If you’re new to the world of investing, the whole process can seem overwhelming.
There’s good news:
The first step is the hardest, and everything will seem much easier after you start.
If you choose one of the best robo advisors to assist you.
Digital platforms like Syfe and StashAway are two of the most popular in Singapore because they’re user-friendly and intuitive.
Which one should you choose, though?
Keep reading below to find out the pros and cons of each platform.
The investment strategy regards the framework and algorithms these platforms use to decide the best investments.
StashAway uses the Economic Regime-based Asset Allocation (ERAA), which:
- Allocates assets into classes instead of picking specific stocks. Of course, this choice is backed by comprehensive data.
- Helps counteract market fluctuations.
- Tweaks your portfolio as the economic climate changes.
Besides, StashAway allows you to create different risk-based profiles depending on your risk appetite, though the highest risk is 36%.
By comparison, Syfe relies on Smart Beta Strategy. That’s a fancy way of saying that the platform invests all of your funds into equities while building you a “Smart Beta” portfolio. As such:
- You get access to over 1500 ETF stocks that Syfe figures out using that “Smart Beta” strategy based on factor investing.
- Syfe chooses those factors according to your needs.
Warning: You won’t always get massive returns, in which case Syfe readjusts factor selection.
The frameworks that these two robo advisors use may sound too theoretical. Let’s see how these paradigms translate into the actual asset allocation:
StashAway focuses on asset classes. We’ve discussed that above; this approach focuses on classes instead of individual assets depending on your risk appetite. For example, a high-risk portfolio will include:
- International equity
- Equity Sectors (US)
- Real estate
By comparison, a more low-risk portfolio includes mainly bonds and safer stocks, like ETFs.
Syfe Equity invests in stocks, giving you access to 1500+ stocks worldwide. As such, Syfe Equity is focused on well, equity. That’s its name, after all.
While you won’t have a diverse portfolio, you will have high annual returns.
For example, Syfe’s Invesco QQQ Trust includes stocks in Apple, Netflix, Amazon, Intel and Facebook following the Nasdaq. It’s no wonder its average annual return has been 15.9% for the past ten years.
Another example is IShares MSCI EAFE ETF. This ETF includes Nestle, Roche and Toyota stocks, managing 2.6% returns during the past ten years.
As you can see from the section above, StashAway is best for a diversified portfolio approach to minimise risks, whereas Syfe Equity is best for ETFs.
There’s the “but”:
Both robo advisors allow you to invest in ETFs. At this point, if you only want to invest in ETFs anyway, you might think that Syfe is the automatic option because that’s what they specialise in.
That’s a mistake.
These ETFs have different domiciles. Here’s what that means for you:
- With Syfe, there’s only a 15% tax for the S&P ETF domiciled in Ireland. However, the QQQ ETF discussed above is in the US, implying a 30% dividend withholding tax.
- With StashAway, you only get that 30% dividend withholding tax. However, US-based ETFs are more straightforward and value-for-money.
US-domiciled ETFs are:
- Low tracking error
This point is relatively simple; which type of funds can you use to start your investments with these two robo advisors?
StashAway wins the prize because it allows both cash and SRS funds. By comparison, Syfe only allows cash, not SRS funds.
Luckily, none of these two robo advisors requires minimum investment sums.
StashAway’s performance looks like this:
A low-risk index of 12% brought 9.70% returns, compared to the 10.20% benchmark of 28% equity and 72% bonds.
By comparison, a 16% risk index translated into 13% returns compared to the 11% benchmark (40% equity and 60% bonds).
Moving higher on the risk ladder, a 26% risk index generated 18.80% returns compared to the 13.10% benchmark (75% equity and 25% bonds).
Side-note: With StashAway, x% risk means you have a 1% risk of losing that amount during the following year.
Syfe can generate more earnings, as its average performance for the past ten years is 14.7%. The problem is that Syfe only allows you to invest in equity, which, albeit more profitable, are also riskier.
Remember: Stocks increase in the long term. As such, your stocks can have low periods or plateaus, so you have to be patient.
Stash Away charges yearly management fees between 0.20% and 0.8% p.a. These fees depend on your initial investment amount:
- 8%: Below $25,000
- 7%: $25,000-$50,000
- 6%: $50,000-$100,000
- 5%: $100,000-$250,000
- 4%: $250,000-$500,000
- 3%: $500,000-$1,000,000
- 2%: Over $1,000,000
Stash Away also charges an expense ratio for the ETFs, about 0.4%/ year.
The good news is that StashAway lacks fees for:
- Maintaining balance
- Using the platform
By comparison, Syfe has lower fees for people who invest below $100k:
- 65%: Below $20,000
- 5%: $20,000-$100,000
- 4%: Over $100,000
Also, the ETF expense ratio on Syfe is 0.2-0.3%.
In Conclusion. Which Robo Advisor Should You Choose?
We noticed the first difference between these two robo advisors regards the asset class.
From this perspective, StashAway can be the better choice because it allows you to build a more diverse portfolio. Besides, StashAway lets you create a very low-risk profile if that’s what you wish.
By comparison, Syfe is riskier, though it offers higher long-term returns.
Fund domicile is also essential. Syfe has some ETFs domiciled in Ireland, with a 15% tax. By comparison, StashAway’s ETFs are domiciled in the US – just like Syfe’s other ETFs apart from the CSPX.
That means StashAway’s ETFs are more expensive.
When it comes to the funds you can invest, both robo advisors allow you to start with whatever sum you’re comfortable with. However, Syfe’s fees are smaller for deposits below $100k. By comparison, StashAway enables you to invest SRS funds, too, not just cash.
What does all that mean for you?
Go with StashAway if you value the security you get from a balanced portfolio.
StashAway lets you build different profiles based on your risk appetite and goals. The riskiest portfolio of this bunch is still limited at 36% risk, and it offered 21.90% returns in 2020 because the risk is spread on different classes of assets.
Thus, StashAway guarantees constant and steady returns even if the economic situation shifts. This platform works best if you plan to limit your tenure to the short or medium term.
Go with Syfe if you want to take more risks, value long-term investments, and need lower fees.
This robo advisor lets you invest your cash in stocks only. Although stocks are riskier, they bring you more profit. Besides, the 1500+ stocks Syfe offers are grouped in trustworthy ETFs with good performances over the past decade.
The catch is you need to dedicate at least five years to your portfolio to see results.
Stocks are volatile, so they can rise and plummet fast. That means your portfolio can sometimes take a severe hit; however, you’ll have to think long-term and don’t let these fluctuations deter you from your main objective.
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