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Syfe Equity100: Is This The Right Robo-Advisory Portfolio For Investors Who Want To Take On Higher Risk For Higher Returns?

Higher expected returns come with the need to take on higher risk


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For those of you who don’t know about Syfe, they are one of the younger robo-advisory platforms in Singapore. Launched in July 2019, Syfe has done exceptionally well over the past year since we first wrote about them. They have also launched multiple products for Singapore investors looking to invest via robo-advisory platforms.

While the COVID-19 global pandemic has thrown the global economy into disarray, one interesting observation is that it has also propelled many people to start investing. After one of the worst stock market crash in recent times, when major indices such as the S&P 500 fell by 30% within a 30-day period from 24 February to 23 March 2020, financial markets have made a stunning recovery with some stock market indices trading higher than their pre-COVID-19 levels. Naturally, this has caused some retail investors to wish they had invested more during the initial drop.

In an interview earlier this year that we did with Dhruv Arora, Founder and CEO of Syfe, he shared that “the last three months [March 2020 to May 2020] has been [Syfe’s] strongest since its inception in terms of new clients coming onboard and the assets [the company] managed”.

Even those who may have invested during this period may lament that they wished they had taken on more risk. Traditionally, robo-advisory platforms hold a portfolio mix of equities, fixed income, cash and sometimes even gold, as with Syfe Global ARI portfolios. The asset diversification means that the portfolio is better protected during market downturns (e.g. from 24 February 2020 to 23 March 2020), but may not increase in value as quickly during a market rally (e.g. from 24 March 2020 till 31 August 2020) as compared to a pure equity portfolio.

It’s for this reason that Syfe has launched a new portfolio – Equity100. This fully-managed portfolio puts 100% of your investment monies into equities (i.e. stocks). According to Syfe, this means getting access to a well-diversified global portfolio of over 1500 stocks in the world’s leading companies.

What Does Syfe Equity100 Invest In?

Naturally, Syfe doesn’t invest in 1500 + stocks directly. Instead, it gains access to these stocks via the Exchange Traded Funds (ETFs) that it invests in.

These include the Invesco QQQ Trust, which tracks the NASDAQ 100 index, and the iShares Core S&P 500 UCITS ETF, which tracks the S&P 500.

If you’re wondering why Syfe has chosen the S&P 500 UCITS ETF, which is domiciled in Ireland, it is mainly for tax efficiency. A US-domiciled ETF tracking the same S&P 500 index would be subject to a higher dividend withholding tax rate compared to its UCITs counterpart.

Source: Syfe

At the risk of simplifying the portfolio, here are the four main things you need to know about the Equity100 Portfolio.

Firstly, you are getting a global portfolio, not a U.S. or a Singapore-based portfolio.

Secondly, with exposure to more than 1,500 stocks, you are getting a well-diversified equity portfolio. Most of Equty100’s component  ETFs invest in large-cap companies so the 1,500 stocks (which is already a huge number by itself) are represented by big companies the likes of Microsoft, Amazon, Facebook, Procter & Gamble, Alibaba, and more.

Thirdly, Syfe uses a strategy called Smart Beta. Without going into the details, it basically means that Syfe has identified several factors that it believes help deliver higher returns. Accordingly, the Equity100 portfolio is tilted to these factors to generate better returns for investors. This is sometimes known as factor investing.

The three factors that Syfe has identified are 1) Growth, 2) Large-cap and 3) Low-volatility. And while most Smart Beta strategies have static factor allocations, Syfe dynamically adjusts factor allocations over time based on cyclical market conditions. This means that if growth stocks start underperforming, Syfe could tilt the Equity100 portfolio to value stocks instead. But given the current market cycle, we understand from Syfe that it does not expect the growth, large-cap, and low-volatility factors to fall out of favour in the near future, so these factors may not change anytime soon. If you are keen to understand this better and want to read more, do read Syfe’s explanation on how Smart Beta works.

Lastly, Equity100 puts all your money into equities only. It’s a very well-diversified equity portfolio, but ultimately, everything is in stocks only.

It’s worth noting as well that Syfe’s two other products, the Global ARI and its REIT+ are somewhat different portfolios compared to Equity100. So investors shouldn’t expect returns across the different Syfe portfolios to be closely correlated. Like its other portfolios, Syfe charges between 0.40% to 0.65% p.a. for the Equity100 portfolio.

Theoretically, you can recreate Equity100 by investing in all the underlying  ETFs on your own. However, the likely downside is that doing so on your own would be expensive and inefficient.

Read Also: Syfe REIT+: Why This Newest Robo-Advisory Product Is A Great Way To Get Started On Your REITs Portfolio

Personally, I like Syfe Equity100 in the same way I like its REIT+ portfolio.

With REIT+, it’s a straightforward product that invests in basically two asset classes – Singapore REITs and Singapore government bonds (via the ABF Singapore Bond Index Fund). Syfe also offers its REIT+ investors an option to choose a portfolio that is 100% allocated to REITs.

With Equity100, the product value proposition is clear as well. What you get is a global stock investment portfolio that invests in the biggest companies around the world. If global stock markets go up, the value of your portfolio will increase. If global stock markets underperform, your portfolio will be affected since it is fully exposed to stock market volatility. It’s as simple as that.

Just like I wouldn’t invest all my investment monies into REIT+ but would be glad to hold it as part of my overall investment portfolio, the Equity100 portfolio is not an ‘all-in’ investment product. However, it is a great complementary investment product for investors who want added exposure to global equities. For example, suppose you are already invested in some of the robo-advisory platforms and are holding some Singapore Savings Bonds (SSB). In that case, you may prefer to invest in the Equity100 for higher equity exposure.

If the Equity100 is the only investment product that you are holding, then you need to be mindful of the investment risk that you are taking. Over the long-term, this shouldn’t be an issue since global equity markets are likely to grow. However, in the short-term, market downturns can have an adverse effect on your portfolio.

Unlike Syfe’s Global ARI portfolio, there isn’t a risk management tool in place to protect your downside risk. So if the markets go down by 30% within a 30-day period (which it did earlier this year) your investment portfolio will likely lose a similar value.

If you are interested to get started on investing with Syfe, DollarsAndSense has an exclusive partnership with Syfe – enjoy 0% management fee for the first $30,000 during the first 6 months after you sign up. Apply here to enjoy the promotion.