Are you thinking of investing this year? But if you’re not the most financially savvy individual, this new endeavor may be a little intimidating. So how do you get started?
One way is through the help of a robo advisor. These are digital platforms that will help you start investing and managing your money. Robo advisor is designed to be stress-free and cost-effective for the newbie investor.
StashAway and Syfe are two of the most popular robo advisory platforms today. They provide a clean user interface, have an easy-to-understand investment method, and have no minimum investment requirements. Here’s a guide to how robo advisors work and a comparison of the two most popular platforms.
What Are Robo Advisors?
Robo advisors are digital advisory platforms that use automated solutions and algorithms. Among the services they offer are automated maintenance and handling of your investment portfolio. The platform will determine your financial goals and risk appetite and will pool together funds that may be appealing to you.
Here are the main benefits of using these digital advisory platforms:
- Affordable management fees of between 0.5% and 1%
- Minimum investment as low as $50
- Easily monitor your portfolio using mobile or desktop apps
How do Robo Advisors work?
Robo advisors help ensure hassle-free opening of accounts online. It also conducts online risk assessments to provide more personalized investment advice and solutions.
After signing up for an account with a robo advisor, you’ll be asked to fill up an online questionnaire. You’ll have to provide personal information. If you’re using SingPass, your personal data will be automatically filled in.
Additionally, you’ll be asked to share your risk tolerance, financial situation, and your financial goals. Lastly, you’ll have to deposit money into your account. Once the robo advisor is done assessing your information, their algorithm will automatically invest your money through selected portfolios.
Similar to mutual funds and Exchange Traded Funds (ETFs), robo advisory platforms curate funds from smaller investors to make large and diversified investments. Most robo advisors also invest in ETFs to diversify their portfolios.
How Much Are The Fees and How Do Taxes Work For Robo Advisors?
The main fee you will incur upon investing with a robo advisor is a management fee. It is also called advisory fee and it covers:
- Advisory costs
- All the transaction costs, including withdrawals and depositing of funds
Some robo advisors may also charge a small annual platform fee.
On top of the usual foreign exchange fees, the fund expense ratio will range between 0.3% and 0.16% p.a.
Lastly, if you invest with robo advisors that buy ETFs listed in the US, your dividends will be subject to a 30% dividend withholding tax.
Pros and Cons of Investing With Robo Advisor
What are the pros of investing with a robo advisor?
1. Easy To Use
Even newbie investors can easily use this digital platform. Most robo advisors have mobile apps and web versions that have a clean and simple interface. It can easily be understood by beginner investors, as well as advanced investors.
2. Start Investing with a Small Capital
Robo advisory platforms allow you to own fractional portions of ETFs. You can’t do this on your own unless you invest a large capital. That said, some robo advisors only require a minimum investment amount. You can start with a S$1 investment while other platforms impose a minimum investment amount of S$50 to S$10,000.
3. Low Fees
As previously mentioned, robo advisors in Singapore charge advisory fees between 0.5% and 1% p.a. This is lower than what established traditional financial advisors charge.
4. Diversified Portfolio
Robo advisors can provide detailed monitoring of market indicators. Plus, they can apply investment strategies based on their findings. They will also invest your money in different assets to diversify your portfolio. This reduces your risk since your investments are spread out.
So if one or two of your stocks go down, it will be counter-balanced by assets that are rising in value.
5. Personalized Portfolio
No need to pick from a list of mutual funds that you think best fits your financial goals. With robo advisors, you’ll have a portfolio mix that suits your needs based on the answers you’ve provided on the questionnaire. Additionally, robo advisors will automatically rebalance your portfolio as market conditions change.
What are the cons of investing with a robo advisor?
1. Not Everything Is Automated
While robo advisors can optimize your returns and provide a curated portfolio through an algorithm, they can’t view your entire portfolio holistically. They can’t offer personal human advice. That said, you’ll still need to monitor your investments.
2. You Might Forget Your Long-Term Investment Goals
Since your investments are automated, you may forget your investment needs. For instance, you may forget to increase your investment size as you earn more.
3. Currency Exchange Spread and Risk
Most robo advisors in Singapore heavily invest in US-based ETFs. This means your money will be subjected to USD conversion rates. Plus, you’ll be incurring currency conversion fees charged by brokers.
4. Tax on Dividends
As previously mentioned, most robo advisors invest in US-based ETFs. This also means that your dividends are subjected to 30% dividend withholding tax. So your dividend returns will be lesser as compared to buying ETFs listed somewhere else.
5. Lack Of Flexibility
Robo advisors make choices based on their algorithms. That said, there will be instances where you won’t agree with their choices. Additionally, you can’t choose a specific ETF to include – or exclude. This means there’s a possibility that your money is being invested in something you don’t believe in.
