Stashaway Malaysia (very honest review 2022)
One of the earliest roboadvisors in Malaysia made a series of unpopular moves in 2021 and 2022.
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StashAway was my training wheels for investing. I started using it in 2019, and thanks to their super-duper, user-friendly interface, it was an educational and seamless experience.
StashAway helped me get over my fear of investing, so I am really thankful that it exists.
It was the platform where I made all the mistakes such as:
Changing the risk tolerance of my portfolio wily nilly, not realising that each time I did that, I was essentially selling stocks off. And I did that during bear-ish times too.
Not having an investing philosophy or strategy, thinking StashAway will take care of that for me, so all is good, right? Not when their investing philosophy and strategy clashes with yours!
Diving into Thematic portfolios, thinking it’s cool, without doing any research to find out the pros and cons. (Cons — you’re essentially hedging your bets on an industry, which means you’re less diversified and exposed to more risk, and by the time thematic portfolios comes to the market, it’s usually at the height of its popularity, meaning, at its peak. And of course I’d have to pick the sector suffering the most in the down markets of early 2022: Technology.)
Not knowing nor caring what I’m investing in because I didn’t think it mattered. Uhm, of course it does.
Not realising that I’m being charged an annual fee. Like, duh.
But never mind, you’re here for the dosh on StashAway, not read about my investing woes and silliness, so let’s get to it!
Pricing
Here’s the moment where I lament about the high annual fees charged by Malaysian roboadvisors.
Our neighbours down south have Syfe (starting at 0.65% — the fee decreases the more you invest) and Endowus, which starts at 0.6% for smaller portfolios.
Meanwhile, Americans are spoilt for choice with Betterment and Wealthfront both charging 0.25% annual management fees.
Still, I get it — robo advisors are still cheaper than what many unit trust funds charge, so we will take wins where we can.
By the way, StashAway has a nifty tool that lets you see the fee you will incur based on your investment amount. If your portfolio stands at RM50,000, you will end up paying RM375 in fees. And if you have RM1mil? RM3,925.
Imagine having to pay that when your portfolio is running at a loss. It does give you pause, doesn’t it?
Functionality
I call StashAway the swiss army knife of Malaysian robo advisors. You can do many things:
Automate your investments
Create multiple portfolios with different risk tolerance
Invest towards a goal with their Goal-based Investing portfolio
Thematic portfolios: Healthcare innovation, Technology Enablers, The Future of Consumer Tech and Environment and Cleantech
ESG investing
Invest in money markets via StashAway Simple
Flexible portfolios — where you can add or remove asset classes and adjust allocations. It’s still in beta stage as of this writing and not widely available
Investing philosophy
On their website, StashAway states that they are a “convinced passive investor when it comes to securities selection”.
Meaning, they invest in the “entire market”. Yet, they also say “active approach in deciding in which market to invest, and in which proportion.”
Their Economic Regime-based Asset Allocation (ERAA®), is “the intelligent investment framework that minimises your risk and maximises your returns.”
The ERAA will trigger a reoptimisation — basically, change the asset allocation of your portfolio — when these things happen:
An economic regime change
Uncertain economic conditions flagged by our Risk Shield
A change in valuation of an asset class
This seem to indicate that they have a more active investing style.
The KWEB saga
Here’s why I’m convinced that StashAway actively managed: They’re trying to actively beat the market.
Around 2021, StashAway placed a large proportion of funds into KraneShares CSI China Internet ETF (KWEB). Many portfolios ended up overweight with China tech stocks. Now, I admire China like the next person, but I’m not a big fan of having a large proportion of my portfolio dedicated to a country and a sector, even if both had seemingly bullish prospects. I mean, what if something happened to China tech stocks?
Well, yes, something did happen.
When China regulators came down hard on Chinese tech companies in 2021, KWEB fell. By a lot.
But StashAway told investors to have a “long-term” view on KWEB….
Only to sell off KWEB months later due to sanction fears.
And then fate served StashAway a pie to the face when KWEB shot up by 39.72% a few days later.
Stashaway, in essence, sold at KWEB’s lowest point, cementing losses for many. So much for holding for the long term.
People were not happy.
So, passive investors? I … don’t think so.
