I am switching to Endowus for my SRS investments and here’s why

Since 2014, I've been topping up my Supplementary Retirement Scheme (SRS) account and investing through OCBC's Blue Chip Investment Plan (BCIP), buying into Nikko AM Singapore STI ETF stocks each month in a dollar cost averaging manner.

For a lazy investor like me, this works really well because just like my cash investments through AutoWealth, all I have to do each month is to top up my SRS account and BCIP will make the purchase automatically at the end of the month.

At the same time, I avoid timing the market and getting swayed by market fluctuations.

Although I like how everything has been working out for the past 6 years, the Straits Times Index (STI) had a muted performance, considering we are undergoing the longest-running bull market in history.

Now that i have set up my StocksCafe account (use my referral link to test all their features for 2 months for free!), I am able to show how my SRS portfolio has been performing for the past 6 years.

The dividend yields from Nikko AM Singapore STI ETF is growing but doesn't get me excited given I'm going to be invested for the next 20 years and growth are much more important than dividends.

Shifting my SRS investment from a Singapore-focused portfolio to a global diversified portfolio

Given the lackluster long term performance of the STI, I'm convinced that it will be a better move to convert my SRS portfolio from being 100% Singapore-focused, into a global diversified portfolio.

For the past few years, I've been struggling to find a simple and automated way to do this. In my exploration of potential platforms and funds, the costs of investing can add up pretty quickly to around 1% to 3% per year.

For layman investors like me, it's can be challenging to sieve through all the funds offered on platforms like Fundsupermart and Dollardex, especially some of the feeder funds that are investing in multiple ETFs and funds (that means I'll need to read up on all those ETFs and funds!).

But these days, things are changing with robo-advisors like Endowus starting to allow investors to invest their SRS funds in funds from Dimensional Fund Advisors (DFA) for less than 1% per year. In my case, I'm looking at DFA's World Equity fund that charges 0.43% per year and Endowus charges an Access Fee of 0.4% per year.

Let's talk about Dimensional Fund Advisors

Kyith from Investment Moats has written a comprehensive article about DFA in his blog and I don't think I can do any better than him on this so you should read his article to get an in-depth knowledge about DFA.

But in a nutshell, here's what you need to know.

Founded in 1981, DFA uses market financial data to design and manage portfolios. They take a less subjective and more systematic approach to investing. They believe that by implementing this approach consistently, investors will understand and stick with their approach, even in challenging market environments.

In the course of their research, DFA found that securities offering higher expected returns share certain characteristics, which DFA call dimensions. To be considered a dimension, these characteristics must be sensible, persistent over time, pervasive across markets, and cost-effective to capture.

With these dimensions, DFA created broadly diversified portfolios that emphasize the dimensions of higher expected returns, while addressing the tradeoffs that arise when executing portfolios.

What resonated with me is how DFA chose to use data as the foundation in their approach towards designing investment portfolios in a strategic and systematic manner.

As of 30 June 2019, Dimensional has $586 billion (USD) in firm-wide assets under management.

Investing my SRS funds through Endowus

Endowus is the first robo-advisory platform that can help you invest your CPF and SRS funds for a low fee. I've heard them speak in a few personal finance and investment events.

In this blog article, I'm going to be focusing on solely about investing with your SRS funds.

Here's an excerpt about Endowus that I've taken from their website.

Our investment strategy is underpinned by a scientific process rather than speculation. We utilize modern portfolio theory that uses time-tested investing rules such as diversification and asset allocation to maximize your returns while minimizing risk. For equities, we utilise passive and systematic portfolios that have broad market exposure with tilts towards proven factors of returns such as value, size, and profitability, as evidenced by the research of Nobel Laureate academics. For fixed income, we leverage the expertise of the largest fixed-income investors in the world and their ability to execute time-tested strategies with real track records.

One of the most popular question that everyone has on their mind is how rebalancing will be executed.