6. Relatively New and Untested
Most robo advisors were launched in the last 3 to 4 years. Their algorithms haven’t been tested yet in a severe economic downturn. The current COVID-19 pandemic and its economic consequences will be most robo advisors’ first test.
Syfe vs. StashAway
There are a myriad of choices when it comes to robo advisors. Each one offers a wide range of portfolios. But there are two robo advisory platforms that are gaining popularity today.
StashAway and Syfe are both relatively new. StashAway has been in the market since 2017 and has a diversified portfolio across different asset classes.
Syfe is a newcomer but is gaining popularity due to its straightforward interface, affordable fees, and no minimum investment amount. Its Equity 100 portfolio is 100% concentrated equities.
The returns of Equity 100 will be higher, but in the short term, it will be more volatile. Additionally, Syfe charges lower fees compared to StashAway. If you are torn between the two robo advisors, here are a few more comparisons:
1. Investment Strategy
A. StashAway uses ERAA Framework
StashAway builds an efficient portfolio foundation and goes further to include economic regimes data. This framework is called Economic Regime-based Asset Allocation (ERAA).
ERAA focuses on asset allocation instead of securities selection. This means this robo advisor platform focuses on allocating investments into each asset class, instead of choosing a specific stock or bond. The goal is to help investors navigate the ups and downs of the market.
Using the ERAA framework, StashAway has a certain allocation for each regime. And it will re-optimize your portfolio when it detects a change in the economic regime.
This is possible through the use of a large number of persistent and high-quality signals from economic data. That said, ERAA makes informed data-backed decisions when allocating assets.
StashAway Risk Index
The risk index indicates that there is a 99% probability that you will not lose more than a certain percentage of your portfolio in a year. This means the x% is the level of risk you are willing to take. The higher this percentage, the higher the risk index. The highest risk profile that you can create in StashAway is 36%.
B. Syfe Equity 100 uses Smart Beta Strategy
Syfe’s Equity 100 invests 100% of your monies into equities while focusing on building a smart beta portfolio for you. This investment strategy allows you to gain investment exposure to a diversified pool of 1500+ stocks through its underlying Exchange Traded Funds (ETFs).
These ETFs are identified using their Smart Beta Strategy. This is also known as factor-based investing. Syfe provides high returns by concentrating on three key factors:
- Large market capitalization
- Low volatility
These factors are chosen to ensure that your portfolio will generate better performance.
Syfe will choose the best factors for you.
However, these factors will not always give the best returns. When that happens, Syfe has a dynamic factor selection to choose the best factors based on the current economic climate.
Syfe also uses another investment methodology for their other portfolios. For instance, Syfe’s Global ARI uses their proprietary investment strategy which combines Global Market Portfolio (GMP) and Risk Parity Portfolio (RP). This investment methodology adjusts your portfolio to ensure risk-adjusted returns.
A. StashAway allocates among the asset classes
StashAway has an asset allocation strategy. With this strategy, they can focus on the performance of a combination of assets instead of an individual asset. With the use of the ERAA framework, this robo advisor can determine what asset combination is best to achieve the risk level you indicated.
So for example you indicated a 36% risk portfolio. You will be allocated to these four main asset classes:
- International Equities – most heavily weighted in US Equities
- Equity Sectors (US)
- Real Estate
B. Syfe Equity 100 invests in stocks
As previously mentioned, Syfe’s Equity 100 invests your money in stocks. Syfe invests in over 1,500 stocks of the world’s top companies. That said, instead of asset diversification, it is 100% invested in equities.
Here are some of the equity ETFs that Syfe will invest in:
3. Both Invest in ETFs
ETF is a basket of securities, shares of which are sold on an exchange. These two robo advisors invest in exchange traded funds (ETFs) instead of individual stocks. But just like individual stocks, ETFs are traded throughout the day at prices that change based on current supply and demand.
By investing in ETFs, these robo advisors ensure that your risk is diversified over different companies. However, the amount of dividend withholding tax and the estate tax that you’ll have to pay will depend on where the fund is from.
4. Syfe’s Equity 100 and StashAway’s ETFs have different domicile
A. Syfe Equity 100’s S&P ETF is domiciled in Ireland
This means you’ll enjoy a tax advantage since you will only incur a 15% withholding tax.
Other ETFs, such as QQQ, are still domiciled in the US with a 30% dividend withholding tax.
B. StashAway’s ETFs are US-domiciled
This means you’ll incur a 30% dividend withholding tax. But why does this robo advisor platform choose US-domiciled ETFs despite the higher tax?
