SRS Investment

[tangent314]

what is difference between ETF and unit trust?thought ETF and unit trust are funds?

ETFs are traded on the stock markets like normal stocks which you buy/sell through brokerage, whereas UTs are bought/sold through platforms. That's not the reason to favour one over the other though. What usually matters is that generally you will find that passively managed funds are ETFs while actively managed funds are UTs, although there are some exceptions to that. Passively managed funds charge a lot less fund management fees than actively managed funds, and studies have shown that on average, actively managed funds don't outperform passively managed funds after taking into account the fees.

The only benefit robos have over direct purchasing is that there's no transaction fee, only annual platform fees. It works out for me because I deposit monthly into stashaway. The transaction fee from 12 trades will cost more than the higher platform fees.

You are making a huge huge mistake here. Transaction fees or commissions are charged only twice, once when you buy and once when you sell. Platform fees are charged EVERY YEAR. In the long run, transaction fees are fairly negligible effect on your total returns whereas any recurring fees are compounded year to year and have a very significant effect on your returns.

That's why generally we care a lot more about total annual fees (platform fees and fund TER) than any platform sales fee as long as it's not crazily high (i.e. more than 1%).

Here's a quick example. Compare 1% sales charge + 1% redemption charge against 0.5% annual platform fee. Assuming average 5% IRR over 10 years on an investment of $10000, your final amount will be:

With 1% sales + 1% redemption charge: $9800 * 1.05^10 = $15963
With 0.5% annual platform fee: $10000 * 1.045^10 = $15530

 

[Jinjia Stupid Idiot]

I read the other thread says endow us good and lion still need to go through broker and returns not good dfa returns higher so net net is same

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[tangent314]

LionGlobal funds, like most Unit Trusts available to Singaporeans are purchasable on many various Unit Trust platforms. If you purchase through Poems or DollarDex, there is 0% sales fee, 0% redemption fee, 0% switching fee, and 0% platform/annual fees.

LGAS has a 70/30 equities/bond split, whereas under Endowus if you are somehow 100% invested into Dimension Global Equities (which requires setting your portfolio to maximum risk), then you will have a 100% equities portfolio. Yes, if the markets are doing really well, then a 100% equities portfolio will do better than 70%, whereas when markets go down, the 70% will fare better.

 

[Han Shot First]

The only benefit robos have over direct purchasing is that there's no transaction fee, only annual platform fees. It works out for me because I deposit monthly into stashaway. The transaction fee from 12 trades will cost more than the higher platform fees.

The transaction fees are always there. But hidden. When you pay an annual management fee to a robo-advisor, all the transaction fees that the robo-advisor will incur in managing your account (and ETF trades) are already accounted for as a small part of the robo-advisor's annual management fee.

Bottom line is that the robo-advisor makes a profit, and the advisor prefers to charge an annual fee because it wants to maximize its profits.

 

[tutonic]

The transaction fees are always there. But hidden. When you pay an annual management fee to a robo-advisor, all the transaction fees that the robo-advisor will incur in managing your account (and ETF trades) are already accounted for as a small part of the robo-advisor's annual management fee.

Bottom line is that the robo-advisor makes a profit, and the advisor prefers to charge an annual fee because it wants to maximize its profits.

That's true, but in my specific case, since I'm depositing into it monthly, and my current balance haven't even crept up to 10k, the overall fees incurred by the robo platform is significantly lower than fees from doing it myself, since I'm buying monthly, and at my current AUM, the transaction fees alone already cost more than the management fee I'm currently paying for my robo.

There is no dispute that doing it yourself is significantly cheaper, but that's only once you're past a certain AUM, and also depending on how you invest (one lump sum vs monthly). I'm not claiming robos are cheaper. Just that they're cheaper for me, right now.

 

[tutonic]

You are making a huge huge mistake here. Transaction fees or commissions are charged only twice, once when you buy and once when you sell. Platform fees are charged EVERY YEAR. In the long run, transaction fees are fairly negligible effect on your total returns whereas any recurring fees are compounded year to year and have a very significant effect on your returns.

That's why generally we care a lot more about total annual fees (platform fees and fund TER) than any platform sales fee as long as it's not crazily high (i.e. more than 1%).

