Asked on 18 Dec 2019
Which is more suitable for someone who is starting out with little capital.
And will one be more profitable than the other in the long run?
I would choose to select stocks and do research myself instead. With proper knowledge and skillset, i believe i can do better than robo which that is the case. Investing do not have to be active, what you need to do is work extra hard to find higj quality stock and then just sit tight on it and let your money grow. That's it. You only need 3 - 4 great companies to make you wealthy in the long run.
I’ll give you another perspective, say you have $100k now, how sure are you that you’ll be able to suddenly switch from passive to active investing? How confident are you that you’ll be successful in getting higher returns?
If you can’t manage a small sum of money, you can’t manage a large sum of money.
Managing a smaller sum gives you room to make more errors. Learn from them, and invest in ourselves.
If you were to be down 20% on a 1 million dollar portfolio, you would’ve lost 200k. Compare that to if you were only managing a 10k portfolio
#1 passive Robo investing
#2 active investing
#3 passive self investing
given the cheapest online brokers, much reading on all relevant topics and regularly investing ultra-longterm into big and low cost well-diversified passive indexing ETFs
#3 would be the best choice
Before you start investing, it will be best to understand your objective. Here are some questions to help you:
What is your capital?
How will you want to invest your capital? E.g. lump sum or an amount on a regular basis
How long will you want to stay invested? E.g. 10 years
What is your risk appetite? E.g. How do you feel about short-term volatility?
What is your objective for investing?
If you are starting out and has limited capital, you may consider to adopt the strategy call dollar cost averaging. While it is not a foolproof investment strategy, it allows you to position yourself with a limited capital. Here is how it works: https://www.blog.pzl.sg/dollar-cost-averaging-singapore-does-it-really-work/
In addition to focussing on profitability, understand your objectives alongside with other factors such as risk appetite. Different instruments serve different purposes to help you reach your goal.
Here is everything about me and what I do best.
I'd do active investing using an options portfolio, and you can start on this with about 2k usd. You will need someone to guide you though. This will allow you to generate returns in excess of 30% pa consistently if you are disciplined enough.
It depends on what you mean by active investing, how much and how frequent you trade,
Active investing in SGX often means that minimum commission is $10, not including GST and SGX fees.
Do note that just because many of these robos are investing in ETFs that is tracking indicies, this does not mean that investing through these platforms are passive investing. Some of these investments actively trades with sizable changes in portfolio allocation so it is really hard to say that these are "passive investing".
I do my own ETF passive investing through interactive brokers for my cash portfolio and I stick to a strict portfolio allocation - that is true passive investing using passive instruments.
What is small capital? No matter how small the amount i feel robo passive investing is better. This is because the returns from passive investing tends to outperform 90% of active investors in the long run. So a 0.7-0.8% annual fee is still enough to beat active investors unless you feel you are the lucky top 10% of active investors
Active investing can be challenging if you have little capital. Cause if you end up buying individual stocks, the fee can eat into your profit or put you in red immediately. For example, using dbs vicker to buy a stock worth of $200, you will straight away lost $11 dollar which is consider one of the cheapest out there. That is chipping 5% off, and you may even need to wait for years just to get back that 5%.
As for passive investing, the fee tends to be cheaper with some of them have no min fee. So in this way, even with an investment of $200, robo advsior like stashway will take away $2 or a regular saving plan RSP in DBS will eat $2 too.
So fee can be quite scary and it can be very cruical if yo uhave little capital. On the other hand, passive tends to go for ETFs, while active you have more choices.
I do both.
Passive(Robo) investing : Time in the market via ETFs, esp when i cant find opportunity in individual stocks.
Active Investing: Timing the market, seeking alpha when market overreacts/panic
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