If this is not your first time here, then you might remember a few blog posts that I have written about AutoWealth. Today’s post is going to be a yet free marketing post for the robo-advisor known as AutoWealth, and I’m their 12th man.
Although I do have a five-figure portfolio value with them, I want to stress that almost everything written below is publicly available information. This is also not a post about whether AutoWealth is better than the rest. I feel that the robo-advisors community as a whole have drastically changed the investment landscape in Singapore and collectively, and all of them deserves the credit.
Outreach and Social Media
AutoWealth has a blog here but very few people know about it. This is because they don’t syndicate it with blog aggregators such as Singapore Investment Bloggers or The Finance SG. They do post articles from time to time, ranging from light-hearted ones about retiring to a seaside villa to more current affairs related like trade wars.
Of course, they have a Facebook page as well. Their videos page is an absolute gem and my personal favourite, because it showcases the team behind the company. The real people, flesh and blood, that are working hard to drive this company forward. Check out Episode #2 bit on Noel which I thought was pretty funny!
Portfolio Risk Levels
AutoWealth portfolios comes in only four flavours for you to choose from. Clients are not allowed to customize their portfolios beyond the 4 options, which is probably a good thing because it means that there is no way to mess them up.
- Risk Level 1 : Preservation (20% equities / 80% bonds)
- Risk Level 2 : Conservative (40% equities / 60% bonds)
- Risk Level 3 : Balanced (60% equities / 40% bonds)
- Risk Level 4 : Long-term Growth (80% equities / 20% bonds)
Do note that Preservation and Conservative, which have lower portfolio risks, tracks the MSCI World Index which excludes Emerging Markets.
My AutoWealth Balanced portfolio tracks the MSCI All-Country World Index (60%) and the FTSE World Government Bond Index (40%).
I have specifically chosen risk level three. If and when the market crashes, I will probably switch my setting to risk level 4 : Long-term Growth. This is to take advantage of cheaper equities by selling bonds (20% of portfolio) and buying equities. At the same time, I will hopefully be able to increase my monthly contributions and make lump-sum injections into my portfolio.
Equities : MSCI All-Country World Index
In terms of AutoWealth portfolio construction, it may strike you as odd since iShares has an ETF that tracks ACWI already. Why go through the trouble of using four separate Vanguard ETFs instead?
Option 1) Using Vanguard ETFs to Construct Equities Allocation of Portfolio >8,000 stocks
- Vanguard Total Stock Market ETF (VTI) with 0.04% expenses
- Vanguard FTSE Europe ETF (VGK) with 0.10% expenses
- Vanguard FTSE Pacific ETF (VPL) with 0.10% expenses
- Vanguard FTSE Emerging Markets ETF (VWO) with 0.14% expenses
Option 2) Using iShares ETFs to Construct Equities Allocation of Portfolio > 600 bonds
- iShares MSCI ACWI ETF (ACWI) with 0.31% expenses
Part of the answer probably lies in the ridiculously low fees, especially the obscene amount of 0.04% for VTI. VTI makes up about 33% of my portfolio and 54% of the equities component. Having individual ETF components also facilitate with portfolio rebalancing.
Bonds : FTSE World Government Bond Index
Using ETFs to Construct Bonds Allocation of Portfolio
- SPDR Bloomberg Barclays International Treasury Bond ETF (BWX) with 0.35% expenses
- Exposure to fixed-rate local currency sovereign debt of investment grade countries outside the U.S.
- iShares 7-10 Year Treasury Bond ETF (IEF) with 0.15% expenses
- Exposure to intermediate-term U.S. Treasury bonds
iShares International Treasury Bond ETF (IGOV) with 0.35% expenses Exposure to bonds issued by the governments of countries around the world excluding the U.S.
While I don’t have an answer yet, I’m pretty such the answer lies somewhere along low cost and liquidity. In fact, the official FAQ states that “AutoWealth has a rigorous process to screen over 6,000 ETFs listed globally and select the best ETFs based on factors including diversification effect, direct holdings of underlying Bonds or Stocks, reputation of the ETF provider, ETF fund size, liquidity and expense ratio amongst other factors.”
You may be interested in the AutoWealth Investment Portfolio Factsheet for more details.
