Even if you don’t know what exactly a robo advisor is, you might have heard of Stashaway, since it’s been around since 2016 and easily dominates the robo advisor scene here.
The weirdest thing about Stashaway is that one of its co-founders is the ex-CEO of Zalora, and this is always mentioned in articles about robo advisors. Perhaps due to his background, Stashaway is extremely user-friendly and fits right into the other digital platform we use daily — Grab, Netflix, and yeah, Zalora.
Nonetheless, it’s reassuring to know their CIO is an actual investment banking veteran, so at least 1 person in the team has a finance background.
Anyway, I finally stopped dragging my heels and tried it out. Here are my thoughts on it so far:
Disclaimer: Not a certified financial advice-giver. I’m just a lowly writer trying to beat inflation.
How do you get set up with Stashaway?
Like I mentioned, Stashaway is really, really user-friendly. Of the big 3 Singapore robo advisors — AutoWealth, Stashaway and Smartly, sometimes abbreviated “ASS” — it’s the only one with a mobile app.
I downloaded it, and the whole sign-up process takes just minutes. I can totally see the ex-Zalora thing at work here… As with e-commerce, everything on Stashaway is engineered to be baby-bottom-smooth.
It’s also the only one of the 3 with MyInfo integration, so verifying and submitting all your income details is an absolute breeze (as long as you remember your SingPass sign-in details, that is).
Actually, even if you’re not ready to invest, I totally recommend that you set up a Stashaway account anyway.
The app lets you play with different life goals (e.g. saving for a car vs retirement), investment timelines (e.g. 5 years vs 30 years) and risk appetites (e.g. willing to “gamble” 20% vs 10% of your investment) and you can see the investment portfolio and projections change accordingly.
After you’ve set up your portfolio, which can be changed anytime, you can start seeding the investment via either cash or your SRS funds. For cash, no CDP account is needed — I just transferred via PayNow.
What are Stashaway’s fees & minimum investment?
There are no upfront fees, no minimum investment and no minimum balance, so you can withdraw any money you want anytime. Stashaway fees apply when you start using it to invest:
- 0.8% annual fee to Stashaway for up to $25,000 in investments
- 0.7% annual fee for $25,000 to $50,000
- Fee decreases all the way to 0.2% for >$1mil
That excludes fees to the ETF manager (~0.2%) and forex transaction fees if any. For comparison, here are the commission fees for the big 3 robo advisors in Singapore.
|Total annual fees||Stashaway||Smartly||AutoWealth*|
|$1,000 investment||$8||$10||— (min. $3,000)|
* Charges 0.5% commission plus platform fee of US$18 a year (for simplicity’s sake, we’ll round that up to S$25).
You can see that Stashaway charges the least for small investments, while if you plan to invest $10,000 or more, AutoWealth is significantly cheaper.
What is Stashaway’s investment methodology?
Stashaway has its own investing strategy, called “Economic Regime-based Asset Allocation”, which is Greek to me — I gather it’s something about their investment allocation being responsive to / driven by economic trends, and therefore dynamic?
You have the option to turn on auto-reoptimisation, which is great, because that’s the whole point of robo advisors — to automate things so you don’t have to do anything if, you know, there’s a financial crisis in Kazakhstan.
Whether this investment methodology is sound or not, I have no idea. I wouldn’t be too seduced by sexy words like “algorithm” or “re-optimisation” though. I’ve come across critics of Stashaway’s investment methodology on the internet, so I’d take it all with a pinch of salt.
Personally, I don’t think there’s any way to judge apart from testing it out for myself.
What does goal-based investing on Stashaway look like?
There are 2 modes of investment for Stashaway: Either goal-based or not (i.e. “general” investing).
For goal-based investing, you have to pick a goal and feasible timeline, and Stashaway will project an investment plan for you. For example, I want to retire early at age 45 and live on $1,000 a month.
According to Stashaway, I have to accumulate $276,000 in 12 years by investing $1,440 to $1,940 every month. To my ends, the app recommends a portfolio of 48% fixed income assets (i.e. bonds) and 18% US equities, with the rest (all small percentages) divided among minor asset classes e.g. commodities.
What about just regular investing with no particular goal?
The other fork is to select general investing. From here, you can choose from either “balanced” (i.e. normal) or “higher risk” portfolios. Balanced portfolios have risk levels of up to 20%, while higher risk ones go up to 36%.
These numbers may sound random, but Stashaway actually quantifies risk as a percentage. For example, if you choose 20% risk, this means that, of every $100 you invest, you are willing to lose up to $20.
I find the risk index a lot more realistic than getting the user to judge their own risk appetite. I mean, who doesn’t think they’re a rockstar, right? Everyone will confirm choose the highest risk level if they could, unless they had to seriously contend losing 100% of their investment.
The lower the risk level, the more of your portfolio will be in bonds. A low-risk portfolio looks like the early retirement one I posted above — close to half of it in bonds while only 18% will be in US equity.
Conversely, the higher your appetite for risk / growth, the more of your portfolio will be in equities, e.g. 50% US equities. (36% risk is the highest you can get for general investing.)
What did I like about Stashaway?
From a novice user’s perspective, I liked Stashaway a lot. (Of course, this might be because I have not actually invested long enough to comment on its performance — I reserve the right to take it back if my investments plummet.)
