How I Invest My Money as a Self-Employed Person (Detailed Breakdown!)

Where do I invest my money?

In this article, I want to talk a little bit about the breakdown of my (boring) investment portfolio. I’ll also shed some info on the asset classes involved and what I want to improve or refine further. 

By the end, I’ll share some of my core investing mindsets (or principles, whatever you wanna call them) that I follow closely in my decision-making process.

Have a good read!

Now, a few caveats…

1. The market is dynamic (so is life). Our financial priorities change as we grow older. Hence, I am pretty sure how I invest today will evolve along with time and my priorities in life. 

2. The focus of this discussion will be on my long-term investment portfolio. This means that invested assets will be focused 100% on achieving my financial goal (Financial Independence, or FI). 

They will not be cashed out for other purposes other than portfolio rebalancing. 

3. Money allocated for savings and emergencies will NOT be included in this discussion. This is because there is a high chance that these monies will be used for purposes other than to achieve my financial goals. 

Read my articles on savings and emergency funds HERE and HERE

4. Money allocated for short-term trading will not be included in this discussion. The nature & purpose between trading and investing are extremely different and there is no reason for me to add them to this discussion.

With that in mind, please approach this post with a pinch of salt. Your investment approach and style should be aligned with your own priorities in life, risk profile, and more. 

Do consult a licensed financial planner if you are serious about building your own investment portfolio. I am also working with my personal financial planner and have written about my experience HERE


No Money Lah’s Investment Portfolio + Breakdown Discussion – June 2020

#1 Cash in Hand for Investment Purposes

There are a few reasons why 40% of my portfolio is in the form of cash.

Reason #1: Risk of income fluctuation as a self-employed. 

There are certain months where my income may be less than my intended average figure. 

Hence, at this point in time (June), I have a 3-months cash buffer allocated for my monthly investment routine as you’ll read in this article.

Reason #2: Cash reserved for different opportunities.

We never know what’ll happen in the market tomorrow. 

Especially in this current market condition, I have extra cash reserved to take advantage of any opportunities that may come knocking on the doorstep. 


#2 Stock Market (REITs) – Active Income Investing

How I Invest: Every month, barring nothing special happens, I will pump a specific sum of money into my selected REITs.

When it comes to the stock market, I focus particularly on Real Estate Investment Trusts (REITs)

This is the part of my investing routine where I am involved actively to research and study what to invest.

The reasons why I focus on REITs are because REITs’ volatility is generally milder relative to other sectors in the market, and I like the idea of consistent dividend payout from REITs (something like collecting rent as a landlord). 

Simply put, REITs are my niche and it is a sector that I can utilize my thought process & analysis skills with high competence to generate alpha (edge).

What I’d like to refine further: Starting to expose myself more to foreign REITs (ie. Singapore, HK & US REITs) for the 2nd half of 2020.

Note: Click photo to access this article.

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p.s. I am often asked if I feel ‘sayang’ for missing out on all the hot headline stocks. To be honest, I don’t.

For one, I do not have time to study these companies for long-term investment. Secondly, the moment you see a stock appear on the headline, you are probably way too late to join the game.

I focus on my niche and strength, and will not touch something that I am not familiar with. 


#3 Robo-Advisors (StashAway + Wahed) – Automated Passive Investing

How I Invest: Monthly automated debit order.

Yes, I am aware of the risk of overconcentration by just investing in REITs. 

Hence, I am also passively invested in robo-advisors like StashAway and Wahed to diversify my portfolio into ETFs of various industries and other asset classes (ie. Bond, Commodities, Sukuk). 

In terms of risk profile, I am mainly focusing on medium-risk portfolios from both platforms (StashAway: 14% Risk Index, Wahed: Medium Risk Profile).

The beauty of robo-advisors is that I can invest passively at a reasonably lower cost than conventional unit trusts. 

What I’d like to refine further: Nothing.

p.s. Use my: StashAway Referral Code and get 50% off your management fees for 6 months, as well as Wahed Referral Code (Code: YIXCHI1) and get RM10 bonus fund!

Note: Click photo to access this article. 

#4 PRS – Passive Investing

Just to take advantage of tax and government’s previous incentive.

Note: Click photo to access article

#5 Gold – Monthly manual debit order

How I Invest: Manual debit via HelloGold’s Smart Savers program

Personally, I think of Gold as a wealth preservation asset and a correlation hedge against overall market volatility. 