Here's a quick example. Compare 1% sales charge + 1% redemption charge against 0.5% annual platform fee. Assuming average 5% IRR over 10 years on an investment of $10000, your final amount will be:

With 1% sales + 1% redemption charge: $9800 * 1.05^10 = $15963
With 0.5% annual platform fee: $10000 * 1.045^10 = $15530

I'm not disputing what you say here, but this isn't entirely relevant for my situation (and I presume for most young working adults).

Assume you set aside 1k per month for investments, the transaction fees alone is already $120 per year. By comparison, 0.8%* per monthly balance of 1k compounded over a year is only $96. All these is omitting any returns from the investment for ease of comparison. If you were to continue doing that for 4 years (48 months), you'll incur a total of $480(since transaction fees are not compounded), while management fees, even after compounding 0.8%* on monthly balances is only $384.

So yes, even after 4 years when you're close to hitting 50k AUM via monthly 1k contributions, it makes sense to stick to robos for a sizeable number of people here who make tiny monthly contributions to their investments.

Of course, when you're doing huge lump sum deposits (from your yearly bonus or whatever), then it makes sense to use IBKR or Saxo or any of the brokers), but other than that, given my scenario, robos are still cheaper.

(*) 0.8% is Stashaway's annual fee since that's the one I'm using. This isn't even considering their tiered pricing which starts to decrease once you have more than 25k AUM (although not a sizeable decrease to 0.7%). If you factor that 0.8% on first 25k, and 0.7% on next 25k AUM, the total management fees drop to $216.

 

[Okenba]

I'm not disputing what you say here, but this isn't entirely relevant for my situation (and I presume for most young working adults).

Assume you set aside 1k per month for investments, the transaction fees alone is already 120USD per year. By comparison, 0.8%* per monthly balance of 1k compounded over a year is only 96 SGD. All these is omitting any returns from the investment for ease of comparison. If you were to continue doing that for 4 years (48 months), you'll incur a total of 480USD (since transaction fees are not compounded), while management fees, even after compounding 0.8%* on monthly balances is only 384 SGD.

Year 1 (12k AUM):
Transaction: 120 USD (call it 165 SGD)
Robo: 96 SGD

Year 2 (24k AUM):
Transaction: 165 SGD (Total: 330 SGD)
Robo: 192 SGD (Total: 288 SGD)

Year 3 (36k AUM):
Transaction: 165 SGD (Total: 495 SGD)
Robo: 288 SGD (Total 576 SGD)

So yeah. Based on your figures, 3 years, assuming no capital appreciation.

 

[s0crates]

That's assuming that their equities exposure for lionglobal and dimensional do equally well.

LionGlobal funds, like most Unit Trusts available to Singaporeans are purchasable on many various Unit Trust platforms. If you purchase through Poems or DollarDex, there is 0% sales fee, 0% redemption fee, 0% switching fee, and 0% platform/annual fees.

LGAS has a 70/30 equities/bond split, whereas under Endowus if you are somehow 100% invested into Dimension Global Equities (which requires setting your portfolio to maximum risk), then you will have a 100% equities portfolio. Yes, if the markets are doing really well, then a 100% equities portfolio will do better than 70%, whereas when markets go down, the 70% will fare better.

 

[s0crates]

Hold on, why would you want to choose stashaway when endowus is lower in fees? Not forgetting that stashaway has a FX fee as well?

I'm not disputing what you say here, but this isn't entirely relevant for my situation (and I presume for most young working adults).

Assume you set aside 1k per month for investments, the transaction fees alone is already $120 per year. By comparison, 0.8%* per monthly balance of 1k compounded over a year is only $96. All these is omitting any returns from the investment for ease of comparison. If you were to continue doing that for 4 years (48 months), you'll incur a total of $480(since transaction fees are not compounded), while management fees, even after compounding 0.8%* on monthly balances is only $384.

So yes, even after 4 years when you're close to hitting 50k AUM via monthly 1k contributions, it makes sense to stick to robos for a sizeable number of people here who make tiny monthly contributions to their investments.

Of course, when you're doing huge lump sum deposits (from your yearly bonus or whatever), then it makes sense to use IBKR or Saxo or any of the brokers), but other than that, given my scenario, robos are still cheaper.

(*) 0.8% is Stashaway's annual fee since that's the one I'm using. This isn't even considering their tiered pricing which starts to decrease once you have more than 25k AUM (although not a sizeable decrease to 0.7%). If you factor that 0.8% on first 25k, and 0.7% on next 25k AUM, the total management fees drop to $216.

