Unlike paying more for quality goods and services, paying more to access an investment service isn’t necessarily a good thing. Lower fees mean more of your capital is put to work to help you earn returns in the long-term, so you can reach your financial goals sooner.
Investing overseas to build a global portfolio can be daunting, with brokerage charges, FX spreads to convert your funds and other associated fees. If you are an active trader and prefer a hands-on approach to investing, you have even more incentive to scrutinise these fees.
However, if you prefer a more passive approach, robo-advisors like StashAway are now making it easier to get access to portfolios consisting of Exchange Traded Funds (ETFs) which are diversified across asset classes and geographies.
To recap, here are a few reasons why diversifying your holdings beyond Malaysia is beneficial:
- Having all your holdings in RM could see your purchasing power diminish over time as other currencies (USD, SGD, AUD, GBP) strengthen against the RM, which means that overseas holidays and sending your kids to foreign universities will be more expensive.
- To offset or complement your Malaysian stock portfolio. In the past year, the FBM KLCI has fallen 9.61%, and with few major catalysts to spur the market, its best not to overlook global markets which have performed. The S&P 500 has increased by 12.32% in the same time-frame.
- Access to sectors and geographies beyond Malaysia. With all the buzz and news flow surrounding tech stocks, the Technology Select Sector SPDR Fund (Ticker XLK) has increased 20.76% in the past year. Access to a basket of big consumer names like McDonald’s, Nike and Starbucks through ETFs like the Consumer Discretionary Select Sector SPDR Fund (Ticker XLY) is now easier than ever.
In the past, getting access to global multi-asset funds has not been easy due to the high minimum investments (typically RM10,000 for wholesale funds). StashAway’s investment portfolios are constructed using ETFs to offer well diversified and balanced portfolios, without the hassle of filling up forms and meeting an agent. As the access to StashAway comes with no minimum investment, with as little as RM100 one can get immediate access to a global portfolio that’s balanced and well diversified.
Traditional funds have the following fee structures:
- Sales charge: This is a fee you might have to pay upon buying a fund. Unit trusts typically charge a 3-5% entry fee. This means that if you invest RM100,000, only RM95,000-97,000 will actually get invested.
- Management fee: Most fund managers charge a fixed percentage of assets under management on an annual basis. In Malaysia, balanced and Equity Unit Trusts typically charge a management fee of 1.5% – 2.0% annually.
- Switching fee: In the case that you want to switch from one fund to another, you may incur a fee that goes to the manager.
Robo-advisors like StashAway help keep your fees low
- StashAway has no sales charges, so more of your capital is put to work.
- With management fees of 0.8% – 0.2% per annum, that’s half the rate industry standards.
- FX conversion, also comes at a slim 0.1%, is a rate only enjoyed by institutional funds.
Because of robo-advisors’ technology-driven automated processes, they don’t have the high overhead costs from agents and manual processes that traditional unit trusts have. As such, robo-advisors can pass these savings on to clients.
If you’d like to give it a go, they’ve even got a special promo for readers of KCLau.com: To get a 50% discount on fees for 6 months, click here.