In an article by robo-advisor platform Endowus, Not all robo-advisors are created the same, Stashaway’s investment philosophy is described as “largely tactical and very active allocations that massively deviate from any global passive equities indices, and cannot be deemed as strategic or passive in nature. Not by any stretch of the imagination.”
Although StashAway technically follows indexes passively, the indexes they follow are too narrowly focused and are just not broad enough to mitigate the risks (see my exploration of their ETFs below). They also frequently reoptimisate portfolios to adjust their exposure to the market. It is, undeniably, a robo advisor that chases performance.
I suppose this is fine as long as they make the right decisions that will benefit us in the long run. But the fracas with KWEB has seriously eroded investors’ trust.
Investopedia defines active investing as “an investing strategy that involves ongoing buying and selling activity by the investor.”
The goal of active money management is to beat the stock market’s average returns
It’s highly dependent on the fund manager’s capabilities — they would need to know when is the right time to buy and sell.
Active investing tends to be more expensive, as it involves a high number of transactions.
So the million dollar question is: How confident are you with StashAway’s fund managing capabilities?
ETF selections
StashAway has many ETFs in their portfolios. A few things stand out for me:
Many country-specific ETFs such as for Canada, Australia and Japan. Why these regions? Beats me. Why not pick a total world market fund like VXUS?
Sector-focused ETFs, some of which includes consumer staples, technology, energy and financials.
A lack of US total market equity ETFs
All this basically tells me that their ETF selection, especially for equities, does not have enough diversification. Their fixed income selection fared better, with Vanguard Total International Bond ETF (BNDX) and Vanguard Real Estate ETF (VNQ) in the mix.
Here’s a look at my 18% risk apetite portfolio:
As this is a more conservative portfolio, I am about fixed income assets at 43,5%, equities 43.3% and 12.2% commodities. A relatively balanced fund … until you look under the hood.
Fixed income
iShares International Treasury Bond ETF
iShares TIPS Bond ETF
iShares TIPS Bond ETF
US Equities
iShares Core S&P Small Cap ETF
Energy Select Sector SPDR Fund
International Equities
iShares MSCI Australia ETF
iShares MSCI Canada ETF
Real Estate
Vanguard REIT ETF
Commodities
SPDR Gold Trust
Cash in USD
I’m okay with the fixed income, real estate and commodities ETF selection, however my equity selection is pretty … perplexing.
US equities — why limit my exposure to just small cap stocks? And aren’t small cap funds too volatile for someone with a risk appetite of 18%? Why not give me a slice of a yummy US total market fund, such as Vanguard Total Market Index Fund (VTI), which gives me exposure to large, medium and small cap stocks? And why expose my portfolio to just the energy sector? (Though, admittedly, this allocation has prevented my fund from sinking deeper into red as energy stocks are doing rip roaring trade right now.)
And I don’t really understand what StashAway is trying to do with the Australia and Canada allocation. These markets are not exactly the best performing ones. In 2021, when it comes to country stock market returns, Australia was at no.40 and Canada at 30.
I would’ve preferred to be more diversified with a total world ETF such as VXUS, excluding the US. It includes great companies like AstraZeneca (UK), Nestle (Switzerland) and Samsung (S. Korea).
In terms of ETF selection and asset allocation, StashAway is not great. I don’t quite understand its asset allocation strategy.
Performance
The performance of your portfolio depends on:
When you entered the market
What type of ETFs were selected for you
How they are allocated — how much percentage to equities, bonds, commodities? For example, more bonds means less returns.
In 2020 and 2021, during the biggest bull run in US history, my StashAway portfolios delivered small gains, a simple return of about 3%. This is disappointing for me because the US stock market was enjoying a historic bull run. I suspect this was because the performance of my portfolio, which was overweighted on China funds, was diluted because China funds hit rough roads in 2021. Stashaway switching from China to Canada and Australia ETFs, however, didn’t help things.
Here’s a graph of the performance of my 18% risk level portfolio:
This portfolio is in the red, -RM247 loss and my time-weighted return, which I have often found a confusing metric, is a pathetic 2.76% as of this writing. January 2022 onwards, hardly anyone is doing well as the US stock market is currently going through a bloodbath correction or a crash (depending on who you speak to).