 

[Okenba]

Not saying no one should buy robos. Just that they clearly are not worth it from a cost perspective.

You pay a premium to the robo for services such as automatic regular investments, autorebalancing, figuring out what to buy, etc

If one is liable to panic sell, too lazy to rebalance or not disciplined enough to invest regularly, the robo may present a very worthwhile service.

 

[assiak71]

Not saying no one should buy robos. Just that they clearly are not worth it from a cost perspective.

You pay a premium to the robo for services such as automatic regular investments, autorebalancing, figuring out what to buy, etc

If one is liable to panic sell, too lazy to rebalance or not disciplined enough to invest regularly, the robo may present a very worthwhile service.

And stashaway and syfe's tactical AA algo

 

[BBCWatcher]

I would also point out that at least one of these roboadvisors incurs an unnecessary dividend tax headwind and possible estate tax liability, its representations notwithstanding. Also, the ones in Singapore are often inappropriate if/when you become subject to another tax jurisdiction.

 

[tutonic]

I would also point out that at least one of these roboadvisors incurs an unnecessary dividend tax headwind and possible estate tax liability, its representations notwithstanding. Also, the ones in Singapore are often inappropriate if/when you become subject to another tax jurisdiction.

Which one?

 

[Okenba]

Since endowus invests in funds, and not in ETFs, the 0.6% pa fees isn't inclusive of the fund management fees for the individual funds, right? Or is the 0.6% inclusive of all fund management fees?

All robo fees do not include fund fees. Even StashAway's 0.8% does not include the Expense Ratio of the ETFs that they buy for you.

But Endowus and MoneyOwl, since they use DFA and not ETFs, do have higher expense ratios for their funds as compared to Robos which use ETFs.

 

[assiak71]

All robo fees do not include fund fees. Even StashAway's 0.8% does not include the Expense Ratio of the ETFs that they buy for you.

But Endowus and MoneyOwl, since they use DFA and not ETFs, do have higher expense ratios for their funds as compared to Robos which use ETFs.

Actually its roughly the same after factoring in dividend withholding tax.

 

[twosix]

i just use all the $15.3k to buy sg bank stocks.

 

[duststorm]

Endowus has platform fees as well... need to add them all up and compare

Hold on, why would you want to choose stashaway when endowus is lower in fees? Not forgetting that stashaway has a FX fee as well?

 

[w1rbelw1nd]

Not saying no one should buy robos. Just that they clearly are not worth it from a cost perspective.

You pay a premium to the robo for services such as automatic regular investments, autorebalancing, figuring out what to buy, etc

If one is liable to panic sell, too lazy to rebalance or not disciplined enough to invest regularly, the robo may present a very worthwhile service.

Well, it depends right?

For cash, I definitely don't think the robo platforms value proposition is strong.

For CPF and SRS, the value proposition is stronger because of the limited investment options, and poor investment options available.

Not forgetting that convenience plays a big factor as well. Being able to RSP into investment is something that is very apppealing to people who want to be efficient with their time.

Sometimes it is also about access to better fund products. I definitely like the PIMCO SGD hedged funds more than A35 and MBH.

 

[decibel.]

Well, it depends right?

For cash, I definitely don't think the robo platforms value proposition is strong.

For CPF and SRS, the value proposition is stronger because of the limited investment options, and poor investment options available.

Not forgetting that convenience plays a big factor as well. Being able to RSP into investment is something that is very apppealing to people who want to be efficient with their time.

Sometimes it is also about access to better fund products. I definitely like the PIMCO SGD hedged funds more than A35 and MBH.

Hi, are you on 80/20 with EndowUs? I don't think 100% include PIMCO. Any reason why 80/20 instead of 100?

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[tangent314]

Not forgetting that convenience plays a big factor as well. Being able to RSP into investment is something that is very apppealing to people who want to be efficient with their time.

Sometimes it is also about access to better fund products. I definitely like the PIMCO SGD hedged funds more than A35 and MBH.

You can purchase PIMCO Income Fund SGD Hedged using SRS on Poems and DollarDex, with the option to RSP on both platforms. 0% purchase fee, 0% platform fee, 0% redemption fee. You don't need a robo for this.