The reason why I choose to stick with HelloGold is that it allows me to be extremely flexible with the purchase amount, whereas other platforms have a minimum purchase of 1g. 

What I’d like to refine further: Increase monthly allocation in Gold, and start to have exposure in Silver in line with the increment of my income in the near future.

Note: Click photo to access article

#6 EPF – Passive Investing

How I Invest: Monthly manual debit order

EPF is an interesting matter to me as a self-employed. This is because unlike normal employment where there is a standard to how much you and your employer will contribute to your EPF, I have to manage my own EPF account.

This is done by opening my own EPF i-Saraan account and manage my own EPF contribution.

What I’d like to refine further: Increase monthly allocation in line with the increment of my income in the near future.


#7 Bitcoin – Not adding any positions 

Presently, most of my bitcoin positions are my unsold positions during my purchase in mid-2017.

They are relatively small as I was lucky enough to sell off the majority of my position nearly at the height of bitcoin’s $20,000 peak by the end of 2017.

That said, I am also eyeing to start increasing my holding on digital currencies moving forward. Just gotta dive in and do some research first.

What I’d like to refine further: Do deeper research into digital currencies.


#8 ASNB – No Luck

Seriously, if you can get your hands on Amanah Saham Fixed Price Funds, get it. 

The consistency of return and the nature of ASNB unit price (fixed at RM1.00/unit) makes it a no-brainer if you are looking to invest passively.

Unfortunately, I never really got much luck to get many units since I’ve written my piece on Amanah Saham last year *sigh*

Note: Click photo to access article.

Context: My Situation

I am 26 this year. As a self-employed, I run this blog and actively organize live REIT Income Investing coaching sessions – both of which I have a lot of fun doing.

In my downtime prior to Covid-19, I am also an International Table Tennis Federation (ITTF) certified table tennis coach (though that stream of income is no more today).

More importantly, I am also passionately working behind the scene to become a full-time funded trader (*fingers crossed*). This part of my life requires a dedicated post, but suffice to say it is a very challenging, yet exciting journey.

I am single and currently living with my family (it’s a blessing). Hence, I am able to reduce my living expenses significantly which enables me to pursue my goals wholeheartedly, while maintaining a respectable savings ratio.

All in all, my situation is likely going to be very different from many people, as I do not have a fixed monthly income. 

Financially, my situation requires me to be extremely disciplined with money. It also pushed me to think 2 to 3 steps ahead in terms of my income streams, which is why you’ll see things like cash buffer in place for my monthly investment routines.


My Investing Mindset + Approaches

1. Create a disciplined financial and investing routine. For me, I review my financials and investments every month-end, so I am always aware of my financial state. 

2. Take time to discover your investment style. Not everyone has the time & commitment to pick individual stocks. Not everyone can invest in volatile businesses. Everyone is different. 

For me, a hybrid routine of active REIT income investing coupled with low-cost passive investing makes the most sense to my personality, time, and commitment. 

3. Foundational skills like how to analyze a financial report is a MUST in active investing. I think there’s really no shortcut here. 

4. A stock investing plan without an exit strategy is NOT a plan. Market and businesses are too dynamic to buy and hold forever. 

5. 99% of headlines are mostly for entertainment purposes. Until you know what you are looking for, headlines and news can be extremely overwhelming. 

p.s. I don’t really care about the hottest stock in town. 

6. Leverage on technology. Low-cost passive investing platforms like StashAway and Wahed helped complement my investment routine so I am always diversified in other industries. 

7. Avoid investing with borrowed money. I avoid leveraged accounts and invest only with the money I have (ie. Cash Upfront account on Rakuten Trade).

8. Learn to make independent investment decisions. I use various resources to help me gather insights, but ultimately, I make my own investment decisions. 

Nothing helps me improve more than taking ownership of how I invest my own wealth. 

9. Focus on the process – keep learning and stay humble. Whenever I feel like I know everything, the market will prove me otherwise. A little humility goes a long way in the market. 

10. In the long run, successful financial goals and investing depend on one’s habits, mindset, and skillsets. And yes, it’ll take time. 


No Money Lah’s Verdict

Oh my, this is a long article! Thanks for reading till the end, and hopefully you find this post an insightful one!

Ultimately, it is crucial for us to acknowledge that investing is a very personal matter. How I invest will likely be very different from you, and there is really no right or wrong approach here.