Honestly, I’m not surprised by the performance of this portfolio as I entered this one at the height of the bull run of 2020 with this portfolio. And since I only had US small cap equity ETF in my portfolio, I missed out on large cap US stocks which really did well in 2020 and 2021.
What others are saying about StashAway
Many, many bloggers have reviewed StashAway (as a content strategist, I applaud their content marketing team). You can get the basics about how StashAway operates and how to apply for an account through most them, which is why I didn’t cover them here. For example, is it regulated by the Securities Commission (yes), how to open an account etc.
Here are some reviews which I consider more interesting and balanced:
Dividend Magic: Has a monthly performance update since 2020. Leigh was mostly happy with StashAway until the KWEB fiasco: “StashAway made a really bad move with China’s side of things and it has caused a huge stir, both in the portfolio and the community. I’m not gonna lie, I’m pissed. I wouldn’t have had a problem if they just continued taking up positions in China or even holding them. I’m losing money! Guess what? The only portfolio doing well is StashAway Simple.”
A Singaporean perspective:
A no-holds-barred review from CF Lieu: Stashaway Malaysia Review: 23 Secrets Exposed! (2022) — “Roboadvisors might be simple to invest with, but they’re NOT low-risk. Robo advisors are not genius tools that allow you to outperform the market in the short term.”
Should you use StashAway?
I shall preface this by saying, this is not financial advice. I’m not a certified financial planner nor do I want to play one on TV. You should not listen to a random person on the Internet when it comes to making financial decisions. Do the hard work by doing your own research. Now that that’s out of the way...
Personally, I feel StashAway’s investing philosophy doesn’t align with mine, as I’m a really boring index-fund investor who prefers to dollar cost average monthly into a broad, total market index fund/ETF and keep it forever. I’m not into buying and selling shares to “reoptimise” my portfolio in reaction to market ups and downs. (Sadly, I learned about my inclinations after I dollar-cost-averaged (DCA) a significant amount into StashAway😔.)
I’m not clairvoyant and I don’t believe anyone, not even highly-educated, experienced professional fund managers can time the market. (I mean, KWEB rising immediately after StashAway liquidated its holdings is proof enough).
However, you may feel differently. You may actually like StashAway’s tactics.
Whatever robo advisor you select, do your research and make sure it aligns with your needs and strategy. Evaluate their:
Fees
ETF selection
Investing philosophy - tricky as they are often not transparent about this. The best way to learn about that is to experience it yourself (start with small amounts), or to do some detective work in forums like Reddit or Low Yat to see what people are saying about robo advisors. They are spicier there.
However, of all the robo advisors in Malaysia, StashAway has the most features. It has a powerful and user-friendly interface and makes it really easy for the beginner investors to start investing. If they do roll out their flexible portfolio feature, it will give experienced investors more control over their portfolios, which is welcomed.
Because their ETF funds are not diversified and their asset allocation strategy is baffling. For true-blue, passive investors like me, StashAway’s frequent and unpredictable “reoptimisation” exercises can be a turn off.
I may be leaving
Many people have told me that they’ve withdrawn their funds — at a loss — after the KWEB fracas. With so many options in the market, they can afford to.
And I will be very honest with you. I wish I had pulled out much earlier, when my losses were around -RM300. Now it stands at -RM750. And I suspect it’ll go much lower.
I believe in staying for the long term. And to be clear, I’m not thinking of leaving StashAway because I’m losing money. All my investments, whether they are in Wahed, Kenanga Digital Investing, the ETFs I bought, are in the red. Markets rise and fall.
But why use a tool that doesn’t align with my investing philosophy? Also, I have no confidence that I can recoup my StashAway loss because I am not confident with the constant reoptimisations.
I have to also think of my time horizon. With 10 years away from my Coast FIRE retirement goal, can I afford to wait 2 years or more for StashAway to recover? Will they “reoptimise” to tank my portfolio further?
If I withdraw my money, I can at least pump them into ETFs directly — despite the loss.
A dilemma isn’t it?
Currently I’ve stopped DCA-ing into my portfolios. I will wait two more months, and if it doesn’t improve, I may cut my losses so that I can put the money to work somewhere else. Stay tuned!