Any tips/suggestions for a newbie investing in Stashaway? - Seedly
 

StashAway

Robo-Advisors

SeedlyTV EP04

Investments

Asked by Anonymous

Asked on 23 Jul 2019

Any tips/suggestions for a newbie investing in Stashaway?

Hello, I am about to invest in Stashaway for the first time and would like to learn from the community any tips/suggestions/advise when it comes to investing with them. Is it recommended? Or are there any other options?

2

Answers (6)

Sort By

Most Upvote

  • Most Upvote
  • Most Recent

Nothing about the platform, but instead, are you ready to start investing?

My main concern with many retail investors using passive based instruments is that because markets have been doing well, everyone can show fantastic 10 yr annualized returns, but when we see a 20-40% drop, many will sell off because it's just too easy, only a press of a button away.

So my question is that if that happens, what do you do? Will you say Stashaway is bad? You can't, because they just follow the global market. So figure out the game plan before investing a single dollar in any product.

1 comment

8
Luke Ho
Luke Ho

01 Aug 2019

This is so helpful 👍
Harvey Tan
Harvey Tan
Level 6. Master
Updated on 02 Aug 2019

If you want a hand-off approach towards investing, Stashaway is alright. But so is many other robo-advisors. Hard to tell difference between them. Main differentiator between the different robo-advisory are the engine that determine the asset allocation as well as fund selection.

The engine is based off a finanical model that takes in economic data.

The good thing about robo-advisors is they are mostly investing in low-cost broadly diversifed ETFs from big name issuers such as Vanguard and Blackrock. And they are mostly investing passive products. Even then, most charge on average about 0.70% pa, excluding the fund expense ratio. All in cost, I suspect comes in at about 0.9%-1% pa.

Strange thing about Singapore is that passive product does not seems to have the same amount of traction as compared to US. Maybe it is the lack of education or could just be the way the advsiory business is being set up in Singpaore. My main concern with active funds is that although the market has been doing pretty well for the past decade, most active funds across asset classes (in US context, doubt the stats will change much for any active funds anywhere else in the world) are underperforming the benchmark.

Note that most active managers collect their fees regardless of the underlying fund performance. The probability of you choosing an advisor that can construct a portfolio that generate consistent alpha in the long run is close to NONE, which is as good as the probability of a fund manager selecting winning stocks in the long run.

Google "SPIVA report". Some argue active management would have better results in bear market. Once again, the SPIVA report would beg to differ. Perhaps the only good thing about having an advisor is that they can help calm your nerves in a market crash. Go get a dog for that. (apologies for my humor)

Would recommend you read the following books :

  1. The little book of common sense investing
  2. The Intelligent investor
  3. A random walk down wall street

Lastly, do your own due diligence.

2 comments

3
Luke Ho
Luke Ho

01 Aug 2019

Https://www.moneymaverickofficial.com/post/every-single-passive-fund-manager-underperform-reason SPIVA is pretty flawed, since you want to take a lot in the local context not accounting for MAS. The gross yields for the SNP500 were about 9% annualized but only 7% in the last 30 years, not even beginning to look at fees, withholding tax and forex risk. It's peanuts compared to what you can achieve with an active fund outside that area.
Harvey Tan
Harvey Tan

02 Aug 2019

Hi Luke The Money Maverick (MM) article has weak if not laughable arguments. In short, the MM article and your argument have no real substance to discredit most of the findings by SPIVA. 1) The MM article claim that mutual funds should be compared to their ETFs with the same benchmark rather than to the benchmark directly. I agree with the statement, perhaps the strongest point in its argument. However, if the fund manager chooses an efficient ETF as its benchmark, it will not change the results significantly. Reason being efficient ETF can track its benchmark almost perfectly over the long run (If the gross yield of the benchmark is 100bp, the net yield of an efficient ETF will be 100 bp if any +- 5bp). 2 key criteria to be efficient, funds need to be very cheap (TER less than 10-15 bp p/a) and it needs to engage in securities lending. More importantly, most ETFs that should form the core of an investor’s portfolios, are efficient ETFs. See VOO, VTI, BND, VWO. 2) The MM article claim that you cannot compare active to passive investment results due to the index lack of investing factors. This statement is false. As a matter of fact, SPIVA compare apples to apples. For example, an US value-oriented fund is benchmarked against S&P 500 Value Index rather than S&P 500 Index. Indexes can be constructed based on numerous investing factors such value, momentum, quality, size etc. ETFs can then be constructed to track the said index or in the case of active mutual funds that engages in similar investing strategy/factors, benchmarked against the same said index. Therefore, comparison can be made between active and passive investment results. Injecting investing factors into an index is the key reason why we have smart beta/thematic ETFs which by the nature of selecting factors that determine value, quality etc, constitute active investing. 3) The MM article which cite information from WSJ claim that the average ETF has an expense ratio of 44bp and the MM article which cite information from Morningstar (MS) claim that the average index fund has an expense ratio of 74bp. Sadly maybe conveniently, the WSJ article did not disclose its methodology as to how it arrives at 44bp and the link in the WSJ which cite information from MS, direct me to the MS homepage. I will take the above fund fee statistics with a high pinch of salt. ETFs can be broadly split into active and passive ETFs. In generally, passive ETF that tracks an index, has a much lower TER and nowhere near the 44bp that WSJ claimed. On the other hand, active ETFs has a much higher TER, most of them certainly more than 44bp. Averaging out, I guess that gives us 44bp. Stating that the average ETF cost 44bp without any meaningful breakdown for interpretation can be misleading. 4) The MM article includes a personal anecdote on some EM fund. I am going to dismiss that because it is after all, an anecdote. No real quantitative research done behind that. Using personal anecdote to support your argument weaken the validity of your argument. 5) The MM article claim that he achieves 49.6% net of fees yield in inefficient markets and that he can turn an active fund investment into gains. I almost burst out laughing reading this. 49.6% does not mean anything when there is no other numbers/metrics to compare to. What is the benchmark return? What is the alpha generated ? Is it consistent since the fund incepted ? Annualised or cumulative return ? What is the timeframe ? What is the additional risk per unit of alpha ? Sortino ratio/risk metrics etc ? But nice try dangling the 49.6% by the author to entice people to contact him whom by the way, is a financial consultant. Also, Goldman Sach asset management is looking for the author of the MM article, to generate that almost 50% net of fees yield. 6) You claim that SNP500 yield “peanuts” compared to an active fund outside of that area. I am not sure what you meant by “outside that area”. If you are referring to outside of US, your argument will simply fall apart. Because funds outside of US should be compared against the appropriate benchmark that is reflective of the country/sector/strategy that the fund is investing in. Your argument is akin to benchmarking a China-oriented portfolio to SNP500. If you are referring to the US, again your argument will fall apart. Since most active funds in the US failed to beat their benchmark according to SPIVA. Either way, your argument is incomplete if not weak. To wrap things up, I would say that active funds in theory, should outperform the market because it is the nature/interest of active funds to do so. However in reality, the probability of active funds consistently outperforming the market over the long run (15-30years and higher) is close to none. Key words being probability and consistently.
Albert Tan
Albert Tan, Fin Lit Trainer at MoneyOwl
Level 4. Prodigy
Answered on 24 Jul 2019

