Stashaway vs ETFs

[zionpeter]

Got several DMs on previous thread so I am just going to put out the numbers here. Stashaway benchmarks itself against MSCI World Index. So we pick any ETFs that track the index such as URTH for comparison. Might as well throw SPY into the mix.

Stashaway

• 5 year annualized return: 7.14%
• Expense ratio: 0.8%
• Total return if you put 10k in at 2018:
  Annualized return - Expense ratio = 7.14% - 0.8% = 6.34% n = 5 years
  FV of Stashaway = 10,000 * (1 + 6.34%)[sup]5[/sup]
  = 10,000 * (1.0634)[sup]5[/sup]
  = $13,787.17

URTH

• 5 year annualized return: 8.91%
• Expense ratio: 0.08%
• Total return if you put 10k in at 2018:
  Annualized return - Expense ratio = 8.91% - 0.08% = 8.83% n = 5 year FV of URTH = 10,000 * (1 + 8.83%)[sup]5[/sup]
  = 10,000 * (1.0883)[sup]5[/sup]
  = $14,912.68

SPY

• 5 year annualized return: 10.98%
• Expense ratio: 0.09%
• Total return if you put 10k in at 2018:
  Annualized return - Expense ratio = 10.98% - 0.09% = 10.89% n = 5 years FV of SPY = 10,000 * (1 + 10.89%)[sup]5[/sup]
  = 10,000 * (1.1089)[sup]5[/sup]
  = $17,805.23

Hope this paints a clearer pictures. Expense ratios, much like interest rates, can compound over time and erode your returns. Now this is a napkin calculation as I am ignoring taxes and transaction fee etc but the point still stands. In fact, this is looking even worse for robo funds since I am not comparing them against more sophisticated strategy that robo fund claims to make (rebalancing, diversification, hedging). I am merely highlighting that even a passive approach like buying SPY and doing nothing for 5 years will still handily beat robo funds considerably.

Lastly, this is not an investment advice. Do your own research.

 

[agiosconstantinos]

@zionpeter Btw there is a 1% of your investment is cash in Stashaway sitting there do nothing but waiting to be deducted for the management fee

 

[zionpeter]

@agiosconstantinos When you add that and expense ratio on top of management fee, the total robo fund fee easily exceed 1%. This is way too much for passive index following strategy.

 

[agiosconstantinos]

@zionpeter Just curious, why you don't use IVV or VOO as an example? iinm the ER is 0.03% only.

 

[zionpeter]

@agiosconstantinos mostly for namesake. besides we can't make it look THAT bad for robo

 

[auskid]

@zionpeter Thanks for the breakdowns.

I see plenty of Msians here who get into SPY, may I know what platforms do they use to buy into it ?

 

[rcpolk]

@auskid Most go for IBKR. Others go for etoro or MIDF invest. Which broker to choose depends on your views on the amount of fees per trade and broker background.

 

[resjudicata]

@rcpolk Sorry this maybe a stupid question but are we protected in any way?

 

[mariauk]

@rcpolk Can IBKR do fractional share purchases?

 

[zionpeter]

@mariauk Yes. They started offering that two months ago I think

 

[mariauk]

@zionpeter Very cool.

 

[alex594]

@auskid What is “spy”?

 

[weeone54]

@zionpeter StashAway also tends to buy many types of ETFs to diversify, with up to 10 types of ETFs depending on the preset chosen.

That is a LOT of expense ratios combined, and they don't even beat SPY by a wide margin. Some of the ETFs chosen can go as high as 0.7% in expense ratios.

 

[zionpeter]

@weeone54 To be fair, you only pay robo fund for their ratio, not their holdings ratio. So they can diversify into 100 etf, you still only pay 0.8% as an investor.

If you try to replicate their portfolio as a retail investors at $1/transaction, the costs do add up.

But that’s what this post is meant to show, they don’t have alpha. Their diversification is still a beta heavy strategy. You can just buy spy and still beat their performance.

Edit: I was wrong. Stashaway pass on their etf cost to investors.

 

[georgiew]

@zionpeter

So they can diversify into 100 etf, you still only pay 0.8% as an investor.

Just to be clear, you pay the 0.8% SA management fees on top of the expense ratios charged by the individual ETFs.

 

[zionpeter]

@georgiew Whoah I stand corrected. You are right robo fund do pass on their etf costs. At least with wealthfront (US based robo) they charge a fixed dollar fee plus etf cost. With Stashaway it’s a percentage OF FUND INVESTED plus etf cost.

 

[savedat9]

@zionpeter Not including transaction fees is a bit disingenuous. Part of the sales pitch of Stashaway is the fact you can invest any amount you want at any time without a per transaction fee.

 

[zionpeter]

@savedat9 25 shares of SPY (10.4K USD) will incur a transaction fee of $1 USD.

https://preview.redd.it/kpe5yjsmjgv...bp&s=78393c468d52da3190134a805a5acb9911729158

 

[savedat9]

@zionpeter How much would $50 dollars worth incur? On a weekly basis? You know.. DCA for folks who don’t have 10k USD to invest in the regular?

 

[zionpeter]

@savedat9 52 dollars/year