussion earlier in the week. It was great and I enjoyed the conversations we had on investing in general, pros & cons of StashAway, possible improvements to StashAway, etc. Looking forward to attending more of such events!
Anyway, I read Kyith’s latest post at Investment Moats on Your Returns if You Dollar Cost Average into the STI ETF with interest. Mainly because I’m attempting a similar endeavour for the next 10 years – mindless investing in the STI ETF via monthly investment plans. In fact, I’m doing the same thing with global ETFs via robo-advisors. Just that it is the robo-advisors doing all the behind-the-scenes work.
The returns for the past 10 years taking into account different cost structures are between 5% to 6%. That’s quite decent to me for just putting in the same amount of money into 1 ETF using 1 investing platform and doing nothing else. It makes me wonder what the returns would be like for the next 10 years. There are now more investing platforms with lower cost structures and it’s much easier to monitor and make adjustments.
After all, I doubt I will be the type to do nothing else. I mean, the argument is that this approach allows you to free up more time for other stuff. Spending it with your family & friends, working harder at your job to increase your salary income, watching more TV, meditating, volunteering, etc. The possibilities are endless and it’s entirely up to you to decide how to use that extra free time.
But I was just thinking when I looked at the historical price graph of the STI ETF. I know it’s in hindsight and it’s easy to talk about all sorts of actions I would have done to take advantage of the bear markets. Is it possible for me to just do one extra thing instead of doing nothing else when I employ this strategy? I don’t think it takes up much time to execute but I guess timing it would be the most difficult aspect.
If I see price dips of a significant degree, I start increasing my contribution amounts to the monthly investment plans and robo-advisors. Maybe a few hundred dollars every 5% drop? But not lowering my contribution amounts when the price subsequently increases so it’s only a one way price monitoring and investment action taken. Meaning my new base of monthly contribution amounts will only ever increase.
I guess this assumes a certain level of growth in my salary income to be able to sustain it. I reckon there should still be leftover time for me to focus on that. Besides, it’s not like spending more hours at work definitely equate to a higher salary income. There is some level of correlation but I would think more effort should go into trend monitoring so you still have a job with growth potential. Getting retrenched just eliminates or drastically reduce any shot you have at increasing your salary.
Let’s hope I’m still writing 10 years later so I can see whether this approach achieved a higher return. Taking into account all the events that will happen from now to 2027. Makes me wonder what the future us will be like.
Hahaha. 10 years is a long long time. Let’s hope we are still blogging and have obtained some form of financial freedom by then 🙂
Yup, a decade is definitely considered a long time. Haha, I hope we are still around then too and in a better financial position than now. Something to work towards!
I always find it .. “interesting” when folks invest in robo-advisors or ETFs that mirror indexes etc and are happy when they see positive returns after a month or two. I would very much prefer to see negative returns in the short to mid-term. Mean reversion is my best friend.
When the STI ETF dropped to $2.75 in 2016, I started buying it with my CPF OA. It didn’t quite hit my other thresholds to trigger further buy actions.
With robo-advisors, there are perhaps some actions we can take. Let’s say I’m use a 60% equities 40% bonds portfolio allocation now. During a market crash, I can probably switch my allocation to a more aggressive 80% equities 20% bonds.
Ten years? Stay the course =)
I understand that you can switch your asset allocation with one of the robos if I remember correctly?
Also it would appear that they adjust our portfolios according to different economic cycles perhaps that’s why we see positive returns too!
Yes, it’s possible to switch your risk and hence asset allocation with the robo-advisors or you can just set up another portfolio with them. The rebalancing helps a lot with the returns too!
It’s better to invest cash funds on a regular basis in robo-advisors or ETFs when there is negative returns in the short to medium term. After all, the preference is to average the purchase price downwards and not upwards. But I guess it just makes people feel better to see positive returns? Probably more psychological than logical.
Haha, I did make purchases when the stock markets dropped in 2016 but it wasn’t enough. That’s the problem of waiting too long to see if the prices would drop further. I didn’t trigger enough buy actions as I set the thresholds too low and far apart. Something for me to think about.
My robo-advisor accounts are already at the maximum risk allocations. Unless StashAway and Smartly are planning to introduce even higher risk portfolio allocations (which I am supportive of). Yup, let’s see what happens in a decade!
I wouldn’t bother doing anything with a 5% or 10% drop. I’d wait for the fat pitches especially with a large war chest, meaning ideally more than 30% drop. And instead of messing with the rsp, I’d do a lumpsum investment of 50% to 70% of my war chest. To prevent catching falling knives or being stuck in a long basing pattern, I’ll only deploy when there is some positive momentum e.g. portfolio moving above the 200 EMA, i.e. going in near the start of recovery or near end of bear.
I’ll want the biggest bang for the buck for a big lumpsum investment and you get that by going in at major turning points. And by taking a 30K feet strategic approach you don’t need to sweat over precise-ness of 5% moves … you just need to be roughly right.
That’s the thing that I’m comparing against. Whether it’s better to wait for the bigger drop of 30% or more since I have a larger war chest and do a lumpsum investment. Rather than adjust upwards with every 5% to 10% drop.
Though I’m not confident I have what it takes to go in big on those major turning points. Especially when I didn’t do it sufficiently in 2016 and there was already a big enough drop to justify that. Not sure whether I will get better the next time round. Haha, will see how it goes!
Hi financial smith,
New peep here!, Was wondering as well as a Singapore young melllenial, what kind of investments are most suitable to grow one’s portfoli in your opinon.
Tried out Stash Away with the referral for 6 months free 10k handling but it seems to be still recoving from converation rate after a few weeks. Will see how it goes.
~Cheers
Hi Wen Xuan,
It depends on a number of factors. E.g. the type of job you are in, current salary income, future earnings potential, personal and family financial circumstances, level of investing knowledge, etc. Generally, my preference would be stocks and ETFs for a young person just starting out at work in Singapore.
Robo-advisors can be useful but they require consistent funds contributions over the mid to long term to be effective. A few weeks is too short to determine whether StashAway is suitable for you.