US-domiciled ETFs are:
- Low tracking error
5. Funds You Can Use To Invest In Their Portfolios
You can invest in their portfolios using cash investments and SRS funds. If you prefer to use your SRS funds for investing, StashAway is a better choice.
You can’t invest your SRS funds into this robo advisor platform.
A. StashAway’s 36% Risk Index Portfolio provides a 21.90% return in 2020
2020 was an unpredictable year, but StashAway’s portfolios return strong earnings. In their latest report, StashAway reported that their 36% risk index portfolio provides a 21.90% return. Compared to the same-risk benchmark’s performance of 14.50%, this is a really good return.
StashAway’s portfolio offers a broad diversification of your risk. You may not enjoy as high a return if you only invested in stocks. But when stocks do plummet, your portfolio will not suffer a huge loss.
That said, you’ll enjoy stable returns with lower volatility with StashAway.
B. Syfe Equity 100 has an average annual return of 14.7% in the last 10 years
With Syfe’s Equity 100, the average return you would have received in the last decade is around 14.7%. Just like any stock investment, there will be some years that your portfolio will perform well. And there will be times that you will perform poorly.
Syfe Equity 100 invests 100% in stocks. While this is considered a risky form of asset, you’ll also have the highest potential returns. Stocks usually go up in the long run. That said, you’ll need to be patient and stay invested for a long time to reap the high returns.
7. Minimum Investment Amount
StashAway and Syfe do not require a minimum amount to start investing. It allows beginner investors to jump in even with a small amount.
Both of these robo advisors invest your money into fractional shares. So for example, a single unit of the ETF may cost $100. If you only invest $10, you will receive 0.1 units of that ETF.
This is possible since these robo advisors co-mingle your assets with other investors into one account.
So what’s the catch? If either of these robo advisors shut down, you will not be able to control your assets since they are not under your name.
A. StashAway charges 0.8% management fees a year for your first $25K
StashAway doesn’t have a maintaining balance, withdrawal fees, and platform fees. However, you’ll have to pay annual management fees.
This robo advisor charges between 0.20% to 0.80% management fees annually. If you start with a small amount, say less than $25,000, you’ll have to pay 0.8% management fees. Take a look at the table below:
|Amount Invested||Management Fee Rate|
|> $25k and ≤ $50k||0.7%|
|> $50k and ≤ $100k||0.6%|
|> $100k and ≤ $250k||0.5%|
|> $250k and ≤ $5100k||0.4%|
|> $500k and ≤ $1 million||0.3%|
|> $1 million||0.2%|
Additionally, you’ll have to pay the expense ratio of the ETFs as well. According to StashAway, the average expense ratio that investors pay is around 0.4%.
This may make a dent in your investment, especially if you start with a small sum. In fact, you may incur around 1.2% of fees annually.
B. Syfe charges 0.50% management fees a year for a $25K investment
Syfe’s management fees are quite low too. It ranges between 0.65% and 0.4%. It is slightly lower than StashAway’s fees.
|Amount Invested||Management Fee Rate|
|≥ $20k and < $100k||0.50%|
Syfe doesn’t have a stacked fee structure. For instance, if you invested a total of $40K, you’ll incur a 0.50% fee on your entire investment amount.
Additionally, just like StashAway, you need to pay the ETF’s expense ratio. The average expense ratio that investors pay ranges between 0.2% and 0.3%. That said, the total robo advisor fees you’ll need to pay is slightly less than 1%.
|Syfe Equity 100||StashAway (36%)|
|Investment Strategy||Smart Beta||ERAA Framework|
|Asset Class||100% in Equities||Equities (Global and US) |
|Fund Domicile||Ireland (only for CSPX) |
US (all the other ETFs)
|Source of Funds||Only Cash||Cash and SRS|
|Minimum Investment Sum||None||None|
|Fees||Slightly less than 1%||Slightly higher (1.2%)|
|Performance||Higher in the long term||Lower short term volatilities|
|Useful For||Long term investing||Balanced portfolio|
So which robo advisor platform should you invest with?
Choose StashAway if you want to have a more balanced portfolio.
StashAway’s 36% Risk Index Portfolio is the highest-risk portfolio on the platform. But despite the high risk, it was still able to provide a 21.90% return in 2020. Additionally, your risk is diversified across different asset classes.
With StashAway, you can enjoy steady returns, no matter the economic condition. It’s also a good choice for short-term and medium-term investors. And if you want to invest using SRS funds, you can also do so.
