Robo advisors are gaining in popularity as an investment tool of choice for those looking to passively invest. We take a look at DBS’ iteration and how it stacks up against the competition.
Are you aware that DBS has its own robo advisor? It's one of the many robo advisors that have recently entered the market looking to entice investors who prefer passive investing.
DBS’ robo advisor aims to provide financial advice and automate the investing process for you. Should you use DBS’ digiPortfolio or give it a pass?
We explore how it works, what its fees are, and whether it's worth your time.
Overview of DBS’ robo advisor
DBS’ robo advisor offering, digiPortfolio, provides investment advice and automated investing to users who do not have time to watch the market. Its main focus is to provide passive investors with an easy way of making their money work for them.
The robo advisor does this without requiring much attention or effort from investors.
It has low fees, diversification across 12 asset classes, systematic rebalancing out of the home country, and automated portfolio monitoring.
In addition to this, DBS’ robo advisor offers a wide range of account options – individual, joint tenancy, trust, and corporate – making it suitable for most investors.
How to register for digiPortfolio?
You can register for digiPortfolio through DBS’ website or by downloading the app from the App Store or Google Play.
Once you have registered, you will be asked to provide some personal information such as your name, contact details, and investment goals.
Its robo advisor will then take this information and use it to create a portfolio that is suitable for you.
You can choose to invest through your bank account or credit card or use the cash mode if you would rather not transfer money into your investment account without actually having it there in the first place.
How does the DBS robo advisor work?
DBS’ robo advisor builds you an automated portfolio based on certain factors that you specify: your risk tolerance, investment time horizon, and personal goals.
Based on the information that you provide, the robo advisor will create a diversified portfolio of investments for you across 12 asset classes.
These include local equities/stocks, overseas stocks / international equities (outside Singapore), global bonds, and the three major types of Exchange-Traded Funds (ETFs) – passive ETFs that track global indices like MSCI index, smart beta ETFs that are rules-based investment strategies, or an actively managed portfolio.
DBS’ robo advisor will then monitor your investments for you by regularly rebalancing them back to their target allocation and will also automatically sell any investments that have fallen in value below a predetermined threshold.
However, for digiPortfolio to successfully do this, you need to either select the Asia Portfolio or the Global Portfolio. Both these portfolios have various investment and risk levels.
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What are the fees for DBS’ robo advisor and the minimum investment?
The fee for using DBS’ robo advisor is 0.75% per annum. This may seem like a lot, but it is actually lower than the fees charged by most robo advisors.
The minimum investment amount is S$1,000, which may be a little high for some people.
However, it's important to note that you can invest as much money as you want with DBS’ robo advisor.
In addition to this, DBS also offers a wide range of account options – individual, joint tenancy, trust, and corporate – making it suitable for most investors. But how does DBS digiPortfolio compare with other robo advisors?
A comparison of digiPortfolio with other robo advisors
|Robo advisor||Fee/p.a. for S$1000||Minimum investment|
|DBS digiPortfolio||0.75% (S$7.50)||S$1,000|
|UTrad Robo||0.88% (S$8.80)||US$2,500|
|AutoWealth||0.5% + US$18 (S$29)||S$3,000|
|OCBC Roboinvest||0.88% (S$8.80)||US$2,500|
Different types of portfolios
Most Singaporeans would undoubtedly find the Asia portfolio appealing. Though we may be the most familiar with the Asian economy and SG-listed equities, it can be scary to pick equities for ourselves.
digiPortfolio's Asia portfolio takes the decision-making away by giving you only three choices. You can pick one of these risk levels: Slow n’ Steady, Comfy Cruisin', or Fast n’ Furious.
The portfolios differ in the asset classes in which ETFs are invested. The lower the risk, the more of the portfolio is invested in bonds (technically known as ‘fixed income’), whereas the higher the risk, the more it's invested in equities such as company shares.
Here is a breakdown of the ETFs and their specific variations.
DBS Asian digiPortfolio:
Slow n’ Steady
Invests primarily in fixed-income securities to provide portfolio stability while exploiting the stock market's growth potential.
|18%||Equity||NIKKO Straits Times Index ETF, NIKKO StraitsTrading Asia ex Japan REIT ETF, Xtrackers MSCI China ETF, Lion-OCBC Hang Seng Tech ETF|
|78%||Bonds||Nikko AM Investment Grade Corporate Bond ETF, ABF Singapore Bond Index Fund|
Diversifies equally between equities and fixed-income assets.
|53%||Equity||NIKKO Straits Times Index ETF, NIKKO StraitsTrading Asia ex Japan REIT ETF, Xtrackers MSCI China ETF, iShares MSCI India Index, Lion-OCBC Hang Seng Tech ETF|
|43%||Bonds||Nikko AM Investment Grade Corporate Bond ETF, ABF Singapore Bond Index Fund|
Fast n' Furious
Equities rather than fixed-income instruments are favoured at this level. Investors who are willing to accept greater volatility may use this level.
|78%||Equity||NIKKO Straits Times Index ETF, NIKKO StraitsTrading Asia ex Japan REIT ETF, Xtrackers MSCI China ETF, iShares MSCI India Index, Lion-OCBC Hang Seng Tech ETF|
|18%||Bonds||ABF Singapore Bond Index ETF, NIKKO SGD Investment Grade Corporate Bond ETF|
DBS Global Portfolio
The global digiPortfolio, like the Asia portfolio, is divided into three risk levels; the distribution of bonds vs equity is identical to that of the Asia portfolio at each degree of risk.
