This article was first published on 22 January 2020 and been updated to include the latest information. This article contains affiliate links. DollarsAndSense may receive a share of revenue from your sign-ups.
StashAway’s cash management portfolio – StashAway Simple – enables retail investors to invest in money market funds to beat the interest rate offered by banks on their cash savings. In providing such a service, StashAway allows users to monitor their cash holdings and investment portfolio, via the StashAway robo advisory tool, in a single convenient, consolidated platform.
From 1 September 2020, StashAway Simple has revised its projected net return to 1.4% per annum on any amount placed with them, without any lock-in periods or minimum balance. This is higher than other no-frills, high-interest savings accounts and fixed deposits currently offered in Singapore.
Before this, StashAway Simple continued to pay 1.9% on funds placed with it, despite the underlying investments not being able to achieve such returns, by providing an additional rebate.
Despite sharing several similarities with regular savings accounts from banks, there are some key differences between the two which are important to understand before signing up.
#1 StashAway Simple Is Not A Savings Account
The first point you should understand about StashAway Simple is that it is a cash management account and not a savings account.
Unlike a savings account where your money is deposited with a bank, your deposits with StashAway Simple is allocated equally into two funds – Money Market Fund (MMF) which is made up of short-term money market instruments, and Enhanced Liquidity Fund (ELF) which consist of debt instruments.
The combination of the funds makes StashAway Simple riskier than simply putting aside funds in a conventional bank account, although the risk is significantly lower than typical growth-orientated investment portfolio.
StashAway Simple does not come with any sales charge or require any minimum balance. Furthermore, to boost investor returns, any rebates from management fees are credited back to account holders in the form of projected net returns that is tied together with the returns of the two funds, less expenses.
On the other hand, you can’t withdraw funds in StashAway Simple from an ATM, nor use it to pay your bills, issue a cheque based on funds from it, or other functions you come to expect from your savings account.
#2 StashAway Simple’s Projected Rate VS Savings Account’s Tiered Interest Rates
As explained earlier, StashAway Simple aims to deliver a projected net return of 1.4% per annum. While the structure of the projected net return is flat and easy to understand, this rate is not guaranteed and may fluctuate according to economic conditions.
|Funds||LionGlobal SGD Money Market Fund||LionGlobalSGD Enhanced Liquidity Fund||Average Percentage|
|Weighted yield to maturity||1.53%||1.99%||1.76%|
|Expenses||– 0.39%||– 0.43%||– 0.41%|
|Rebates from Fund Manager||+ 0.125%||+ 0.125%||+ 0.125%|
|Projected Rate||1.265%||1.685%||1.475% p.a.|
According to the factsheet and annual reports by the respective funds, and taking into account rebates from the fund manager, it does look like 1.4% is an achievable return. While we derived a figure slightly higher than the 1.4% projected by StashAway Simple, we have to understand that it is based on past figures and that the current economic landscape may continue to diminish interest rates.
Interest rates of regular savings accounts offered by the banks is typically lower, although banks may revise their interest rates from time to time.
In the case of some high-interest savings accounts, there are tiered interest rates that require customers to satisfy multiple criteria, such as crediting of salary, transacting using their credit cards and maintaining a monthly expenditure in the form of insurance or investments. This higher interest may seem attractive but is only practical for those who can hit the criteria specified by the bank each month.
#3 The Use of SRS Funds in StashAway Simple
Another difference that sets StashAway Simple apart from the conventional savings account is the flexibility of channelling our Supplementary Retirement Scheme (SRS) monies into it.
SRS plays a complementary role to one’s CPF savings, and can also be used as a tool to enjoy tax relief. However, a typical SRS account with banks only provides an interest rate of 0.05% per annum on SRS savings.
Due to the low-interest rates, our SRS savings risk becoming eroded by inflation over time. The usual choice of many SRS account holders will be to invest the monies. But for those who would prefer to place their SRS funds into instruments with a higher yield while limiting exposure to high risk, StashAway Simple can be a good option.
Given the structure of StashAway Simple, there is no doubt that there are some risks involved. For those who want risk-free investments to grow their funds, they can consider other relatively liquid products such as fixed deposits or the Singapore Savings Bonds, where the interest on deposits is guaranteed by the banks or government.
Investing With StashAway’s Robo-Advisor Platform
If you wish to potentially earn more on your monies (by taking on slightly higher risk), you might want to look at StashAway’s robo-advisor investment solution. For DollarsAndSense readers, StashAway is giving 50% off in management fees for 6 months, for up to $50,000 in portfolio value.
We will not be charged any management fee nor have any of our funds contribute to our AUM for the calculation of management fees for our StashAway Simple portfolio, and this exclusive offer is for its StashAway investment products.
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