Most of us expect to earn a decent interest return on our cash savings today. One of the ways we can do this, without having to open yet another investment account is through the StashAway’s cash management portfolio – aptly named StashAway Simple.
StashAway Simple enables retail investors to invest in money market funds, which – depending on the risk you take – can potentially beat the interest rate offered by other safe investments such as T-bills, the Singapore Savings Bonds (SSB) or bank fixed deposits.
Via StashAway Simple, we can monitor more aspects of our financial lives within a single investment platform. StashAway also allows us to invest in globally diversified portfolios, Singapore-focused portfolios, Income portfolios, and Thematic portfolios, as well as invest our SRS funds, portfolios meant for Accredited Investors and institutional grade investments.
On its website, StashAway Simple has a projected return of 3.8% p.a. on any amount placed with them, without any lock-in periods or minimum balance. This looks higher than other no-frills, high-interest savings accounts and fixed deposits currently offered in Singapore.
Despite sharing several similarities with regular savings accounts from banks, there are some key differences between the two that are important to understand before we sign up.
Read Also: Complete Guide To Cash Management Accounts In Singapore
#1 StashAway Simple Is Not A Bank Savings Account
The first point we should understand is that StashAway Simple is a cash management account and not meant to be used as a savings account. Unlike a savings account where our money is deposited in a bank, our funds with StashAway Simple are allocated into the LionGlobal SGD Money Market Fund (30%) and LionGlobal SGD Enhanced Liquidity Fund (70%).
The combination of these funds makes StashAway Simple a riskier investment than simply putting our cash in a conventional savings account. Nevertheless, the risk we take on is significantly lower compared to growth-orientated investments or even other fixed income products.
StashAway Simple does not have any sales charge or require any minimum balance. Furthermore, to boost investor returns, any rebates from management fees that StashAway receives are credited back to account holders.
In short, StashAway Simple is a low-risk investment. It is not a bank savings account, and we cannot expect to withdraw our money from an ATM, nor use it to pay our everyday bills.
Read Also: Best Savings Accounts In Singapore – If You Don’t Want To Keep Jumping Through Hoops
#2 StashAway Simple’s Projected Rate VS Savings Account’s Tiered Interest Rates
As explained earlier, StashAway Simple aims to deliver a projected net return of 3.8% per annum. While the structure of the projected net return is flat and easy to understand, this rate is not guaranteed and may fluctuate according to economic conditions.
Funds
LionGlobal SGD Money Market Fund
LionGlobal SGD Enhanced Liquidity Fund
Average Percentage (taking 70:30 composition)
Weighted yield to maturity
4.00%
4.05%
4.035%
Net Expenses charged by underlying fund manager, including quarterly rebates
0.15%
(Disregarding rebates, LionGlobal SGD Money Market Fund has an Expense Ratio of 0.32%; LionGlobal SGD Enhanced Liquidity Fund has an Expense Ratio of 0.4%)
– 0.15%
StashAway Management Fee
0.15%
-0.15%
Interest Rate
3.735% p.a.
According to the latest factsheet and annual reports by the respective funds, and taking into account rebates from the fund manager, it looks like the returns are marginally lower than the projected 3.8% return. This may be due to a lag effect in the numbers we are using from the Annual Report and Factsheet.
Interest rates of regular savings accounts offered by the banks are typically still much lower. In the case of some high-interest savings accounts that report to pay a higher return, there are usually tiered interest rates that require customers to satisfy multiple criteria, such as crediting of salary, transacting using their credit cards and maintaining a monthly expenditure in the form of insurance or investments. This higher interest may seem attractive but is only practical for those who can hit the criteria specified by the bank each month.
Banks may offer promotional rates for fixed deposits from time to time, but they are generally still slightly lower than the 3.8%-level offered by StashAway Simple.
We may also compare StashAway Simple’s returns to the Singapore Savings Bonds (SSB). Its annual projected 3.8% return is slightly higher than the 3.06% return paid by the SSB within the first year, as well as the 3.1% average return offered over the 10-year holding period. Currently, Treasury Bills or T-bills are paying 3.13%.
All this may also point to a potential for StashAway Simple returns to narrow going forward. After all, its underlying investments are in high-quality debt instruments.
Read Also: Best Savings Accounts for Working Adults in Singapore
#3 The Use of SRS Funds in StashAway Simple
Another difference that sets StashAway Simple apart from the conventional savings account is the flexibility of channelling our Supplementary Retirement Scheme (SRS) monies into it.
SRS plays a complementary role to one’s CPF savings, and can also be used as a tool to enjoy tax relief. However, a typical SRS account with banks only provides an interest rate of 0.05% per annum on SRS savings.
Due to the low-interest rates on uninvested SRS savings, there is a risk of it becoming eroded by inflation over time. The usual choice of many SRS account holders will be to invest the monies. But for those who would prefer to place their SRS funds into instruments with a higher yield while limiting exposure to high risk, StashAway Simple can be a good option.
Given the structure of StashAway Simple, there is no doubt that there are some risks involved. For those who want risk-free investments to grow their funds, they can consider other relatively liquid products such as fixed deposits or the Singapore Savings Bonds, where the interest on deposits is guaranteed by the banks or government.
Investing With StashAway’s Robo-Advisor Platform
If you wish to potentially earn more on your monies (by taking on slightly higher risk), you might want to look at StashAway’s robo-advisor investment solution. For DollarsAndSense readers, StashAway is giving 50% off in management fees for 6 months, for up to $50,000 in portfolio value.
Sign-up for free today at this link!
This article was first published on 22 January 2020 and has been updated to include the latest information.
The post StashAway Simple Cash Management Account Vs Regular Savings Accounts – What’s the Difference? appeared first on DollarsAndSense.sg.