Choose Syfe’s Equity 100 if you prefer lower fees and are looking into long-term investments
Syfe’s Equity 100 invests fully in stocks. Although it’s a risky asset, it also has the highest potential returns. However, you’ll need to stay invested for the longer term – at least 5 years.
It’s also worth keeping in mind that stocks are extremely volatile. Their value goes up and down very quickly. If you invest at the wrong time, your stocks may plummet in the short run. But if you stay invested, your stocks will see huge growth in your assets. Patience is the key.
How To Sign Up
A. StashAway Account
- 18 years old and above
- Singaporean, Permanent Resident, or foreigner
- For Singaporean and Permanent Residents: NRIC
- For Foreigners: Passport and proof of residences such as utility bill, phone bill, or bank statement
1. You can download the mobile app or through the StashAway Web Application.
2. Click “Get Started” on the top-right, or the “Start Investing” button
3. Fill in some personal information.
You can start investing in just 15 minutes! You can also use the app to adjust your risk preferences, financial goals, as well as check on your portfolios.
B. Syfe Account
- Soft copy of your NRIC (front and back)
- Your online bank token to set up your fast fund transfer
1. Choose your portfolio type
2. To open an account with Syfe, you need to complete your risk profile.
3. Confirm your portfolio
4. Name your portfolio
5. Select your dividend options and funding amount
6. Input your personal information
7. Upload your NRIC
8. Select the currency of your portfolio and then transfer funds
Other Robo Advisors in Singapore
|No.||Robo-Advisor Platform||Minimum Investment||Yearly Advisor Fees|
|Investments In Funds (for main portfolio)|
|1||Endowus||$1,000||– 0.4% (CPF and SRS portfolio) |
– 0.25% to 0.6% (Cash portfolio)
– 0.05% (Cash Smart portfolio)
|2||MoneyOwl||Dimensional portfolio: $50 (per month) |
$100 (lump sum)Income portfolio: $100 (per month)
$1,000 (lump sum)Cash management: $10
|– 0.5% to 0.6% (Dimensional portfolio) |
– 0.25 to 0.3% (Income portfolio)
– 0% (cash management portfolio)
|Investments In ETFs|
|3||DBS digiPortfolio||Asia portfolio: $1,000 |
US Portfolio: US$1,000
|4||Autowealth||$3,000||– 0.5% |
– USD$18 (platform fee)
Income portfolio: $10,000
|0.2% to 0.8%|
|6||Syfe||None||0.4% to 0.65%|
|7||UOBAM Invest (powered by UOB Asset Management)||$1||0.6% to 0.8%|
|8||UTrade Robo (UOB Kay Hian)||$5,000||0.5% to 0.88%|
|9||FSM MAPS||$500 (per month) |
$1,000 (lump sum)
|– 0.0875% (Conservative portfolio) |
– 0.125% (Other portfolios)
|10||Kristal.AI||None||– 0% (Under US$10,000) |
– 0.3% (Above US$10,000)
|Investments In Individual Stocks And ETFs|
|11||OCBC RoboInvest||US$100 to HK$350,000||0.88%|
Frequently Asked Questions About Robo Advisors
1. Are Robo Advisors Regulated by the Monetary Authority of Singapore (MAS)?
Yes, robo advisors are regulated by the Monetary Authority of Singapore (MAS). Robo advisors need to be licensed under the Securities and Futures Act (SFA) and/or Financial Advisers Act (FAA).
Robo advisors can be licensed under SFA even if they don’t have the usual corporate track required requirements. However, they need to have board or senior management members who have fund management and technology experience.
Additionally, they can be licensed under the FAA if they are able to collect customer data and evaluate their risk profiles. This will prevent robo advisors from recommending the wrong type of investments.
2. What Investment Strategy Does Robo Advisors Use
Robo advisors use different types of investment strategies. StashAway uses the Economic Regime Asset Allocation (ERAA) framework while Syfe uses Smart Beta investing strategy.
3. What Kind of Investments Can You Make With Robo Advisors?
Robo advisors typically invest in ETFs, mutual funds, bonds, real estate, commodities, stocks, and more. That said, before signing up with a robo advisor, take a look at the assets under their portfolio.
StashAway’s asset classes include ETFs, real estate, and commodities. Syfe’s Equity 100, on the other hand, invests fully in ETFs.
- Robo advisors are digital platforms that provide automated investment services by taking into account your financial goals and risk appetite.
- These platforms offer automated maintenance and handling of your investment portfolio.
- StashAway and Syfe’s Equity 100 are inexpensive and require no minimum investment amount to get started.
If you’re thinking of investing with robo advisors, StashAway and Syfe are both great options. While StashAway is great for a more balanced portfolio, Syfe’s Equity 100 is perfect for long-term investing.
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