Either way, personal finance and investing is a life-long journey. Our money and investment routine have to evolve as we step into different stages of life.

Hence, keep learning, stay humble.

p.s. Curious, where do you invest your money in? Feel free to share with me at the comment section below! 

Talk soon! :)


This is an article that I’ve always wanted to write about. In fact, I have several drafts for this topic, yet I never really landed on an approach to this article.

Big thanks to Mr-Stingy’s article on 'How I Invest My Own Money' (check it out!), which has helped me decide how I should approach this topic. You can also check out a similar topic from Ringgit Oh Ringgit HERE.


You Might be Interested: What'd I do If I Were to Start Investing All Over Again?


4 BETTER Ways to Save Money in a Low Interest Rate Environment! (detailed comparison)

Since the Covid-19 pandemic started earlier this year, central banks across the world have been lowering interest rate in hope to spur the economy with increased consumption & borrowings.

On the flip side, under a low interest rate environment, the yield of conventional financial vehicles like Fixed Deposit (FD) are affected negatively. 

In fact, Bank Negara Malaysia (BNM) has just announced the lowering of interest rate from 2% to 1.75% this month (July), which is never seen even during the Global Financial Crisis in 2008/09.

Simply put, savers suffer in this historically low interest rate environment.


The question is obvious:

Is there anywhere we can place or save our money in this low interest rate environment? 

Let’s find out together.

Malaysia's Interest Rate at Historical Low (source: Tradingeconomics)

Firstly, Our Goals & Criteria:

What I intend to achieve with this article is to share what I think are suitable alternatives to FD for most people to place their money.

The main goal here is to seek options that can allow most people to PRESERVE the value of their wealth. 

Hence, please approach this article from a wealth & value preservation mindset, NOT from an investment mindset.

Since we are talking about potential FD alternatives here, there are a few criteria that I consider while planning for this article:

  • #1 The majority exposure of these financial vehicles must be limited to low-risk asset classes.

  • #2 Ideally, we’ll want to have a low barrier of entry to these options. Meaning, we can start even with a small amount of capital.

  • #3 A flexible deposit & withdrawal feature would be a plus point.

  • #4 No troublesome tiering conditions where I must spend up to some amount or swipe my card X times a month to be eligible for the yield. (too mafan)

Now, a huge disclaimer (confirm people will mention): NONE of the options mentioned below are insured by PIDM and NONE of them have guaranteed yield or return. So if that’s your thing, this article is not for you.

With that in mind, let’s start!


1. Money Market Funds

Money Market Funds are mutual funds that typically invest in cash equivalent short-term debt instruments with short maturity (normally around 1 – 2 years, sometimes even shorter).

In other words, Money Market Funds place your money in instruments like government treasuries, corporate, and bank securities. Also, Money Market Funds' managers typically attempt to keep the price of the funds fixed (ie. RM1/unit), so only the yield will fluctuate.

In nature, Money Market Funds are considered lowest in risk within the fixed income asset classes as the short maturity (a.k.a. expiry) of the instruments invested lower the risk of default and reduce exposure to long-term risk in the market.

Generally, yields are paid out in the form of dividends either monthly or quarterly.

Personally, I have most of my money placed with BIMB Dana Al-Fakhim (via BIMB’s BEST Invest) and Phillip Capital Money Market Fund for non-investment related purposes. 

Average Past Return: Around 3 – 4%/annum

Pros: 

+ Higher return than FD;

+ Low barrier of entry (RM10 for BEST Invest);

+ No lock-in period (deposit & withdraw anytime).

Cons:

- Funds’ return can be impacted by low-interest rate, albeit they are still better than FD.

- Minimal amount of management & trustee fees will incur.


2. StashAway Simple 

StashAway Simple is a cash management service from robo-advisor StashAway. 

Essentially, StashAway Simple is also invested in Money Market Fund. However, I think it deserves its own place in this article due to its unique value proposition as shown below: 

Historical Return: Between 3.6 - 3.7%/annum (data taken from the historical performance of Eastspring Investments Islamic Income Fund*)

Projected Return: About 2.4%/annum (this is an estimated potential return and SHOULD NOT be compared to the historical returns of other funds)

Pros:

+ Lower fee structure compared to typical Money Market Funds (~0.165% vs ~0.5%/annum). There’s no management fee from StashAway though there’s a minor fee charged by the underlying fund manager.