Some of my favourite things about the platform are…
Educational content: I was expecting account set-up to be a tedious administrative affair, but it was nice that Stashaway provided so much interactive educational content at every step. It was basically a crash course in investing and I definitely felt a little upskilled from the time I spent on the app.
Responsible: Stashaway seems very responsible about educating the user rather than assuming prior knowledge. There are explainers and videos almost every step of the way, and there’s a floating WhatsApp button where you can chat with someone at any point. So I was very comfortable with the platform, even as an investing novice.
Understandable risk level: While some other robo advisors have rather vague risk ratings of “low, medium or high” variety, Stashaway puts a hard number on the risk level. There are also warnings if you try to shoot for a risk level you might not be totally prepared for:
Cheap for small investments: At 0.8% regardless of how little you invest, Stashaway’s fees are really low, especially for small investment amounts. I felt comfortable putting in just $500 to try it out since the fees are so low. I like that it includes regular maintenance (rebalancing) at no extra cost, although this is kind of standard across most robo advisors now.
Claims back dividend taxes: Dividends from US-listed investments are taxed 30% by the US government, which is significant, but Stashaway can claim back some of it for you. (This tax is near-unavoidable since most robo advisors help you invest in the US market.)
What didn’t I like about Stashaway?
I may sound like a complete convert, but Stashaway has a few shortcomings that may give you pause.
Lack of customisation: As with most robo advisors, the biggest downside of low commission fees is the inability for the user to customise their own portfolios.
For example, if you want to avoid investing too much in the US because you think it’s unstable or you don’t want your dividends to get taxed, you don’t have the option of doing that. In contrast, I’ve noticed that some players, such as OCBC RoboInvest, offer geography-specific investment portfolios (e.g. Singapore, Australia).
Too much depends on tech: With Stashaway, I feel that so much depends on the tech — how good the algorithm is — rather than the investment expertise. Lacking the investment and technical knowhow myself, there’s no way for me to tell if it’s legit until I actually invest (and possibly lose money).
Too much slicing and dicing: I didn’t really like how fine-grained some of Stashaway’s suggested portfolios were, because it meant more things to understand.
For example, I can understand the relationship between risk level and ratio of bonds to equity in my portfolio. But when they give me other asset classes like “14.8% hybrid”, “14.8% commodities” and “1% cash”, it seems unnecessarily complicated and intimidating.
More expensive for larger investments: While Stashaway is user-friendly and affordable for small investment amounts, I would probably not go with them if I intend to invest anything above $10,000. As shown in the table above, AutoWealth is quite a lot cheaper once you hit that mark, so even if AW’s algorithms aren’t as powerful as Stashaway’s, that’s still instant savings.
Conclusion: Is Stashaway good for beginners?
Personally, I like Stashaway a lot because it does make one form of investing very cheap and simple.
But, I would not recommend it for total investing beginners, because Stashaway is basically playing in a relatively advanced space: It takes your money and invests it globally, especially in the US. Doing this comes with its own risks, and you should know them before going in.
To know if you’re ready to use Stashaway (or any other robo advisor), you should ideally answer Yes to most of these questions:
- Do you already own some low-risk beginner assets e.g. Singapore Savings Bonds, regular savings plans?
- Have you explored the investment options available domestically, i.e. on SGX?
- Are you comfortable and keen to invest in US bonds and stocks?
- Do you understand the risks and costs of investing in the US, e.g. taxes for dividends and bond payouts?
- Are you ready for a long-term passive investment, where you have to basically ignore your investment for a while?
- Are you OK with having not much control over the exact details of your portfolio?
(If you have answered Yes to most or all of these, you’re actually probably not as much of a “beginner” as you think.)
In conclusion, I would recommend Stashaway to at least “high beginner” investors — i.e., those who may not have had a whole lot of practical experience, but have at least enough financial understanding to really know what you’re getting into.
Update (11 Sep 2019): Stashaway has a new SGD portfolio!
It’s good to see Stashaway being responsive and plugging gaps in their product. Stashaway has now released a new option for those of us who have been grumbling about foreign currency risks and being too exposed to the global market: The new Income Portfolio.
Stashaway’s Income Portfolio has a few good things going for it. It’s a standardised, diversified mix of assets (bonds, stocks and REITs), all of which are Singapore-based, and it’s also low risk (12%, meaning there’s a 1% chance that you’ll lose 12% of your investment).
This is good for complementing your regular global Stashaway portfolio, especially a higher-risk one. Also, I know that you can invest in most of these assets easily through a local brokerage, but the main draw is that you don’t need to think or lift a finger.
So what’s the catch? For one thing, there’s a relatively high minimum investment of $10,000 (no lock-in though) to start. The same Stashaway fees apply too, which is steep considering going DIY can cost a lot less.
Perhaps due to the fees eating into your returns, Stashaway’s projected income of 3.75% p.a. (comprising dividends + bond payouts, I imagine) is not exactly spectacular. You’d have to invest a truckload of cash to live on that income!
Still, if sheer laziness or analysis paralysis is causing you to leave a significant lump of cash rotting away in a lousy bank account, then it might be worth considering this as an add-on to your existing portfolio(s).
Do you use Stashaway? Tell us about your experience in the comments.