We rely on technology to simplify many daily activities in our lives – from knowing exactly when the bus will arrive at the bus-stop to keeping in touch with our family and friends 24/7 to getting our favourite dinner served to us at our doorstep after a long day at work.
It should also come as no surprise that technology would provide equally smart and effective solutions to simplify our long-term investment needs.
Robo-advisors are digital platforms that provide automated investment and portfolio management solutions for ordinary investors. In essence, the rise of its popularity is mainly because it takes over much of the heavy lifting work for investors.
Using complex algorithms, robo-advisors are able to simplify the process of assessing an individual’s risk profile, selecting a suitable and diversified basket of investments catered to the individual and managing his or her investment portfolio.
This reduces any instances of conflicts of interest with a human financial advisor, plugs potential knowledge gaps that many younger, inexperienced or uninterested investors may have as well as even out the playing field by offering access to professional portfolio management, via its complex algorithms.
Its algorithms not only put investors on equal footing, it also minimises human intervention within its entire value chain, and thereby reducing cost for its investors. That being said, most robo-advisors still offer good customer service support and employ highly skilled fund managers and programmers.
We decide to test out Singapore-based StashAway to find out easy (or difficult) it is to start out, and what we can expect in terms of service standards and investment methodologies. Below is a walkthrough of our sign-up process, complete with screenshots and learnings.
Opening A StashAway Account
StashAway was founded in 2016 and operates under the Monetary Authority of Singapore’s Capital Market Services Licence (CMS100604-1).
The robo-advisory platform uses a proprietary investment strategy based on the theory of economic cycles, Economic Regime-based Asset Allocation, or ERAATM. This enables it to monitor economic trends and valuations to rebalance its customers’ asset allocation mix for the long-term.
StashAway charges a fee of between 0.2% to 0.8% per year, depending on the amount invested. Currently, StashAway is giving 50% off its management fees for 6 months, for up to $50,000 in portfolio value. You can sign up here after reading this walkthrough.
The folks at StashAway has built a personalised sign-up page for DollarsAndSense readers. Here, you read more about StashAway’s investment methodology, its unique features and gain useful financial insights, as well as receive exclusive sign-up perks.
I went ahead to “Get Started”. First, I had to fill in some personal information about myself. Many platforms require such information, and moreover, robo-advisors’ algorithms need this to do its job assessing my risk profile and recommending a suitable investment basket for me.
It even highlights this at the bottom of the screen.
It then asked me if we want to invest for a life goal. This was a natural choice, as I think we should always try to save for a life goal. If you’re unsure, you can hit this option to look at some life goals you choose to start investing for. Otherwise, hitting “General Investing” is fine, as you’ll still be able to change this option later on.
I picked to start to “Plan For My Retirement”. Of course, you can pick more than one goal to invest for if you want!
Even if I had no clue how to start planning for my retirement or how much I would actually need, StashAway provides a simple calculator to kickstart this process. There’s also an option if I “already know how much I need”. Based on my needs, I needed close to $790,000 for my retirement, or to invest $570 each month.
Some of the entries in the calculator were pre-filled in, and I left those as they were. I’m taking a guess that the algorithms did some math to arrive at those figures. I did increase my retirement age to 70, as I believe people will be expected to work till later in their lives, especially with modern medicine and the rising cost of living.
I was asked for how much I expected to receive in CPF LIFE payouts. This may be tricky for people who haven’t started planning for retirement. You may want to read this Beginners’ Guide for CPF LIFE and Monthly CPF LIFE payouts when you retire in Singapore to get a better understanding of this. I selected $1,350, as this was the amount I can expect to receive on the Standard Plan if I saved up to the Full Retirement Sum.
I left the final two entries at $0 because I don’t have another other retirement savings or plans currently. I guess it’s a good thing I decided to start investing with StashAway today!
I received two results: a chart and a portfolio composition.
In the chart, I could basically tell that if I invested $570 diligently every month until I turn 70, I would have close to $1.29 million for my retirement. This exceeds my required amount. Reading the fine prints on the bottom left, I realised this was because there’s a 90% probability I would end up in the green shaded area. This could be significantly lower than the $1.29 million mark.
In the second result, I gained some insights into how my monthly investments would be invested. Interestingly, almost half of it will be invested in fixed income (such as bonds). Close to a third will be in equities, about 15% in hybrid funds and the rest in commodities. This looks like a well-diversified, albeit very safe, investment.
My goal to “Plan for Retirement” is done. To proceed investing towards this goal, I now need to set up my account.
Here, there are three sub-sections: 1) personal information, 2) basic financial assessment and 3) verify your identity via uploading your NRIC.
Next, we need to “confirm investments”.
When I click the green “Review Portfolio” button, I will get to view my:
# 1 Portfolio Summary
Here, I can see my “StashAway Risk Index”. This defines the potential loss of a given portfolio, which means there is a 99% chance that the maximum amount I lose on my portfolio is 14.0%. This is because of the risk level I’m willing to take.
In green, the words “Adjust Risk” allows us to take on riskier or less risky investments.
# 2 Portfolio Composition
Here, I can tell my portfolio is being invested quite evenly in growth and protective (or defensive) investments. To view the investments, we have to look below, at the exact asset allocation.
# 3 Asset Allocation
This shows me exactly what I will be investing in and what weight it will hold within my portfolio. We can presume that these investments have selected by the algorithm based on my prior inputs. These investments are also primarily exchange traded funds (ETFs) from around the world.
To continue, I now have to fund my StashAway account, by transferring money into it. There is no minimum amount in Singapore dollars (SGD) transfers, but there is a US$10,000 minimum for US dollars (USD) transfers.
Next, I have to indicate the one-time transfer, as well as the subsequent monthly transfers I want to make. My decision will be to stick to the $570 transfers each month.
Lastly, I also have to indicate that I want to make subsequent monthly transfers of $570 as well.
Finally, I will need to actually make the transfer from my bank account. StashAway will provide a unique reference code that I need to use, for them to recognise it came from me.
Now, I’m all set, and ready to start accumulating my retirement nest egg.
And if you follow the same steps like I did, you too would be well on your way to investing your wealth for the future. To help you along, DollarsAndSense has partnered with StashAway to give you a headstart on your robo-investing journey.
StashAway is giving 50% off in management fees for 6 months, for up to $50,000 in portfolio value. That makes it perfect for taking StashAway on a test drive and see if it is the robo-advisor for you. Sign-up for free today at this link!