I’m Being Selfish
I’ll be honest with you. I am being extremely selfish when it comes to the robo-advisor known as AutoWealth.
There is so much of what I have learnt about index investing combined with the vast knowledge that can be distilled into simplicity – would the end product then be AutoWealth? I like AutoWealth as a product and I want it to flourish – which means more clients, more funds under management and if we’re lucky, even lower fees in the long run.
For now, let’s disregard their other sources of revenue. A few words about fees then. Let’s assume if they have $100,000,000 under management, then 0.5% translate to just $500,000. Also, assume their clients (assume 20,000) have account-size of $5,000-ish and therefore pay about $486,000 in fixed platform fees. That’s just slightly under $1 million in total annually, which really isn’t much.
Accounting for rental, salary, utilities, taxes and even automation incurs expenses (SAXO, equipment, hosting, cloud services etc). $1 million is really nothing. If this article is to be believed, the real number is perhaps one-tenth or two-tenths of what I assumed. If you had watched the video I linked to earlier, you would have noticed that they have interns as well.
Of course, it would be foolish to disregard another point-of-view. If they do indeed have 20,000 clients, and all of them are disciplined enough to contribute just $100/month .. that’s another $2m increase in AUM monthly.
Needless to say, I’m not privy to their business operations and I’m pretty sure there are other sources of revenue that I’m not aware of.
AUTOWEALTH. HAS. TO. GROW.
Maybe it’s just me. I have never seen and met any team that is as earnest and sincere as AutoWealth. I can’t exactly describe it accurately with words, but if you have ever see Tai Zhi, Noel or Ming Zhen in real life (at events etc), you’d know exactly what I mean when I say that they are down-to-earth.
And yet, they’re thriving seemingly in a cut-throat playing field that requires them to be possibly something they’re not. I’m glad that the AutoWealth team hold their investment philosophy close to their hearts and this is not something that they compromise on. You can’t even mess up your portfolio even if you tried to.
Their investment methodology is laughably simple (please, I meant it as a form of highest compliment, OK?) and so easy to understand that if John Bogle is alive, this is the kind of product that he might approve of. Hmm. Maybe not, because he would still say – the fees are too high! /sarcasm/
Last year (I bet hardly anyone knows this), 8I Holdings Limited had announced a strategic investment in AutoWealth Pte Ltd with S$1 million for a strategic minority equity stake. The capital will be used to strengthen its branding and marketing to grow its assets under management. Robo-advisors are increasingly being seen as a complementary product rather than competitors, and this is great news to me as they venture into the Malaysian/regional market.
I feel that index investing should be simple and hassle-free. Will AutoWealth help you make money in investing? I can’t tell you if that will happen for sure, especially with anything related to finance. All of us have to be responsible for our own investments. But yes, I have the faith and conviction that AutoWealth will produce market returns.
Perhaps some retail investors expect robo-advisors to do wonders, and consistently out-perform the market with low cost + low risk. No, my friends – That isn’t what I expect. Realistically, all I want is periodic investments into low-cost ETFs with automated re-balancing that maintain my desired portfolio allocation in order to achieve market returns, be it positive or negative. Isn’t this what traditional index investing is all about? To achieve market returns 🙂
Organic growth is hard. Extremely hard. Whatever little I can do to lend my support for AutoWealth (and therefore, make sure that I can continue to use its services for many years to come), I will do it, and I will keep shilling (damn, I didn’t even try to convince you to give AutoWealth a try) until they get that first $100 million asset-under-management.
[ selfish ] concerned chiefly with one’s own personal profit or pleasure.
P/S : I’m so selfish that I’m not even going to drop my own referral code on this post. All you need to do is to sign up together with a friend or family member and both of you can enjoy a $20 credit headstart. The offer is from AutoWealth official website and valid till end 2020. Super simple, right? I suppose if you really have no one to sign up with, you can always do a search for “referral” in my blog’s search box or simply click here.
Let’s just say that I did not write this post for the referral credits. If you feel very strongly about it, why not try using my referral code for your $20 during sign-up and inform AutoWealth that they can keep my $20. You have my blanket approval (just screenshot this blog post) to do so 🙂
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