Getting started on investing can be intimidating. You have deadlines to meet, bills to pay, and life goals to hit — investing feels like an intimidating chore to add to the pile. You know you should do it to secure your financial future, but it feels hard. And with so many investment choices out there, where should you begin?
But investing is not as painful as it seems. To do this, let’s discuss why the Endowus Flagship portfolios have been our most common start to clients’ investment journey.
Investing that is simple
The stock market allows you to become an owner of the profits and future growth of the biggest and best companies all over the world. Profits rise and sometimes fall during business cycles, but research shows that markets always emerge stronger through the cycles as businesses increase productivity, innovate, and produce more goods and services for the world.
Despite many tumultuous episodes, time in the market is more important than timing the market. Even the worst investor in the world can do well over the long run. A person who invests at the peak of the market in every decade from 1970 to our present day would still have had an annualised return of almost 9%, just by having his money grow in the market.
The question is, how should you be invested? We often hear of worries that investing in the stock market feels like gambling because stock picking has such random outcomes. It is true that buying and selling single stocks or sectors and even countries or regions can be exciting, but it can lead to unpredictable returns.
Endowus uses scientific research sharpened by decades of empirical data that tells us there is no need to try to beat the entire market. Instead, look at the market indices that represent the performance of the overall markets — the broadest global benchmark is the MSCI All Country World Index (ACWI) — and buy portfolios with funds that track their performance.
Endowus’ Flagship Portfolios are designed to give investors broad exposure to global markets in a strategic and passive asset allocation. This is opposed to a tactical — or short-term and opportunistic — allocation. It is also unlike an active allocation that most of our competitors espouse. Our allocation strategy for core portfolios such as the Flagship Portfolios — known as the Strategic and Passive Asset Allocation (SPAA) — means that we largely track the global indices over time.
This portfolio should form the core of your total investment. Investors may want extra exposure to a specific market, theme, or sector. Perhaps you’d like to buy some direct exposure to the growth of clean energy, the global property market, and/or to China. That would mean a tactical allocation through a satellite portfolio. Together, this is known as a core-satellite approach, but that should come after — not before — starting with a well-diversified core portfolio that tracks the big, broad global market over the long term.
Investing that is accessible
Endowus has kept the investments well within reach for an investor who is just starting out. A new investor can start on the Flagship Portfolios with a minimum investment of $1,000. Subsequent investments are at a minimum of $100; Endowus allows investors to seamlessly make regular investment contributions, by setting automatic monthly investment instructions.
The Endowus Flagship portfolios are created to be accessible and easily understood by new and experienced investors, and across different life stages. Unlike using a brokerage, where you select and pick a specific stock or fund, you start by selecting a risk tolerance that allows us to curate a portfolio of funds for you.
From then on, Endowus will monitor the portfolios, and only rebalance them when they significantly deviate from your initial allocated portfolio mix to make sure it is aligned to your risk tolerance. Our Investment Office is constantly screening for better fund products, and makes recommended portfolio changes only so you are invested in the best product.
Whether you are a student or a young parent looking to invest funds through CPF, the Supplementary Retirement Scheme (SRS), or cash, there is something for everyone at Endowus.
Investing that is fair
Endowus believes that retail investors should get access to best-in-class funds at lower costs. For a long time now, the cheaper class of funds — known as the institutional share-class — was only available to investors who park significant amounts of money with their private banks. To add, it was once hard to find low-cost funds, and practically impossible to find fund distributors willing to forgo the commissions paid by fund management companies.
Our aim was to level the playing field for retail investors. We have brought in access to the S&P 500 for CPF investors, and since then, added in another global stock index fund, both of which are used to construct our Flagship CPF Portfolios.
For Flagship Portfolios funded by cash or funds specifically from your SRS account, clients can invest in low-cost, best-in-class funds from names like PIMCO and Dimensional. Again, access to these was once largely reserved for family offices and private wealth clients, or were not actively distributed. Not anymore.
We also return these fund-distributor commissions — known as trailer fees — to our investors. The amount of trailer-fee rebates that Endowus has returned to customers since inception has now crossed $2 million.
Investing that is tailored
Many new investors, unfamiliar with financial markets, often prefer safer investment solutions such as saving plans, annuities or even fixed deposits as these are not perceived to be risky. But for longer term investment goals from 2 years onwards, conservative investors can consider a diversified fixed income portfolio that generates higher yields.
You get to select your risk tolerance as part of setting up your Endowus Flagship Portfolio. By selecting your risk tolerance, which is measured and represented by the deepest loss that you can tolerate, we would match the portfolio that historically had a similar loss. The thought process of choosing an appropriate risk tolerance will help you stay disciplined in holding your investments during market uncertainty.