The main difference between the Asia and global portfolio is the ETFs that make up the portfolios. See the breakdown below:
Slow n’ Steady
|20%||Equity||iShares MSCI World, iShares MSCI China A, VanEck Vectors Gold Miners, iShares Global Infrastructure|
|73%||Bonds||iShares JPM USD EM Corp Bond, iShares Global Corp Bond, Vanguard USD Treasury Bond, Vanguard 1-3Y USD Corp Bond|
|58%||Equity||iShares Core S&P 500, Xtrackers MSCI Europe, HSBC MSCI AC Far East Ex Japan, Vanguard FTSE Japan, iShares MSCI China A, VanEck Vectors Gold Miners, iShares Global Infrastructure|
|38%||Bonds||iShares JPM USD EM Corp Bond, iShares Global Corp Bond, Vanguard USD Treasury Bond, Vanguard 1-3Y USD Corp Bond|
Fast n' Furious
|83%||Equity||iShares Core S&P 500, Xtrackers MSCI Europe, HSBC MSCI AC Far East Ex Japan, Vanguard FTSE Japan, iShares MSCI China A, VanEck Vectors Gold Miners, iShares Global Infrastructure|
|13%||Bonds||iShares JPM USD EM Corp Bond, iShares Global Corp Bond, Vanguard USD Treasury Bond, Vanguard 1-3Y USD Corp Bond|
Is DBS’ robo advisor worth your time?
In general, digiPortfolio is a good way to invest in the stock market. It has low fees and offers an easy-to-use service for investors who do not have much time on their hands.
However, it's worth noting that if you're going to use this app, then your returns will probably be lower than if you were to use a full-service broker.
If you are looking for returns above the market rate, then DBS’ robo advisor is not your best option.
On the other hand, if you're simply interested in making money work for you with as little effort on your part as possible, then using it may be worth considering.
Why opt for digiPortfolio over other robo advisors?
The key selling points for robo advisors are:
- Ease of use
Ease of use
For a long while, other robo advisors such as StashAway have appeared to be the pinnacle of simplicity. However, DBS has created a tool that needs even less mental exertion.
You can start investing quickly and easily if you already have a multi-currency DBS bank account. There's no need to transfer money in or do anything extra; all you have to do is log in. However, the global portfolio necessitates you to opt for USD instead of SGD before making a deposit.
Though it’s anyone’s guess as to which robo advisor will ultimately perform better, DBS' 0.75% transaction fee puts you at an advantage over those with higher fees, such as Stashaway's 0.8%.
If you're searching for a simple way to invest in Singapore/Asia ETFs, DBS digiPortfolio has a broader range of Asia ETFs than most robo advisors, which usually specialise in US-listed assets.
Cons of DBS digiPortfolio
A DIY passive investing strategy using a DBS digiPortfolio may be less expensive than, say, StashAway, but it will not surpass DIY passive investing through a competent investment broker.
Let's assume you've saved up to S$10,000 for a passive, long-term investment. If you buy and maintain an investment in a DBS portfolio, you’ll have to account for a recurring cost of 0.75% per annum in fees.
However, you can buy the ETFs individually at any stockbroker. Saxo Capital charges a low 0.08% per transaction and a minimum of S$10 for each trade.
If you want to trade internationally, you may do the same; but bear in mind that different costs may apply. The cost of investing overseas for some brokerage firms is lower than for local equities. Saxo also charges a yearly US$12 custody charge, so that’s an additional expenditure to consider.
Final word and recommendations
Despite the fact that robo advisors may have a higher price tag than DIY-investing, they make investing and managing your assets simple.
There are a number of portfolios available, each with its own set of features and drawbacks. Some let you add funds to your portfolio, take cash out, or invest based on dollar-cost averaging over time. In other words, you can do anything you want without having to worry about the transaction cost.
With non-robo financial firms, you're charged per transaction rather than on the basis of the investment amount. Such transaction costs may make DIY-investing unnecessarily expensive.
In summary, DBS digiPortfolio is more cost-effective than other robo advisors, easy to use, and offers a broad range of Asia ETFs. If you're looking for an affordable, simple way to invest in Singapore/Asia ETFs, DBS digiPortfolio is the best option available.
Parking your funds with a robo advisor can be a great way to get started in investing. Weigh up the different robo advisors using our comparison tool to see which might best suit your portfolio.
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