This started out in 2016/17 as a search to build a mid-term portfolio in a structured way such that I have key asset classes like stocks, bonds & REITs which are geographically not concentrated, set up as a basket which I can keep buying on a monthly/quarterly/yearly basis. Since I had been doing this in the Indian market using smallcase and direct mutual-funds I wanted to replicate it in US markets which I found more promising given its maturity. NYSE and NASDAQ has 6x more monthly trading volumes as compared to NSE and BSE and has a strict regulatory framework which ensures compliant financial reporting which is the basis for fundamental analysis. More on this in future blog posts.

While US/Canada has one of the best in class robo investing platforms, for retail investors, like Wealthfront and Betterment, options are quite limited for investors who are not living in the US. For people living in Singapore, Stashaway is the first choice given their credibility, pricing and quality of the platform. Bear in mind pricing is one of the key elements here as you don’t want to pay arbitrary amounts of platform fees, custody fees, brokerage fees etc which you might incur if you plan to buy small amounts of stocks/ETF’s in regular intervals. What Stashaway did here was to charge 0.8% management fees for the first $25K and reduce in steps to 0.2% for $1M. So no overhead of other charges when you invest small amounts of $1-2K regularly, great right!

Based on investors risk rating which is found using a set of questionnaire, Stashaway will invest in 4-8 different ETF’s which can be of low-risk like US treasury bonds and can go up to sector-focused equity ETF. Stashaway team has built a rigorously tested algorithm which re-balances its portfolio based on macro & microeconomic conditions and is apparently not human intervened. Note that algo-trading is a well-defined practice and there is a big difference in High-Frequency Trading(HFT) and Quantitative-Trading, and I presume Stashaway associates them with the later as HFT is more infrastructure dependent and rooted in decades of well-tested trading models which is only used by big-boys in the industry. There is a great book on this by Jim Simons, which I highly recommend. Also, the set of portfolios that Stashaway recommends is fixed for a given risk profile. This was a major turn-off for me.

There is nothing wrong with Stashaway, it is perfectly fine for risk-averse(relatively) retail investors who want to invest in equities which have better returns than Central Provident Fund(CPF) or bank deposits and relatively safer than directly investing in stocks. The portfolio I was allocated with a high-risk tolerance rating(28, if I remember correct) was XLP, VBK, XLY, GLD, XLK, TLT, CWB, AAXJ, TIP. Stashaway kept switching ETF’s and changing allocation ratio based on their own judgement, which I personally trusted.

I have tried to do a head to head comparison of costs associated with Stashaway and a broker, I have gone with Saxo for this example. Saxo is one of the most competitively priced brokers in Singapore second only to Interactive Brokers.

StashawayBroker (eg. Saxo)
1K/m when total investments is $0

Other costs
~$0.66/m @ 0.8% pa upto $25K total investments – which is a big deal!

~$12/m @ $4/counter if you invested in 3 ETF’s every month. Transaction cost is only if you buy/sell

custody fee: ~$1.2/m @ 0.12% of ~$12K of portfolio value
1K/m when total investments is $50K

Other costs
~$25/m @ 0.6% pa >$50K potfolio value

~$12/m @ $4/counter if you invested in 3 ETF’s every month. Transaction cost is only if you buy/sell

custody fee: ~$5/m @ 0.12% of ~$50K of portfolio value

Bottom line, If the current value of my portfolio is $10,000, I end up paying $80/yr(0.8%) with Stashaway and $76/yr(0.12%+$64) with Saxo

2 key factors that made me switch to a broker;

  1. No flexibility to choose a portfolio of ETF’s that I wish to hold.
  2. I saw an ‘ongoing fee’ of 0.8% p.a with Stahsaway vs 0.12% with Saxo.
Pro’s of going with a broker (eg. Saxo)Con’s of going with a broker (eg. Saxo)
I get to choose a more aggressive & concentrated portfolio based on my risk appetiteI do not get advisory services and sophistication of portfolio formation and rebalancing which is rigorously back-tested eg Monte Carlo
0.12% pa of ongoing fees$4/counter trading fees.
To balance it out I buy every 3 months instead of every month. I reduce my portfolio to 4 ETF’s hence I incur $64/yr($4x4ETFx4mths) for any value of ETF’s I buy
I get to buy ETF’s which I believe in eg ARKK, which invests in disruptive technologies like Tesla and VOO which tracks S&P500 indexMy portfolio is subjected to a lot of biases and not rooted in stable fundamental analysis

Check out my ETF portfolio here and feel free to connect with me on Twitter for questions or suggestions.