Over time, the value of individual investments in your portfolio will move up and down and drift away from your target asset allocation. If an underlying holding drifts by more than 10% from its target allocation (i.e. a fund with a target allocation of 10% moves by more than 1%), we will send you an email to inform you. You will have the option to opt out of rebalancing if you choose, however, we believe an optimized rebalancing that maintains the target asset allocation is a meaningful contributor to long-term returns. If you do not choose to opt out of rebalancing your portfolio back to its target asset allocation, we will go ahead to execute the rebalancing three business days after you receive the email. Every cash flow (deposit or withdrawal) is used to rebalance your portfolio towards the target weights. In the absence of cash flows, we rebalance by selling and buying existing funds in the portfolio.

Where does your invested money in Endowus get invested in?

In the process of registering my account, I played around with their Model Asset Allocations to see what funds will they recommend me to purchase based on my preferred asset allocation.

Here's what an 60/40 equities and bonds asset allocation recommendation looks like.

By toggling around the different asset allocation models, I was able to see that Endowus will invest my money in the following funds based on my selected asset allocation model:

  • Dimensional World Equity Fund (Equity allocation)
  • PIMCO GIS Global Bond Fund (Bond allocation)
  • PIMCO GIS Emerging Markets Bond Fund (Bond allocation)
  • PIMCO GIS Global Real Return Fund (Bond allocation)

Similar to AutoWealth, what I like about this is that there's only 4 funds that I need to read up on and understand where the money is bring invested in. I just need to research on them and decide whether I like these funds, or not.

Before doing any research, decide on your asset allocation first. In my case, I only intend to do an investment with 100% equities allocation so I only need to do my research on Dimensional World Equity Fund.

My deep dive into Dimensional World Equity Fund

Dimensional World Equity follows a simple and repeatable approach that blankets nearly every investable company in the world, including emerging-markets companies.

Using the research of renowned academics such as Eugene Fama and Kenneth French, the strategy focuses on stocks with lower valuations (measured by price/book ratio), smaller market capitalisations, and higher profitability (using an adjusted measure of operating income).

Their research shows that stocks with these characteristics have tended to outperform over the long term. The managers exclude the most expensive and unprofitable companies completely and apply market-cap multipliers to give under or over weightings to the remaining stocks, depending on how much they possess of the desired characteristics (that's the dimensions we talked about earlier).

The result is a portfolio that is broad and well-diversified, with a blend of growth and value stocks.

Looking at the fund's investment across the globe, we can see that it remains heavily invested in United States with 54.78% of equity invested in that region.

In terms of sector weightage, we can see that the fund is also well-diversified across Consumer, Financial Services, Industrials and Technology. This is important as I'm planning to invest for the long term and not be affected by cyclical market fluctuations.

Even though the fund is heavy on United States, the top 10 stocks that is held by the fund is only 5.69% of the entire portfolio. That tells us that the fund is so diversified that not a single company will be able to cause the fund to incur a huge loss even if it closes down.

Dimensional World Equity Fund in a nutshell

  • ISIN: IE00BF20L762
  • Launched in 19 Mar 2018
  • Fund type: Open Ended Investment Company
  • Price currency: SGD
  • Domicile: Ireland
  • Benchmark: MSCI All Country World Index (ACWI)
  • Fund Size (Mil) as of 27/01/2020: GBP 1757.88
  • Dividends: Accumulating
  • Expense Ratio: 0.43%
  • Total number of stocks invested as of 30 Sep 2019: 10,918 stocks across the globe


My experience using Endowus to invest my SRS funds

Registering my Endowus account was an easy and seamless process that required very little interaction with the Endowus support staff.

I registered my Endowus account following the instructions on the website and it took 2 days for my UOB Kay Hian account (used by Endowus to make the investments on my behalf) with the linking to my SRS account to be ready for investing.

It took a total of 4 days for my SRS funds to move from my OCBC SRS account into my UOB Kay Hian account and invested into Dimensional World Equity Fund by Endowus.

