Robo Advisory CEOs Share With Us What Singapore Investors Ought to be Doing During This Volatile Period
2021 has been a challenging year to purchase. Earlier this year, stock markets worldwide fell by as much as 30% over just one month. Perhaps, the larger surprise is that markets have since recovered quickly, and in some instances, are trading in a level that is very close to what it really was before the COVID-19 pandemic.
To help investors know very well what they should be doing during this volatile period, we talk to the CEOs of a number of Singapore's most prominent robo-advisory companies.
Participating in the interviews were Michele Ferrario (StashAway), Tai Zhi Ow (AutoWealth), You Ning Sun (Endowus), Chuin Ting Weber (MoneyOwl), Dhruv Arora (Syfe) and Asheesh Chandra (Kristal.Ai). These Interviews were done in May 2021.
Timothy Ho (DollarsAndSense): 2021 has been a challenging year for investors. Thanks to COVID-19, we have been through an emotional ride ride, both from a healthcare standpoint, as well as for our investment portfolio. What should investors, both new and experienced, be doing during this period?
Michele (Stashaway): For investors who adopt a long-term view using their investments, they've already prepared their investments to match their risk appetite and personal financial goals, so it's easier to maintain a level head to ride the current uncertainty. If you react to the short-term noise and sell your investment funds, you'll struggle to get back in to the market when the recovery happens, and you will end up with losses in your portfolios. Instead, we recommend investors to focus on the long-term and take advantage of the dip in the markets by continuing to dollar-cost-average in to the markets.
According to the StashAway Insights 2021, systematic investors who still stick to their long-term investment plans and invest systematically via a market correction perform much better than those who withdraw during a correction. As Warren Buffett famously said, “Be fearful when other medication is greedy, and greedy when other medication is fearful”.
Tai Zhi (AutoWealth): Invest and do so prudently.
Firstly, set aside your rainy-day funds first, so you avoid cashing out at precisely wrong time (e.g. “COVID-19 sell-off”) when you really need funds to tide you over.
After putting aside your rainy-day funds, invest your excess funds and become discipline to “save”/invest a portion of your income regularly in a reasonably low-risk portfolio. There isn't any point trying to chase the highest possible returns when a market risk event like COVID-19 causes you to crash out of an “excessively high risk” portfolio and crush your future confidence towards investing.
You Ning (Endowus): For those who have not started, today is the day! Carpe Diem (seize the day)! Starting may be the hardest part. No matter how nervous the markets cause you to, open your account, and put in some money. And once you’ve started, it is much easier to keep going.
Investing your CPF OA is a great place to start. Because CPF monies can't be withdrawn until 55 and there's a consistent stream of CPF contribution, it's the perfect place to have a regular investment plan. Endowus' CPF portfolios provide exclusive use of passive index funds managed by Vanguard, at the lowest fees.
Chuin Ting (MoneyOwl): MoneyOwl is not a roboadviser, but an extensive and bionic financial adviser, we have not just an investment platform, but also a comprehensive planning platform, an insurance coverage platform and a will-writing platform.
We recommend that investors do the following, that is actually in essence the same advice in any investing period.
- Do a comprehensive financial plan so you know how to make the trade-offs between investing along with other priorities
- Do not be afraid to start investing because as long as you have time and are invested in the broad market, you'll be okay as the stock market always recover and go up over the long term. But if you still prefer to not go in with a lump sum, tranche it in a disciplined manner and decide in advance the timings of each, and stick to it no matter what happens in the markets or in the news.
- Stick to your plan – remain invested in a broadly diversified portfolio which fits your need, ability and willingness to consider risk, without trying to time your ins and outs and without shifting asset allocation; and continue investing your monthly surplus regularly.
- Remain invested in broadly diversified portfolios without trying to guess which stocks or sectors would do better.
- Ensure that your fund manager (if you are using one) is also doing just like above – being broadly diversified and not tactically shifting asset allocations.
Dhruv (Syfe): Every single day, we see more facts about the current pandemic and its consequences emerge, and the markets seem to have detached themselves in the economy due to the heavy interventions of central banks around the world.
No one knows if the recent market rally (Editor's note: interview as done in May 2021) is a sustainable recovery, and our risk indicators still indicate the chance of the markets coming off again likely, but we believe that if have the resources and discipline, staying invested repay. We would not go overboard and are not saying this is a great buying opportunity because we expect the next few quarters to be volatile. But if you invest with a long term perspective (which is what we recommended) and bear the market swings, the time you have on the market (rather than timing the market) will be your best weapon!
Asheesh (Kristal.Ai): Keep some dry powder. Invest in sectors that have proven longevity like pharma and tech. Do not get swayed by emotions. And more importantly, tweak the rule book just a little. A 70:30 portfolio won't make sense right now, but more customized products will.
It’s Amount of time in The Market, Rather Than To Time The Market
When speaking to the CEOs of these robo advisory platforms, one recurring theme they all stressed is for investors to focus on spending more time in the financial markets, rather than to be timing the marketplace. This makes sense, given the current volatile period, where predicting the stock exchange will be difficult.
The pandemic is really a timely reminder for many investors that predicting short-term movement within the financial markets can be difficult, and that many investors are likely to do better by focusing on having a long-term investment strategy instead.