Regular Shares Savings Plans (RSS)
Asked on 27 Jul 2019
I'm considering starting some ETF investments but am thinking between RSS & Robo-Investors. Will it be good to use both? Also, would it be better to start with high risk investments then move on to low risk? Or should I do the reverse by starting with low risk investments then move on to high risk?
Hi, in my view, investing requires the investor to be disciplined and committed to a time horizon. Else, you will become emotional and tend to "buy high, sell low". In all my years of experience of stockbroking and asset management, I have seen enough data points to convince me of the differences between investing and gambling. We should do less gambling and do more investing. People say they invest, but it is easily proven using science and maths to confirm we are mostly gambling. The key to investing is to decide our risk tolerance, which is a function of risk attitude and risk capacity. Go read my whitepaper at https://squirrelsave.com.sg/blog/risk-profiling-just-another-questionnaire.html to understand the subject better.
The other experts in this thread have explained the difference between RSS and Robos. As for Robos, there are differences. Do check them out. SquirrelSave which I founded is new. My aim is to use machine learning to take the human emotion and betting tendency out of real investing. The system remembers the risk profile you set and does not need the investor to make any day-to-day decisions. I used to be an investment manager. But with the availability of live data, the evidence led me to decide that the machine will offer a better investment outcome over the long term compared to the average human investment manager. Check out my blog at https://squirrelsave.com.sg/blog/why-replace-human-investment-manager.html to learn more.
Given my recommendation to get your risk profile right, I created a tool to help people assess their own risk profile. Try it out and have some fun doing it.
Therefore, the answer to your question whether to start with high or low risk is that it is not the appropriate question if you want to invest, It should be a mix depending on your risk profile.
All the best!
RSS and robo advisor are two different fundamental concepts but are related.
RSS (regular share saving) plan is where you invest a specific fixed amount into a investment plan. The investment plan could be an investment portfolio designed by the robo advisors or could be a portfolio consisting of various unit trust/mutual funds/ETFs recommended by your financial consultant.
The idea behind RSS is that you lower your average buy price over time and anchor on the principle on that timing the market is impossible.
Furthermore, it does not require a high capital outlay at the start. You can start as little as 100 dollars a month.
Robo advisory is just another delivery medium for investment. For example, instead of going to a financial consultant, robo advisory would require you to answer a couple of questions that determine your risk tolerence and investment time horizon. That risk tolerance/your response would determine your portfolio's asset allocation. In general, higher risk tolerance would mean higher allocation to equity securities and in turn would mean lower bond allocation. As to whether it is better to start with high/low risk is dependent on your risk tolerance and investment time horizon.
In general, if you have high risk tolerance and your investment time horizon is over 2 decades, it would be optimal for you to construct a high risk portfolio, ie a portfolio with a high percentage in equity and low in bonds. But note that just becasue you are young and willing to take risk, does not mean that you should have high equity allocation portfolio.
Before you embark on any investment, it would be beneficial if you can ask yourself some key questions :
Do i have emergency funds in place
Do i have the basic insurance coverage
Do i have any financial committment (parent to take care, wedding, BTO, etc)
All these will play a part in determining your risk tolerance
Hope this help.
As always, do your own due diligence.
Let me clarify how RSS and Robo-advisors are different concepts!
First of all, the Regular Shares Savings (RSS) Plan is more of a method of investing while Robo-advisors are more of a platform for investing instead.
RSS Plan uses Savings as an avenue to motivate/automate people's monthly cashflows and direct them towards an investment-oriented outcome. It makes use of the Dollar Cost Averaging concept and Time-in-market concept to encourage investors that a longer investment horizon will be more beneficial in the long run. The most basic form of RSS would be to place a monthly investment into the STI ETF.
Perhaps the confusion comes when RSS methods are allowed on Robo-advisor platforms. Robo-advisors main purpose is to recommend a (or a few in some cases) portfolio that is tailored to your risk profile according to the questionnaire that you would have answered while registering for an account.
In that sense, an investment strategy is recommended to you by a robo-advisory system while RSS is a conscious method of investing.
In terms of which method/platform you might want to decide on, Robo-advisor's biggest advantage would be the cost of investing and also the access to global portfolio that may add diversification benefits to your current portfolio. (https://solutions.kristal.ai/seedlypost)
In terms of starting with high or low risk, that would be a difficult question to answer and would be best addressed by a professional financial advisor (human or robo-based). It would depend on a variety of indicators: (Non-exhaustive)
Availability of Capital
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