Agreed with Hariz on readiness of the investor. You need to be clear of your investment objectives. Your need, ability, and willingness to take risks also need to align with your financial goals.

A platform is just a place for you to execute your investments. Perhaps it might be good to consider the adviser's alpha as well? In down markets, the ease of selling away with a click of a button may work against you.

The key to a successful investing experience is to stay invested. It may sound crazy but at times, doing nothing may be the most difficult thing to do. Having the option for you to talk to someone amidst the volatility of your investment journey is definitely a plus.

0 comments

3
Joel Loo
Joel Loo
Level 2. Rookie
Answered on 30 Jul 2019

I think it’s a good approach if you want hands off. I have channelled some funds monthly for about 2-3 years and the returns so far is about 13%. Of course, the market is on a bull run so everything is nice and rosy. But when the market is down, be prepared to see negative returns.

0 comments

1
JW
jiajing wang
Level 4. Prodigy
Updated on 31 Jul 2019

You must have the determination and PATIENCE to keep you money in and monthly deposit in StashAway. Don't be pessimistic and think you can do better than the robo advisor if you have not seen gain initially. Lastly

Sign up with my link and we'll both get up to $10,000 SGD managed for free for 6 months! https://www.stashaway.sg/referrals/jiajingw29

1 comment

1
Boonhow Eng
Boonhow Eng

31 Jul 2019

Suggestion is 1. decide on the amount you want to put in every month. 2. the amount is something you are comfortable with. 3. once decided, don happy happy increase, don happy happy decrease.

There's a ton of other options, because if you're looking at long term results across a portfolio that is going for 20 years or longer, many things beat Stashaway. The SNP500 alone.

QQQ Index.

Emerging Market Index. Or if you wanted significantly higher alpha, active funds that outperform the strongest index in the world by 4 percentage points net of fees.

Some people would take two approaches to Robos

1) Trading regularly

2) 5 - 10 year approach, which is optimal because you get a very sweet risk-adjusted return. At some point in 2018, it's risk-adjusted return was so much better that I had to refer a client to it compared to my own product. So I don't look down on it, but I'm doubtful whether it's the best instrument for your situation.

If you insist on looking at Robos or ETFs that it comes with, I'd still go with Stash compared to the SNP500 immediately - because I've written extensively on it and you can see that it has drops as high as 89%. https://www.moneymaverickofficial.com/post/why-you-should-invest-aggressively-now-and-how-you-still-can-have-peace-of-mind Yes. I'm not kidding. So it can be a bit hard for a newbie to stomach if it happens to you immediately, compared to the asset allocation that Stash will do for you. I also think that Stashaway, although it may not be as fee friendly as say, Autowealth - is better. The CIO just seems like quite a visionary. But please, don't take any of this as formal advice. Do get it from a professional. That's what it always boils down to anyway - because no one who's giving you advice here will take responsibility for what happens except a professional. https://www.facebook.com/luke.ho.54

2 comments

0
Harvey Tan
Harvey Tan

02 Aug 2019

In the performance table that you put up, which row and column item should i be looking at for the 4% alpha ?? I cannot seems to read your table correctly ?? It will help your case if you put the fund name along with links to the fund factsheets/prospectus. Your 4% alpha could come along with 50% additional volatility for all we know!!!
Luke Ho
Luke Ho

09 Aug 2019

Thanks Harvey. Unfortunately, I'm a licensed professional, so venturing into such specific information would constitute as formal advice. Any misinterpretation of that advice and someone whos a little crazy could cost me my license, so no. MAS is moving into correcting people who offer such advice freely, so it will eventually go for people who don't have licenses as well - where you can face your own ramifications. But I can assure you that the volatility is actually slightly lower than the SNP500 (at time of the fact sheet).