A total of 6 days from account registration to being invested is relatively fast, compared to my past experience with other investment platforms. I also like that everything was communicated in a timely manner through email so i didn't have to log into my Endowus account daily to check on the progress.

I have also scheduled recurring investment using my Endowus account so that money will be moved from my SRS account into Endowus every month and injected into my investment portfolio for dollar cost averaging investing.

Having enjoyed a great experience investing through Endowus, I've been recommending my friends to invest their SRS funds through the Endowus platform.

Have you invested your SRS funds through Endowus? I'd love to hear your experience on using their platform.

Start your investment with Endowus

This is not a sponsored post, but I do have an Endowus referral link that you can use to register your Endowus account. We will each get $20 in Access Fee credit (equivalent to $10,000 advised free, assuming Access Fee of 0.40%) after you have created and funded your account.

it's not a lot of money, but it can pay for 6 months of Access Fee.

What is the Wuhan Coronavirus and will it change your investment strategy?

The biggest topic trending on the streets for the past few days has been the Wuhan Coronavirus that has infected thousands and spread to multiple countries so far. I'm not going to post any statistics here because those numbers are meaningless and you should check official sources for real-time statistics.

One of the major challenges today is the fact that China isn't the most transparent country so you can't really be sure if the information shared on the Internet is true or not.

In fact, there was a false rumour going around Facebook claiming that Woodlands MRT was closed for disinfection due to a suspected case of the Wuhan Coronavirus infection, urging the public to avoid that train station. Ministry of Health has come out to clarify that this was false.

Instead of watching the latest video shared by your friends on Facebook or listening to the latest pantry chatter, I highly recommend everyone to visit the Ministry of Health website to get the latest update on the virus and what we can do to try and reduce the chances of getting infected.

Here are some resources from credible sources

Here are a few resources released by the Singapore government and the Ministry of Health.

Wuhan Virus - Situation in China: Taking Precautions

Infographic on what is Wuhan Coronavirus and what precautions you can take today

Prof Leo Yee Sin of National Centre for Infectious Diseases (NCID) answers a few key questions about the Wuhan Coronavirus

Will the Wuhan Coronavirus change how you invest?

For some people, they have the know-how and the capital to make bets on specific sectors and stocks to capitalise on trending news like the Wuhan Coronavirus.

Brian Halim from A Path to Forever Financial Freedom took a bet on Top Glove Corporation Bhd, a rubber glove manufacturer that owns and operates 43 manufacturing facilities in Malaysia, Thailand, and China. He purchase their shares at $1.72 per share using CFD leverage at 2.8%.

Top Glove Corporation Bhd closed at $2.35 today and I'm happy for Brian.

Are you making bets on companies based on the Wuhan Coronavirus?

Personally, I've not done anything remotely similar because I don't have the know-how and capital to make similar bets. I also know that I've never been good with luck-based games like blackjack, toto, 4D so it's unlikely that I'll get luck with short term stock picks. I also know that I lack the mental strength in making such bets. The last time I shorted a stock many years ago, I wasn't able to concentrate 100% at work and was consistently checking the stock price.

I'm much better at skill-based games like mahjong where I have some level of control over winning and losing, and it's a longer game where the winners and losers are determined after multiple rounds.

I'm better off not making any stock bets for short term gains to take advantage of the current situation.

Keep some dry powder on hand in case the market goes down the toilet

We know that on a macro level, some of the industries are going to be affected if the Wuhan Coronavirus situation continues for a few more months (at least).

For example, we know that retail stores are going to be experiencing lesser footfall which translates to lower sales. If this continues for the long term impact, shopping malls may also be challenged with retaining their existing tenants.

Major businesses like Starbucks and Yum China (KFC and Pizza Hut) are starting to choose to suspend operations until further notice. The profitability of those businesses are clearly going to take a hit in the books.

We are also seeing stock prices of pharmaceutical companies going up but that's mostly investor sentiments since it will be months before any company comes up with a vaccine for the Wuhan Coronavirus.