+ Zero barrier of entry. You can literally start using StashAway Simple at any amount you want.

+ No lock-in period (deposit & withdraw anytime).

Cons:

- The cons listed under Money Market Funds.

*The underlying fund of StashAway Simple is Eastspring Investments Islamic Income Fund that invests in Islamic debt instruments offered by financial institutions. You can find out more about the fund HERE.

StashAway Simple is a financial product with a unique value proposition


3. Bond Funds

Bond Funds are mutual funds that mainly invest in bonds (okay haha what am I doing here). 

Essentially, when we invest in a bond fund, the money collected from investors will be pooled together to buy various bonds (ie. debts from governments and corporations) with different yields & maturities.  

Unlike Money Market Fund where the unit price is typically fixed, the value of Bond Fund units generally fluctuates inversely with interest rate.

In short, this means that the lower the interest rate, the higher the value of the bonds invested in a Bond Fund, which may lead to an increase in the value of the Bond Fund.

However, the opposite can also be true, where an increase in interest rate (which will definitely happen in the future) will lead to a drop in the value of bonds.

Return: Around 3-8%/annum, depending on the type of Bond Fund you invest in.

How to buy: Fund SuperMart (FSM)

Under FSM’s fund selector, select ‘Fixed Income’ under Assets Class. Then, if you want to filter your selections further, tick ‘Recommended Funds Only’ and click ‘Generate Funds Table’.

You’ll see a list of FSM’s recommended fixed income Bond and Sukuk Funds, and you can dive deeper into the particulars of the funds. 

Note: Let me know in the comment section below if you want me to write more about Bond Funds! 

 

Pros: 

+ Lower interest rate generally increases the value of bonds within a Bond Fund.

Cons:

- The opposite of pros can also be true.

- Higher min. investment of RM1,000 for most bond funds.

- Typical management & trustee fees apply.

p.s. In terms of risk, Money Market Funds are considered to be less risky compared to Bond Funds, but it also offers a lower yield in return.


4. Low to Medium Risk Portfolio on Robo-Advisors (eg. StashAway, Wahed, MyTheo)

If you are looking for something more diverse, putting your money in low to medium risk portfolio on Robo-Advisor platforms like StashAway, Wahed or MyTheo may be a good option.

Typically, in a low to medium risk portfolio, robo-advisor platforms will allocate the majority of the funds towards bonds and money market instruments, alongside a minimal allocation to equities and commodities.

In short, a low to medium risk robo-advisor portfolio will give you a good bond-focused allocation, with a dose of exposure to asset classes like equities and commodities.

Pros: 

+ Potentially higher returns due to exposure to the equity market.

+ Low barrier of entry

+ No lock-in period (deposit & withdraw anytime)

Cons:

- Potentially higher volatility and risk due to exposure to the equity market.


Robo-Advisor platforms having a healthy weightage of government, corporate bonds, and money market instruments in their low to medium risk portfolio.

p.s. Use my: StashAway Referral Code and get 50% off your management fees for 6 months, Wahed Referral Code (Code: YIXCHI1) and get RM10 bonus fund and MyTheo Referral Code and get 100% off your management fees for 3 months!


But hey, What About Amanah Saham Fixed Price Funds?

Now, some of you may have Amanah Saham Fixed Price Funds in mind, but there is ONE key reason why I’ll not include them in this discussion: 

Reason: High exposure to equities (risky asset class)

One of the criteria that I mentioned earlier in this article is that the options must have the majority of its exposure in low-risk assets.

As such, Amanah Saham Fixed Price Funds (ASB, ASB2, ASB3, ASM, ASM2, ASM3) do not fulfill the criteria as the majority of these funds are parked with equities

This simply means that the actual risk involved while putting our money in ASB is actually higher and hence in my opinion NOT a suitable choice for wealth preservation purposes.

Asset Allocation of ASB2 (Source: ASB2 Annual Report)

No Money Lah’s Verdict: Explore Your Options in this Low-Interest Rate Environment

With the low interest rate environment that we are living in right now, it is crucial for us to explore alternatives beyond FD to preserve the value of our hard-earned money.

Be it for emergency or savings, I think the options mentioned in this article will be suitable for most people to get started.

Have you start placing your money with any of the options mentioned above? Did I forget to mention any other options in this article?

Let me know in the comment section below – can’t wait to hear from you! 


