In the current climate, many around me told me that they want to start investing but are afraid and unsure of how to do so. Instead, they rather rely back on the traditional ways of ‘investing’ or growing their money, through fixed deposits or endowment plans. Throwing your money into fixed deposits can get you around 1.3% p.a (DBS), and Singapore’s inflation rate is about 0.5% so basically, you are only getting back 0.8%. If you are contented with this amount, then fixed deposit will be ideal for your considering its low-risk factor.
What are Robo Advisors?
Robo Advisors are actually similar to fund management, where the Robo Advisor management will pool together funds invested by investors like us and build a portfolio of diversified investments which suits your risk preferences and investing goals. The platform will request information from you, such as your income and occupation. Through these questions, the Robo Advisor will run through its algorithm to recommend to you an asset allocation portfolio.
What’s so good about Robo Advisors?
- No investing knowledge required
Robo Advisors would be an ideal option for those who wish to start investing but have not obtained adequate financial knowledge to make ideal investing decisions. All you need is to fill up certain questionnaires and the platform will recommend to you a suitable portfolio to invest in.
- Simple & Easy to use
Robo Advisors are easy to use. From opening an account to depositing funds, it is usually pretty straightforward.
The portfolio ranges from high-quality index funds to equities and even real estate investment trusts (REITS).
- Suited to personal preferences
Portfolio recommended by the platform is catered to your own financial needs and risk tolerance.
- Passive management
When market condition changes, one does not need to personally handle its portfolio, the Robo Advisors will rebalance or manage your portfolio for you.
What’s bad about Robo Advisors?
- Limited options
Unlike investing yourself, you cannot choose which specific stock you want to invest in. The Robo Advisor has its own set of portfolio it built.
- Currency conversion fees
As some investments might not be denominated in your local currency, currency conversion fees can be charged.
- No investment advice involved
Unlike online brokerage, there are no financial advisors around to speak to you or guide you through your investments. The trade-off would be the low Robo Advisor fees you are paying.
- No guaranteed returns
The way Robo Advisor is marketed may convince one to make it seem like returns are guaranteed, but definitely, it is not the case. Since its portfolio are tied to index funds or equities, it follows the movement of the respective price changes. With that said, returns can be great too.
I believe reading till this point, many of you might be curious what are some Robo Advisors are out there. If you didn’t know, Robo Advisors have been out there since 2008, but it only start to gain popularity from 2015 onwards.
Syfe offers these 3 portfolios, namely ‘EQUITY100’, ‘REIT+’ and ‘GLOBAL ARI’. For those that want exposure to equities, the ‘EQUITY100’ portfolio would definitely suit you. It adopts a Smart Beta Strategy whereby better risk-adjusted returns are obtained, and by its name, you can guess that it invest in 100% equities. Over the past 10 years, it gave an average of 14.4% annual returns, yes 14.4% annually. This is an amazing return, so with $10,000 invested, you would get around $1,440 return less management fees and expense ratio in that year, and don’t forget this value is compounded yearly if you did not withdraw your investments.
Stashaway offers investors with 12 different risk index, however, all of them are based on the same asset class (ETF). Stashaway uses live and historical data to monitor the market conditions, which allow them to be prepared for any major economic event.
To compare Syfe with Stashaway, I’ll mainly focus on these 2 factors, Fees and Performance.
Fees are relatively important in the long run, especially for Robo Advisors since the fees are recurring. The low the fees are, the higher your returns will be, this is why it is important to look at the amount of fees incurred ! A good thing about these 2 Robo Advisors that I am covering do not have a minimum amount to get you started. Let me walk you through the fees structure of these 2.
If comparing fees, I would say that Syfe has one of the most attractive and lowest fees among the Robo Advisors out there. Management fees per year will be 0.65% from $1 to $19,999, 0.5% for $20k and above, and anything above $100k will be 0.4%. However, do take note, this excludes expense ratio which on average is 0.15%.
Moving on to Stashaway fees, any amount invested lesser than 25k, annual fees rate will be at 0.8%. This is important for beginner investors as this bracket would be what we are usually in (less than 25k). With this 0.8%, including their average 0.2% expense ratio, the overall fees will be lifted to 1% which is relatively high. Stashaway would be more friendly to investors that are looking to invest over 500k, as the annual fee rate lies at only 0.2% to 0.3%. In my opinion, Stashaway will be ideal for those high capital investors due to the lower fees advantage.
As seen, these are Syfe’s 3 different portfolio returns averaged over the last 10 years. Equity100 portfolio performed the best, with an outstanding return of 14.4% annually. STI’s annualized return as of 2019 is 9.4%, which means that Syfe’s Equity100 portfolio would have beat STI ETFs returns. Do not forget that these returns are compounded, and your returns get greater each year.
I would like to talk more about Syfe’s REIT+ portfolio. This REIT+ portfolio is the industry’s first SG REIT based portfolio. REIT refers to Real Estate Investment Trusts, which is a type of investment where investors pool their money to invest in real estate assets and obtain a yield between 5% to 8% a year in dividends on average. Which this portfolio, it gave many Singaporeans a chance to invest in a diversified portfolio of REITs in Singapore without having to individually research in each and every one of them. For you readers, if you want exposure to REIT, Syfe’s REIT+ portfolio could potentially be what you should look into.
The above graph is adapted from investingbeanstalk’s wordpress. As you can see, Stashaway’s portfolio had outperformed the S&P 500. Stashaway’s best performing portfolio ‘Stashaway Risk Index 36%’ had yielded 11.75% returns. Having over 10% returns on Robo Advisors are incredible, taking into account the personalised risk factor. Even its lowest Risk Index 6.5%, generated 6.53% annualized returns, which is higher than what fixed deposits and even most endowment plans can give you.
If you’re talking about <$50k, Syfe would be the winner. For beginner investors, Syfe would be more ideal. Syfe is more beginner-friendly.
Syfe’s would be a better pick for long-term because of their investment strategy. Their investment portfolios are designed for long-term growth. If you are looking at short-term, you might see greater growth in your investments in Stashaway as compared to Syfe.
Overall winner : Syfe
Generally, both has its own pros and cons, and are generally beginner-friendly. Both Robo Advisors have proved their ability to provide investors with considerably high returns without low exposure to risks. Ultimately, investors still have to take note that returns are not guaranteed and past performances are not accurate indicators of future performances. Also, when investing in Robo Advisor, do select your risk tolerance wisely too, if you are a conservative investor, do select the portfolio with lower risks.
I’m personally invested with Syfe since September, drawing a return of 9.66%. A friend introduced me to Syfe months back, and I decided to invest with Syfe. Its Equity100 portfolio is what I have chosen because it suits my risk profile more.
If you are interested in investing with SYFE, this is a good news, there is a promo code for you that will give you a bonus !
Promo Code : SRPRY49VT
First Deposit of $500 or more – $10 Bonus
First Deposit of $10,000 or more – $50 Bonus
First Deposit of $20,000 or more – $100 Bonus
Minimum amount required to be entitled for bonus is $500, and it is only applicable to first deposit only. Bonus will be credited to your account directly and will be invested too !
Thank you for taking your time to read this post once again, and feel free to contact me if there is anything I can assist you with, have a nice day!
The content here is for informational purposes only and should NOT be taken as legal, business, tax, or investment advice. It does NOT constitute an offer or solicitation to purchase any investment or a recommendation to buy or sell a security. In fact, the content is not directed to any investor or potential investor and may not be used to evaluate or make any investment.
Do note that this is not financial advice. If you are in doubt as to the action you should take, please consult your stockbroker or financial advisor.