If you were to choose a higher risk tolerance, you would be recommended a portfolio with a higher allocation in equities.
A higher risk tolerance does not equate to taking more single stock, or single country risk. Diversification is critical to long-term investor success, and the Flagship Portfolios are broadly diversified across thousands of equities, countries, and fixed income products.
Investing that is transparent
Endowus fees for our Flagship portfolios starts from a cost-efficient 0.6% per annum for cash, and 0.4% per annum for CPF and SRS. We are committed to your investment success as there are no lock-ins, or no early withdrawal penalties when you invest with us.
While some other robo-advisors may be charging similar fees than us, we are committed to ensuring that hidden costs are minimised. These include:
Foreign exchange fees/costs: Our Flagship Portfolios are created using Singapore Dollar denominated funds. If you are invested in other robo-advisors which use US dollar denominated ETFs, there may be a foreign exchange fee involved. Some are as high as 1%.
Dividend withholding taxes: We only use UCITs funds for our portfolios, because a US-listed fund would invite a 30% dividend withholding tax. For comparison, Vanguard's US-listed VWO has an total expense ratio of 0.14%, but with taxes imposed on investors in Singapore, that total expense ratio shoots up to at least 0.85%. As UCITs funds are only subjected to dividend withholding tax at the portfolio level, you are not paying 2 layers of taxes, and getting lower returns from this hidden cost as a result.
Investing that is performing
While many robo-advisory platforms tout to be a passive investing platform, and claim to have a passive strategy as they use Exchange Traded Funds (ETFs), few are truly consistent and coherent with their investments approach.
These platforms often claim that they are either using smart beta strategies or have an investment framework that can identify economic regimes and reoptimise portfolios around it. These tactical asset allocation are shown to fail against the strategic asset allocation that Endowus espouses.
The Endowus Flagship Portfolios have performed strongly against benchmarks and our competitors. You can refer to Endowus performance in our quarterly updates. The historical returns of our Flagship portfolios are also transparently shown in our website, detailing how the portfolios have performed during periods of volatility as caused by the Global Financial Crisis, the global Covid-19 pandemic, and the ongoing Russia-Ukraine war.
There are also external comparisons showing how Endowus stacks up against Stashaway and Syfe. The more pertinent issue has been the significantly higher volatility and low hit rate of the other robo-advisors’ performances, especially when they promise an all-weather, lower volatility investment approach. We’ve written about how not all robo-advisors are created the same.
Investing that is for you
Investing should be made simple, for everyone. Endowus has helped to level the playing field for retail investors, so all of us can have a fair shot at improving their finances, without losing sleep. Endowus Flagship Portfolios are where you can begin to build your investing journey, and allow your returns to compound over time. Get more details about the Flagship Portfolios here.
Investment involves risk. Past performance is not necessarily a guide to future performance or returns. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Rates of exchange may cause the value of investments to go up or down. Individual stock performance does not represent the return of a fund.
Any forward-looking statements, prediction, projection or forecast on the economy, stock market, bond market or economic trends of the markets contained in this material are subject to market influences and contingent upon matters outside the control of Endow.us Pte. Ltd (“Endowus”) and therefore may not be realised in the future. Further, any opinion or estimate is made on a general basis and subject to change without notice. In presenting the information above, none of Endowus Pte. Ltd., its affiliates, directors, employees, representatives or agents have given any consideration to, nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Therefore, no representation is made as to the completeness and adequacy of the information to make an informed decision. You should carefully consider (i) whether any investment views and products/ services are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances. You may also wish to seek financial advice through a financial advisor or the Endowus platform and independent legal, accounting, regulatory or tax advice, as appropriate.
Investment into collective investment schemes: Please refer to respective funds’ prospectuses for details of the funds, their related fees, charges and risk factors, The listing of units of the fund on a stock exchange does not guarantee a liquid market for the units. Before making an investment decision, you are reminded to refer to the relevant prospectus for specific risk considerations.
For Cash Smart Secure, Cash Smart Enhanced, Cash Smart Ultra: It is not a bank deposit and not capital guaranteed, and is subject to investment risks, including the possible loss of the principal amount invested. Investment products are not insured products under the provisions of the Deposit Insurance and Policy Owners Protection Schemes Act 2011 of Singapore and are not eligible for deposit insurance coverage under the Deposit Insurance Scheme. Interest rates are indicative and subject to change at any time.
Product Risk Rating: Please note that any product risk rating (the “PRR”) provided by us is an internal rating assigned based on our product risk assessment model, and is for your reference only. The PRR is subject to change from time to time. The PRR does not take into account your individual circumstances, objectives or needs and should not be regarded as advice or recommendation to purchase, hold or sell any fund or make any other investment decisions. Accordingly, you should not solely rely on the PRR in making your investment decision in the relevant Fund.
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