Disclaimer: This article is produced for informational purposes only and SHOULD NOT be viewed as a buy/sell advice. Please seek financial professionals before making a financial decision.


StashAway 2020 Review: A Solid Robo-Advisor that You Can Depend On.

About a year ago, I was introduced to the term ‘robo-advisor’ and ‘robo-investing’ via an app called StashAway.

During that time, StashAway has just expanded to Malaysia (they are based in Singapore), and the idea of investing your money with an algorithm-run money management platform (instead of conventional mutual funds) was still very fresh among fellow Malaysians (and no worries, they are regulated by the Securities Commission of Malaysia).

Along the year, similar competitors like Wahed and MyTheo (reviews coming soon!) were also launched into this exciting space – offering more options to fellow Malaysians that are interested to invest passively.

Fast forward to 2020, let’s look into how StashAway has fared in 2019, and while it is the first robo-investing platform, does it still provide the best offerings to fellow Malaysians?

Read: Introduction to StashAway – How Does it Work?


Quick Recap: What is a Robo-Advisor?

Essentially, robo-advisory platforms like StashAway, Wahed, and MyTheo help to invest your money according to your risk preferences and goals through algorithms instead of typical fund managers.

I like to think of these platforms as a mutual fund alternative that offers a cheaper and more affordable way to invest passively (more about fees below).


My StashAway Returns in 2019 & How I am using it in 2020?

One of the most fun ways to start a review about an investment solution is, of course, to talk about the returns.

To be honest, I’ve only funded my StashAway account once to really test out the platform in 2019, and totally put it behind my mind since then (that’s the whole point of passive investing, right?).

To my surprise, my StashAway portfolio has performed decently in 2019. Combined, both my aggressive portfolios (30% & 36% risk index) returned a very respectable ~11.6% return in 2019.

Looking back, this should not come as a surprise at all. This is because a majority of the fund allocation of the aggressive portfolios goes to U.S. sectoral equities – and the U.S. market has been crushing it in 2019. (Kudos to StashAway’s algorithms for catching the trend!)

As a whole, I am quite happy with how StashAway has been managing my money.

From 2020 onwards, I have started to save on StashAway via a recurring monthly deposit to 2 moderate-risk portfolios (10% & 14% risk index).

A large portion of the allocation in my aggressive portfolio is invested in the US market.

Fees Comparison: The most competitive & versatile fees across the Robo-Investing space

One huge advantage that robo-investing services have over conventional mutual funds is its fees.

In general, while typical mutual funds have an average fee of 3-5% per year, robo-investing services charge only a fraction of the fee (<1%).

This is significant, as a few percentage differences in fee could mean a lot to your return. Here is a simple calculation to give you an idea:

 RM100,000 at 5% fee per year = RM5,000 on fees.

RM100,000 at 1% fee per year = RM1,000 on fees (and no, robo-investing services offer lower fee than 1% at RM100,000).

The question now is, how are StashAway’s annual fees compared to the other presently available robo-investing platforms – Wahed and MyTheo?

Now, every robo-investing platform has its own tiers of pricing. Hence, to make my life (and yours) easier, I am comparing the fee in terms of the category of fund amount.

Full fees details: StashAway, Wahed, MyTheo

As you can see, StashAway’s fee is highly competitive, and it gets even better as you invest more with them.

In terms of fees, StashAway definitely nailed it among all the competitors – a perfect representation of ‘the more you invest, the less you pay’.

DON’T MISS THIS: Click HERE to Get an EXCLUSIVE 50% OFF Your (already low) StashAway Fees today!


Customer Service: Still Solid?

At this point in the article, I would like to point out that while lower fees are important, it is not everything. A lower fee that compromises the overall customer experience is a NO-NO.

What’s the point if a company has a low fee but no one is attending to customers’ issues properly?

If any, StashAway held pride in their customer service. In a 2019 year-end email to customers, StashAway boasted an 8-seconds average response time for calls during office hours.

To test out StashAway’s customer service in 2020, I sent out inquiries to all 3 channels of customer support available: Email, Phone & WhatsApp, all during office hours. Is StashAway’s claim about their customer service legit?

As you can see below, StashAway’s customer service is pretty solid. In short, they get the job done.

Solid Response Time from StashAway CS team (Standard as per my personal expectation).

