Asked on 21 Jul 2020
Thanks in advance.
A few friends here have already explained the impact of withdrawal
I'd just like to add one word: do not withdraw any earnings or even your capital, instead just Dollar Cost Average (DCA) every month.
Robo advisor is for long term investment, not something that you withdraw the moment you see some profit
It would depend on your investment duration. If you are planning to invest for the long run, withdrawing a significant amount of money out now would have quite a significant impact on your returns at the end.
Simple calculation to illustrate the example.
1000*(1.08)^40 would be $21,700
If 800 would be $17,379
If 400 would be $8,689
By removing just $200, you would decrease the amount that compounding effect can magnify by $4000.
Adding on to what @nicholas wong mentioned :
Go back to why you invest in roboadvisors.
The nature of roboadvisors is to protect your capital and to improve your capital. It means to be passive - place and ignore
By withdrawing your earning, you are removing the power of compound interest
If the annual compound rate is 10%, capital is 100k, timeline 10 years. Your future value is estimated 260k. Profit =160k
If you remove your profit yearly, each year you earn 10k. Total profit =100k
Most roboadvisors are built to reduce your risk. More rooms to minimise risk and maximise profit with higher capitals earned. Thus theoretically, if your risk profile stays the same, your capital uptake upon withdrawal reduces.
These are 2 main direct impacts. Don't forget about the cost of using the platform
E.g. if you held 1000 DBS stocks worth $10 per stock = $10,000
You wtihdraw half = 500 DBS stock left
Next year it grows to $12 per stock
500 x $12 = $6,000. You earned $1,000
If you did not withdraw = 1000 x $12 = $12,000. You earned $2,000
You might also lose the compounding effect = small inputs over time building to a huge future return. When you withdraw = cut back a lot of potential.
Thus you might want to diversify your investments where some are geared towards long term investment growth, and some more for short term/ withdrawals and spendings. These accounts you mentioned are passive investments e.g. ETFs, which is capped at index performances typically 3-5%. Will be good to look into other (passive for client) tools at 6-8% range for long term growth.
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27 Jul 2020
29 Jul 2020
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