Writing on this blog has continued to amaze me in terms of giving me the opportunity to interact with people who are building products that are giving everyone the access to affordable and good investment services. Products that I would use.
Just a short while ago, I wrote a series of blog posts that shone the spotlight on StashAway, a soon-to-be-launched robo-advisor that is barely a year old – and it has moved at lightning speed.
- STASHAWAY : ROBO-ADVISOR COMPETITOR TO SMARTLY
- THE BATTLE OF ROBO-ADVISORS (SG EDITION)
- ROBO-ADVISOR STASHAWAY GETS S$3-MILLION FUNDING
Both interest and questions on StashAway have been mounting fast and furious. Both myself and the folks at StashAway have noticed that some of these questions can be fairly technical in nature, and obviously I’m not the best person to answer them.
But I will do what I can, which is to point you guys and girls to the resources that are already available as we
speak write. Please go through StashAway website first. It will answer many of the common questions we have. I know it can be difficult to locate the information you want, so I’ve done some digging for you.
Q : What is StashAway investment framework?
A : Read about StashAway’s Asset Allocation Framework. An important detail to note is that they deploy a strategy called Economic Regime-based Asset Allocation (ERAA) and not Modern Portfolio Theory (MPT).
Q : What is StashAway ETF selection criteria?
A : Read about StashAway’s ETF Criteria.
Q : What are StashAway ETF selections?
A : Read about StashAway’s ETF Selection. Looks like we’ll have Vanguard, iShares and SPDR.
I received quite a number of questions regarding the issue of dividend withholding taxes and how it affects returns. This is what I wrote in response to a comment in an earlier blog post.
Hence the biggest issue would be the 30% withholding tax on dividends (which is mentioned by StashAway). As many of the large, liquid & popular ETFs pay quarterly dividends, hence we’ll get hit by these tax every quarter.
While the dividend withholding tax (DWT) is a concern for investors, I guess we would really need to consider the perspective and operations of the Robo-Advisors and why they would select US-listed ETFs (high liquidity) despite the tax issue. Your last paragraph pretty much nails it. The key point is here communication to investors. For example, while an index ETF on LSE would benefit from less DWT, would their lower liquidity and spread etc result in higher long-term costs to investors?
What is dividend withholding taxes? You might be want to read this post by yours truly (with the third highest number of comments) on this blog. More importantly, we also have to recognize that we are reading my post with the perspective of an individual investor. I am a DIY index investor. Not by choice though, since I was forced to do it due to the lack of better options three years ago. You know, like a local robo-advisor?
I met up with the good folks from StashAway over a casual lunch the other day. Disclaimer – while I did get myself a free lunch at Grain Traders, I insisted on buying them coffee so .. that was that. This isn’t a sponsored post in any way – just to get this out of the way.
It wasn’t all 100% talk about StashAway, and we did chat over lots of other things – like the weather. And shopping. Michele shared his motivations for starting StashAway (you can read more about it here) and Rachel informed me that they were working on an article that addresses the dividend tax rates issue. Well, they finished it a couple of days ago and would really like more people to see it.
Ultimately, ETFs are simply vehicles for tracking an asset class. Our analysis reveals a need to consider performance metrics that are adjusted for both costs and tracking uncertainty. Having said that, we find validity in WHT differential as a significant driver of performance when investing in high yielding assets.
It is stuff like this that I would like to see more of. Transparency. Nobody is sweeping the issue of dividend withholding taxes under the carpet and pretending it doesn’t exist. It is about bringing it to table and having a meaningful discussion about it.
What? You have more questions? Check out their FAQ page 🙂
You want more? OK – don’t say that I “bojio” (the act of not inviting your friend to go out together). My reliable sources told me that Michele Ferrario, CEO and Co-founder of StashAway, is holding a seminar titled “Stashaway: Simple Steps to Build Long Term Wealth” on Wednesday, 14 June 2017 from 6:30pm to 9:00pm at Collision 8. The event is free. You can register on Eventbrite for tickets. And take the chance to ask Michele any burning questions that you have.
In case you’re wondering which way I’m leaning with regards to robo-advisors, I would probably start a small portfolio with both of them. Maybe as a complement to the tiny portfolio I have started for my wife. Just to test the waters, you know? I’m just a small fish in the ocean 🙂