What I Like about StashAway (2020)

There is a lot to like about StashAway as an innovative solution for passive investing, and here are 5 things that I like about StashAway:

(1) Ideology/Investing Philosophy

Since the technology and strategies employed by robo-advisor platforms are proprietary, there is no way for us to backtest the strategies’ effectiveness on our own.

In this case, knowing the ideology behind the people that creates these proprietary strategies is crucial. This gives us a good idea about the approach and mindset of a robo-advisory platform towards the market.

As such, I like StashAway’s CIO Freddy Lim’s ideology in making risk a primary consideration while delivering returns and value to the users:

The ultimate goal is to deliver competitive returns at the appropriate level of risk and at a fraction of the cost incurred by traditional strategies.

(2) Competitive and versatile fees

As compared in the section above, StashAway stands out as the robo-investing platform that offers the most competitive and versatile fees for customers of all financial capabilities.

Big thumbs up on that.

(3) Customer service

In my first write-up about StashAway last year, I mentioned that I liked StashAway’s customer service and the point is still solid this year. 

Also, do you know that StashAway is presently (at the time of writing), THE only robo-advisor that offers the convenience of funds transfer between your portfolios? (eg. You can transfer funds from your aggressive portfolio to moderate ones)

(4) Large range of asset classes

In August of 2019, StashAway introduced 13 new asset classes into their already huge asset selections, making up to 32 asset classes that StashAway can use to better optimize customers’ risk and returns.

In other words, this means that StashAway has more flexibility and versatility to best preserve and invest customers’ funds in the face of increasing market uncertainties.

(5) Community & Value Driven

Over the past year, one thing that I really respect the StashAway team is their effort in adding value to the community (while building their brand awareness, of course).

I like how StashAway has been actively organizing talks on the theme of financial planning and investing for the community. These are little things that add value to the people, but requires huge time and effort – kudos to the team again.

Don’t Miss This: Click HERE to Get an EXCLUSIVE 50% OFF Your (already low) StashAway Fees today!


What Could be Better? (2020)

(1) Bring more innovative financial solutions to Malaysia

One of the things from StashAway that really made me excited last year was the release of StashAway Simple.

StashAway Simple is the company’s answer to Fixed Deposit (FD) and FD-alternatives like the conventional Money Market Fund – hence with a low-risk index of around 2.4% with no lock-up period (unlike FD).

I was excited about StashAway Simple, until I noticed that it was only available in Singapore.

What I would love to see from StashAway in 2020 is the release of StashAway Simple in Malaysia, as I am sick of the manual form-filling process of our local financial services already. (be fair to the Malaysian customers maaa…)

[Update 15/6/2020: After a long wait, StashAway Simple is finally launched in Malaysia! Click HERE to check out my review on StashAway Simple!]

(2) Bi-annual or Annual Portfolio Round-Up

As a user, there will be times where I wonder if there is any progress or changes made on my portfolio. 

As a suggestion to help improve the overall user experience, it would be great if StashAway could do a bi-annual or annual portfolio round-up so I have an idea of what was going on with my portfolios. (refer: Spotify 2019 Year in Review).


No Money Lah’s Verdict – A Comfortable Recommendation for Passive Investing

One of the biggest conveniences that technologies have brought to us is the innovation in financial solutions & services, and robo-advisors are definitely one of them.

Given StashAway’s smart fund management, a diverse range of asset classes, competitive fees, and solid customer service, it is a no brainer for people that are looking to start investing and/or diversify their investment portfolio – while not burning a hole in their passive investments paying expensive yearly fees.

Personally, I am a happy customer, that’s for sure.

If you find this review on StashAway useful, my suggestion is to get on board right now: The best time to invest is 20 years ago, the second-best time is NOW.


Read: 

  1. Wahed 2020 Review
  2. MyTheo 2020 Review (coming soon!)


Disclaimers:

  1. Past return is not indicative of future performance. (just like your mom may not be angry at you today doesn’t mean she will not get angry with you tomorrow)
  2. This post may contain affiliate links that afford No Money Lah a small amount of commission should you sign up through the links.

 


How to Invest Using a Robo Advisor in Malaysia

[UPDATE 28/8/2019: Since my writing, StashAway has managed to raise USD12 million in Series B funding, and managed to deliver a 4% – 11% annual return since 2017]

Let’s get right into the topic:

We can now employ the service of a robo-advisor to invest on behalf for us in Malaysia, legally.

