I have a small $50,000 sitting in the bank now and I’m looking for a fuss-free way of growing this money.
Before you consider investing, please take care of these three financial imperatives first:
1. Pay down high cost debt, such as credit card debt.
2. Insure adequately, which usually means the "Big 3": medical insurance (an "As Charged" Integrated Shield public hospital B2, B1, or A plan, usually), simple term life insurance (only if you have dependents, and only if they would need financial help if you were to die prematurely), and genuine disability income insurance (a basic income stream if you were to become disabled, unable to earn a living). The last of these is "controversial" perhaps, but I don't know why -- it's a very basic concept and defends against calamity.
3. Emergency reserve funds, and typically the best place for those is in a Singapore Savings Bond (SSB).
This fourth one is optional but recommended:
4. Take advantage of CPF top-up tax reliefs. Free money is generally worth collecting.
Stashaway caught my eye and I am about to proceed to out my money on this platform. Is it a wise decision or is there a better way?
Stashaway looks
decent for small investors, but I have a few quibbles:
1. Stashaway collects an annual fee of up to 0.8%. Suppose you make a S$25,000 investment. That's S$200/year, every year. That's more than the minimum commissions Interactive Brokers would charge (US$120/year), and unless you do something very silly the minimum commissions should be more than enough to cover your trading costs to buy a couple funds. (And once you get to US$100,000 the minimum commissions disappear.)
2. Stashaway doesn't provide any information on the foreign exchange rate they're using when you buy and sell the funds they carry, as far as I can tell. They're likely to be much less favorable than what you can get from Interactive Brokers.
3. Stashaway is apparently investing in U.S. listed funds, which (for non-U.S. persons) are subject to 30% U.S. dividend withholding tax and U.S. estate tax. Although they have a slightly higher management fee and trading cost, the Irish domiciled fund equivalents are more tax efficient.
However, if you're going to invest in U.S. listed funds (and ignore the tax considerations), Charles Schwab Singapore offers a better deal on their in-house Schwab funds: zero commissions, even lower fund expenses, reasonable exchange rates (although there's likely a wire charge for withdrawals, so you'll want to minimize withdrawal frequencies), and no Stashaway annual fee. Minimum account opening there is S$25,000.
looking for a fuss-free hands off investing
4. And Stashaway picked the wrong funds for that. The truly fuss-free hands off investing would be with the "Target" funds that Vanguard and some others offer. (Sadly I haven't seen Irish domiciled "Target" funds yet.) The way "Target" funds work is that you pick a target date. Let's suppose you're saving for retirement, and you plan to retire in 2043, plus or minus. There's a "Target 2045" fund, and that's the closest match to your target date. (If you want to be a little more conservative, you could pick Target 2040 instead.) Then you buy that fund at whatever pace you can manage. As the target year approaches, every year (or even every month), the fund automatically and gradually reallocates from stocks to bonds. It might start at 90% stocks and 10% bonds then end up at 30% stocks and 70% bonds, for example. (And the best of these target funds have good international diversification.) Then, starting in your target year, the fund is designed to support steady drawdown -- not all in one lump sum, but as a source of income for several years, or even for life, depending on your drawdown rate.
Anyway, THAT would be the best truly "hands off" fund vehicle. They exist and are popular in the United States, from Vanguard and a couple other fund managers. And, for collecting their 0.8% fee, that's really what Stashaway should be offering (preferably with Irish domiciled funds better geared to non-U.S. persons). If they start offering that, then they get more interesting, maybe. But until then, I think you're better off just getting good advice on a couple funds to pick (or maybe even one), then working with Interactive Brokers, most likely -- and only AFTER taking care of those three imperatives, if you haven't already.