I'm going to stay invested with the bulk of my cash in my portfolio, my dry powder will mostly consist of my CPF Ordinary Account which will be progressively deployed if the market tanks by say, 20%?

Choosing to stay invested and not lose sight of the long game

As a lazy investor, it's times like these when I have to keep reminding myself that my investment portfolio is for the long game (at least 10 years). I don't intend to make any big changes to my investment portfolio and continue to make incremental investments every month.

Remembering that I'm going to stay invested for the next 10-20 years, the Wuhan Coronavirus is going to look like a small situation when I look back at this when I retire at 50.

If the prices of those ETFs that I'm investing in are heading on a downward trend, I'm happy to be getting them at a cheaper price. I know that this month's incremental investment is going to average down the equities in my investment portfolio.

Staying healthy is also an investment

Don't be overly-fixated in making investment decisions. Remember that your health matters as well!

Take the necessary precautions to reduce the risks of getting affected by the Wuhan Coronavirus, or any other illnesses.

Eat more healthy food, exercise regularly, and practice good personal hygiene.

Are you changing your investment strategies because of the Wuhan Coronavirus? I'd love to hear your thoughts in the comments below.

Photo by Piron Guillaume on Unsplash

The most important lesson from Mr CPF, Loo Cheng Chuan (that nobody talked about)

I've heard Mr CPF, Loo Cheng Chuan speak on multiple occasions so far. In his recent talk at an event organised by Endowus, he mentioned a very important lesson about financial independence that was rarely highlighted in articles about him.

Who is Loo Cheng Chuan?

In case you have not heard of Loo Cheng Chuan, here's a quick recap.

Loo Cheng Chuan is your typical Singaporean. Married with 3 children, he created a financial safety net for himself by topping up his CPF Special and Medisave Accounts at an early age, and just let it compound over a long period of time to over half a million dollars. Combined with his wife, they have over 1 million dollars in their CPF accounts since reaching 45 years old, and on the way to a multi-million CPF accounts when they retire at 65 years old. He founded a movement called, 1M65 to encourage Singaporeans to inspire Singaporeans that they can get very rich with CPF.

To date, Loo has shared his story at 71 speaking engagements and he has not received a single cent in payment for his talks. He has also been interviewed by several media and blogs about his feat.

What was your dream job as a child?

Don't we all have dreams and ambitions when we were young?

Maybe you wanted to be a professional soccer player, a crime-solving police officer, or even a world famous musician.

But for most of us, we did not chase after our dreams because they get chiseled away, a little at a time as we grow up, by reality.

Many of us ended up in jobs we may not be passionate about, but they pay the bills. 

Having a strong financial safety net allows you to chase your dreams

Here's something I felt that wasn't given enough emphasis in articles about Loo.

The fact that having a strong financial safety net, knowing that you have a million dollars waiting for you at the age of 65 without the need to do anything more, means you are now free to chase your dreams.

Having read through tons of articles and books about retirement planning, I felt this was an important point that deserved more focus.

Loo chased after his business passions

With a strong financial safety net in place, Loo pursued his business passions.

When I heard Loo speak at the Seedly Personal Finance Festival 2019, he talked about founding the 1M65 movement and starting an online business with his wife to sell leather bags.

Fast forward to almost a year later, he and his wife passionately founded a Luxury Fashion Business. Furthermore, he has invested in several startups and holds director or management-advisory positions in several companies.

According to him, his strong CPF safety net has made his multi-business endeavours much easier. If he did not have this financial safety net in place, I imagine he would still be working in a 9 to 5 job, like most of us.

What are you doing to build your financial safety net?

While I like my CPF Special Account for its stability and guaranteed 4% interest rate (until the government announces any policy changes), it's not my only retirement planning tool.

My financial safety net consists of my CPF accounts, investments made through my Supplementary Retirement Scheme account, cash investment portfolio in AutoWealth and my rental property in Cambodia.

What's your financial safety net like? Please share them in the comments below.

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