With the advancement of algorithms and data technology, there has been a rise of ‘robo-advisors’ designed to invest for the mass market consumers since the past few years around the region. In short, we can now depend on algorithm systems to help invest our money.

In this article, we are going to look into the particulars of a robo-advisor, and I’ll also share my thoughts on StashAway, Malaysia’s first robo-advisor platform.

But first thing first…

What is a robo-advisor & how does it work?

In its simplest form, robo-advisor is built on a system of algorithms and data to invest on behalf of customers.

Imagine Jarvis, the AI for Ironman, but specifically tailored to manage money and investment for retail investors like us (albeit not as advanced as Jarvis la).

In reality, how a robo-advisor work is simple. Simply put, robo-advisors will help you invest your money into different assets (normally via Exchange Traded Funds, ETFs*) based on your investment goals and risk preferences

If this sounds too simple for you, it really is that simple.

The core idea of robo-advisors is to make investment simple and accessible to everyone. Normally, all you have to do is to identify your investment goals and how much risk you can take to get started. Then, just sit back, relax, and let the algorithms do the work for you!

*ETF is a marketable security that you can invest in where it tracks the performance of a group of securities such as stocks, commodities, and bond. (eg. FBMKLCI-EA is the ETF that tracks the performance of our very own Kuala Lumpur Composite Index, KLCI).


Enter StashAway, Malaysia’s first robo-advisor platform

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First launched in July 2017 in Singapore, StashAway is the first robo-advisor platform that follows through with the momentum and entered the Malaysian market late last year.

As the first robo-advisor in Malaysia, I am very intrigued to find out what it is all about. So, without further ado, let’s dive straight into it!


How does StashAway invest your money?

This is the first question that came to my mind when I was told about robo-advisor. So it goes without saying that I have to get this answered right off the bat.

The framework that powers all the all the investment decisions behind StashAway is called the Economic Regime-based Asset Allocation (ERAA).

Essentially, ERAA is a set of algorithms that make all the investment decisions for you by considering 2 important factors, among all:

Ensuring constant customers’ risk exposure throughout different economic conditions, and

Optimizing customers’ returns under different economic conditions.

Under ERAA, your money will be invested into various Exchange Traded Funds (ETFs) in accordance with your risk appetite and investing goals. Not only that, the algorithms will also allocate the investments according to the economic condition at any moment.

ERAA separates the economy into 4 different regimes, namely the Good Times, Inflationary Growth, Recession and Stagflation (Source: StashAway)

If that’s not enough, ERAA will also track macroeconomics news and move your investments towards more defensive asset should the algorithm detects potential market crashes.

In short, StashAway’s ERAA framework is designed to ensure long term wealth creation within customers’ risk preference.


My StashAway Experience

To further my understanding about StashAway, I went on to try out the app itself. In general, I like the interface and the overall application process.

In essence, you get to select your investment goals and risk appetite. Then, StashAway will recommend an asset allocation for you. (eg. If you opt for a more conservative risk exposure, your investments will be focused towards Treasury Bond ETFs, which are relatively less volatile in nature)

Note that while you have the flexibility to readjust your risk appetite during the process, you cannot control the proportion of asset allocation that is suggested by StashAway. (eg. If StashAway suggests 15% weightage on Treasury Bond ETF, you cannot change the weightage to 10%)

Once you are done with the initial settings, you can transfer money to the fund and choose to set up a monthly transfer if you want to invest your savings monthly into the fund.

One of the good thing with StashAway is that there is no lock-up period. This means that you can choose to withdraw your investments at any time.

As a whole, I had a decent experience while checking out the app.

“I CAN NOW DO MORE THAN WHAT CHU THINKKKK” [Buzz Buzz]

My Rant with StashAway and the Risk Involved.

(1) ERAA Framework not independently verifiable

This is my biggest and only rant with StashAway.

As mentioned above, the ERAA framework is able to recognize different economic conditions and allocate customers’ investments accordingly (they call it ‘Reoptimization’). By doing so, StashAway claims to be able to reduce the impact of a financial crisis.

All these explanations are backed by a whitepaper with backtesting charts that showed how the ERAA framework is able to perform better in relative to the S&P 500 Index and 60-40 Stock-Bond allocation strategy during the 2008 financial crisis.

However, the fact that StashAway’s ERAA framework and software is not released to the public means there is no way I can verify how true their claim is.

