This article was written in collaboration with the DBS. All views expressed in this article are the independent opinion of DollarsAndSense.sg
This October, the DBS digiPortfolio was made available to those that signed up for early-access, and will be available to everyone by the end of 2019.
digiPortfolio invests in Exchange Traded Funds (ETFs), giving investors immediate exposure to a pool of assets that are diversified across countries and industries.
With much interest surrounding this new investment tool from “The Safest Bank in Asia and Best Digital Bank Globally”, we examine the pros and cons of investing your money through DBS digiPortfolio.
Pro #1 Low Capital Required
You can start investing with just SGD $1,000 for the Asia Portfolio and USD $1,000 for the Global Portfolio. This is a very low barrier for many young investors who have $1,000 available in their savings to spare. The USD $1,000 is specific to the Global Portfolio, where investors would have to fund their Global Portfolio with USD only.
Pro #2 Relatively Low Fees
At 0.75% per annum, the costs involved with the digiPortfolio is relatively low. This means that for every $1,000 you invest, you pay $7.50 in fees a year. This fee is essentially the management fee, which goes towards the research, investment strategy, market monitoring and rebalancing of the digiPortfolio.
With just one fee involved, this makes the fee structure very clear for new investors. You will not have to worry about incurring more fees in the form of sales charges, platform fees, switching fees, withdrawal fees or closure fees. However, this portfolio management fee does not include the fund management fee that is charged by the underlying funds, which is already captured in the fund’s total expense ratio.
These management fees are debited once a year, or when you close your digiPortfolio. For those who signed up for the early bird access, DBS is currently running a promotion where you will receive a full waiver of the annual management fee for 2019 if you open your digiPortfolio and remain invested until 31 Dec 2019.
Pro #3 Access To A Global, Diversified Portfolio
The digiPortfolio gives investors 2 options: the Asia Portfolio or the Global Portfolio. Both of these portfolios invest in Exchange Traded Funds (ETFs).
The Asia Portfolio invests into SGX-listed ETFs that gives investors exposure to Singapore, China and India companies. The Global Portfolio on the other hand, invests into UK-listed ETFs that give investors global exposure.
One key difference between the two portfolios is that the Global Portfolio requires the user to have prior investment experience or knowledge. DBS does this through a self-assessment questionnaire during their Customer Account Review process.
For those who are completely new to investing, the Asia Portfolio does not require any prior investing experience to start. This makes it very accessible for young investors looking to get started on their investment journey.
Pro #4 Highly Interactive And Detailed Portfolio Information
For both the Asia and the Global portfolios, you can see clearly what ETFs your portfolio will consist of. This is based on the asset allocation for your risk profile. You can also go into the details to take a look at the ETF prospectus and fact sheet.
The examples shown below are for the Global Portfolio with Risk Level 4.
For each of these holdings, you will also get commentary on why this ETF was selected:
Pro #5 Straightforward Risk Levels
For many new investors, it is difficult to know for yourself what investment instruments you would want in your portfolio.
However, understanding your risk level is something that can be determined even for new investors, depending on the amount of risk you are willing to take on.
The portfolio fact sheet shows you the estimated returns for various risk levels:
For each of the risk levels for both portfolios, you will be able to see a clear breakdown of the ETF holdings in terms of equity, fixed income and cash. You can also toggle around with the investment amount and duration to get an overview of the projected performance.
Here’s an example of what the page looks like when you choose Risk Level 4 (Fast n’ Furious) for the Global Portfolio:
For any investor, new or seasoned, you should invest in portfolios that align with your risk appetite and in amounts that you are comfortable with, and the DBS digiPortfolio makes it easy to do so.
Pro #6 Professional Portfolio Managers Behind The Portfolio Construction
DBS digiPortfolio is managed by the same investment team that manages discretionary portfolios, with guidance from DBS’ Chief Investment Office. This means that your digiPortfolio is being watched over by seasoned, professional portfolio managers.
Pro #7 Flexibility And Ease To Get Started
For any DBS user, you can apply for the digiPortfolio easily through iBanking, under the Invest tab. The whole process to start investing is straightforward and intuitive.
Do note that you will need a DBS multi-currency account (such as the DBS Multiplier Account or DBS Multi-Currency Account) to get started with digiPortfolio. If you do, then starting is very convenient, since you are not required to make any transactions outside of the iBanking page. You can simply transfer the funds from your DBS account into the digiPortfolio with a few clicks.
For those looking to invest in the Global Portfolio, you will need to transfer the money in USD as the investment has to be funded in USD. You can easily convert SGD into USD through your multi-currency account to have the USD available to fund the Global Portfolio.
It is also easy to close your digiPortfolio account whenever want to. There is no lock-in period and you can choose to close your account at any time if you wish.
Just like many other investment products available, there are also areas that we hope digiPortfolio can improve on.
Con #1 Not (Yet) Integrated With The DBS Multiplier
The popular DBS Multiplier Account is also a multi-currency account, which makes it a great account for those looking to invest with the digiPortfolio. However, digiPortfolio has not been integrated into the DBS Multiplier, which means that investments made and the cash dividends received with digiPortfolio isn’t recognised as fulfilling the Investment category to qualify for bonus interest.
Based on the FAQ section on the DBS website, the DBS team is working to have digiPortfolio be recognised under the “Investment” category for DBS Multiplier in the later half of 2020.
Con #2 You Can’t Start A Regular Savings Plan That Invests Into digiPortfolio (Yet)
Making regular and consistent investments help investors to avoid timing the market and also to remove emotions from the decision-making aspect of investing. It also allows young investors to continuously invest from a young age. This is where regular savings plans come in handy.
However, the digiPortfolio does not have the function to allow investors to make regular investments into the digiPortfolio yet. A top-up feature that enables you to increase your investment in the digiPortfolio is in the works and will be made available in future.
Con #3 Only 2 Portfolio Options Available For Now
The digiPortfolio is a good place to start for those that are looking for an investment portfolio that provides global exposure and diversification with low capital requirements and low fees. You also get to decide on the risk level that you want to take.
However, there are only 2 portfolio options available, both of which only invests in ETFs. This could seem very limited for investors who would like more choice and flexibility in their investment portfolio.
On the flipside, having fewer options could also be a good thing, as it makes it easier to just choose between two options.
DBS digiPortfolio provides both new and seasoned investors in Singapore another convenient and compelling option amongst many other investment options we have available.
There really isn’t any good reason not to start investing for the future, today!