Buying into the stock market can be effortless with Robo Advisors – but is it for you?

Even for someone like myself who works in technology and is relatively good with numbers, the world of investing can be pretty cheem and hard to understand. If you’ve ever joined a conversation with friends discussing the stock market and were mystified by terms like “yield” and “blue chips” (can eat one or not ah?), you’d know what I mean. 

Luckily, with the advent of robo advisors in recent years, you won’t need to become the next Warren Buffett to start investing your money. Literally all you have to do is hand over your money and let the robo advisor’s fancy algorithms do all the work. That’s it!

Robo Advisors – neither robot nor advisor

According to Investopedia, Robo Advisors are “digital platforms that provide automated, algorithm-driven financial planning services with little to no human supervision”. Simply put, they are digital tools that help you to manage and automate your investments. You deposit a sum of money, indicate the level of risk you are willing to take, and the system will help you invest in the stock market – by deciding what products to put your money in. It’s kind of like your Financial Advisor, but run entirely online and with minimal input from you.

Ok, so this Robo Advisor can use one or not?

Still confused? Relak lah, bro – I’m here to break it down for you. Here are some factors to think about when deciding whether Robo Advisors are a suitable way for you to invest your money.

Consider using a Robo Advisor if:

• You do not want to manage your investments: If you don’t have the time to actively manage your portfolio, or simply prefer to leave it in the hands of the professionals, Robo Advisors can automatically take care of everything for you.
• You want to stay invested for the long term: Most Robo Advisors will put your money in ETFs (exchange-traded funds), which invest in a range of assets that typically includes a combination of stocks, bonds and more. These are simple instruments that let you invest passively for the long term, as opposed to seeking short-term gains by buying and selling frequently.
• You have little money to invest: Some Robo Advisor platforms allow you to start investing from as little as $1, making them a suitable way to dip your toes into investing if you have low initial capital, or if you don’t want to commit too much of your money to the stock markets.  
• You do not want to spend too much on management fees: In the past, if you needed help to invest your money, you would need to hire an investment manager – who would charge you a hefty 2-3% of your total investment every year. Robo Advisors can help you at just a fraction of the cost, with typical rates ranging from 0.5-0.8%. 

A Robo Advisor may not be right for you if:

• You need to be in control of your investments: Robo Advisors invest for you automatically – that means you have no control at all over where they put your money in. For example, if you were interested in the tech sector and wanted to invest in it, you would not be able to do so.  
• You want to speak to a real person: If you prefer to have a personalised relationship with your financial advisor, then robo advisors aren't for you. As a fully digital platform, it is not possible for you to talk directly with a human advisor. 
• You want to learn more about investing: Letting a Robo Advisor handle your investments keeps you from being actively involved in building and managing your portfolio. That means you won’t be growing your knowledge, learning how to make decisions on what and when to buy and sell, and doing your proper due diligence.

Steady lah. Then which Robo Advisor to choose?

The number of Robo Advisors in Singapore has grown steadily in the past couple of years, with many banks also recently jumping on the bandwagon. Here are some of the major local players:

• Stashaway, Autowealth: The OGs of the scene, around since 2016
• Endowus: Allows investing of CPF and SRS funds
• Syfe: Offers REIT (real estate investment trust) specific portfolios
• DBS digiPortfolio, OCBC RoboInvest: Generally pricier, but offers the familiarity of a brand name

Think carefully before investing

All Robo Advisors in Singapore are regulated by the Monetary Authority of Singapore (MAS). However, MAS doesn’t want to impede digital innovation, so the licensing criteria is relatively relaxed compared to other financial institutions. This means that it is fairly easy for Robo Advisors to operate even if they lack the usual corporate track record requirements, so be very careful and do your homework before choosing to put your money in one!

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