In short, this means that without any available tools to backtest StashAway’s claims, we will not only be investing our money with StashAway, but also our faith on the effectiveness of the framework to deliver its promises during the next crisis.

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(2) Risk: Past performance does not reflect the future

Even if StashAway’s performance did outperform the S&P 500 index during the 2008 financial crisis in backtesting, this does not mean it will perform the same for the upcoming crises.

Reason being, every crisis is unique on its own and is triggered by different factors. Hence, what worked for StashAway’s framework in the past may not necessarily work in the future crises.

While I feel this is not something that StashAway can fully control, I think it is necessary for readers to understand that in any investment, past performance does not guarantee future performance.


What I Like About StashAway

But wait, let me clarify: I do not hate StashAway. In fact, in many aspects, I kinda like it a lot:

(1) StashAway is regulated by the Securities Commission (SC)

While checking out StashAway, what really gives me a peace of mind is to know that they are regulated by the SC.

This means that they have to go through the grueling procedures and paperwork to prove to the authority that they have the necessary consumer’s protection framework in place to ensure customers’ interest is covered in the case of events such as bankruptcy.

It is also worth noting that StashAway is just a party that manage your fund. This means that the actual assets (the ETFs) do not belong to them and are owned by StashAway’s broker, Saxo, where you are recognized as the rightful owner of the ETFs.

In short, StashAway is a legit business that helps you make investment decisions with your money and all your asset investments belong to you.

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(2) Easy to use and low barrier of entry at just RM1

Another reason to like StashAway is that of how pleasant it is to use the app. Not only you have a feeling that you are in control of customizing your investments (of course to a certain extent only), but the overall experience just trumps in terms of user-friendliness.

Moreover, StashAway’s low barrier of entry at just RM1 means that anyone can afford to get their robo-advisor experience at a ridiculously low price. This is in stark contrast of conventional unit trusts that have the minimum initial investment of RM1,000.

Simply put, at just RM1, you get to kickstart your robo-investing journey with an intuitive user experience.

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(3) Relatively low fees compared to Unit Trusts

When it comes to competition, robo-advisors such as StashAway compete head-to-head with conventional financial advisors and unit trusts.

In this case, what makes StashAway so appealing is its low fees relative to the fees charged by its direct competitors.

As an example, unit trusts will usually charge a sales fees of 5% (or more) and an average 1% annual fee for professional fund management. In comparison, StashAway charges no sales fees and an annual fee between 0.2% – 0.8%.

In the long term, a small savings in terms of fees make up to a lot of differences in terms of your return.

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(4) Good Customer support

While you may expect robo-advisor like StashAway to cut corners on human interaction, but I’ve found their customer support to be quite decent.

One of my encounters with StashAway’s customer support is how quick they are to follow-up with you. Since I’ve just moved to a new place, I have yet to change my house address on my IC. Upon noticing the difference in the address in my application and IC, they have been very quick and helpful in assisting me on the issue via Whatsapp.

Hence, a plus point for StashAway!


No Money Lah’s Verdict

As a whole, I think the rise of robo-advisor such as StashAway does provide another good investment option for the public to build wealth on their hard-earned money.

The question now is this: Is robo-advisor for you?

If you have no prior experience with investing and are considering whether to invest passively via unit trust or robo-advisor, definitely check out robo-advisor due to its low barrier of entry and relatively low cost involved.

On the other hand, if you are a DIY investor that are more comfortable with managing your own investments (provided that you know what you are doing), a robo-advisor may not be for you as its annual fees is still a considerable cost for you as a DIY investor (you don’t pay yourself management fees when you do your own homework, right?).

Ultimately, it really boils down to your own preference and lifestyle.

For me, I think having control on my own investment is essential to achieving my financial goals. However, I have no problem recommending robo-advisor to those who are looking for alternative investment vehicles other than unit trusts.

If you are interested to check out StashAway, be sure to click below to get an exclusive 50% off the management fees for the first RM100,000 invested for 6 months.

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Meanwhile, if you are keen to learn more about robo-advisor businesses around, do check out some other robo-advisors in Malaysia: Wahed (Promo Code for a FREE $10 Bonus: YIXCHI1) and MyTheo (Click HERE to claim Your FREE 3-months Referral Fee).

Note: This post may contain affilliate links that afford No Money Lah a small amount of commission should you sign up through the links.