I’m going to outline some strategies after using various robo advisors in Malaysia for a while. Robo advisors in Malaysia has gone mainstream among the millennial generation. The robo advisors available in Malaysia are Stashaway, MyTheo, Wahed Invest, Raiz Invest and Akru.
These are not profit maximization strategies but are meant to protect capital while at the same time not going too aggressive until your capital is being eroded. This post is not about recommending which robo advisor to use but more of a general strategy.
First, I’ll share my philosophy on using robo advisors. I am at the opinion that robo advisors are a great tool for savings instead of investing. To some people, the word robo advisor sounds like the app can use AI (artificial intelligence) to invest and earn money for the user and maybe beat humans. This is totally incorrect, you cannot beat humans fund managers just buying ETFs and mutual funds without going with risky trading strategies and investment products. Robo advisors (at least in Malaysia) do not trade commodities or futures, robo advisors also do not take huge bets shorting markets or stocks. Therefore, you must only use robo advisors just as a savings tool, use it to save money for a certain goal. Those who claim their robo advisors can beat human fund managers are lying and probably selling a scam.
Now let’s get into robo advisor investing strategy, it’s not sexy or get rich fast method but it will supplement your other investments (mutual funds, stocks etc).
There’s 3 general approaches to it :
Method 1 (easiest) - Balanced/Moderate risk
For the average person, I’m recommending going for a balanced kind of portfolio.
Method 2 (averagely difficult) - Aggressive but with DCA
For the aggressive investor who wants to use aggressive portfolio, go ahead but enable DCA (Dollar Cost Averaging*),do not invest large lump sums but invest a bit by bit.
Method 3 (difficult) - Selectively aggressive
To buy into aggressive portfolio during market dips. For example, when KLCI or Nasdaq tanks, enter the robo advisor with lump sums of money.
Of the 3 methods, method 1 is the easier, just go for a balanced portfolio. My 2 cents opinion is not to take on conservative portfolio as these portfolio returns are very similar to a normal bond funds and fixed deposits. As such, there are no additional benefits using a conservative portfolio, might as well just invest in normal bond/sukuk funds.
.................................
Personally I use a hybrid of all 3 methods
1) My portfolio is set to balanced/moderate (Method 1). I don't use conservative at all, I also don't use aggressive mode except for some instances for experimentation (testing robo advisor)
2) I will not use DCA (Dollar Cost Averaging) but will put in lump sums when there is market turmoil to capture the market lows. (Method 2 + Method 3) . Another variation is during market lows my portfolio will be at aggressive and then I will change it to moderate when market bounces back. Basically you invest more when the market tanks, almost like doing a doubling down in casino except this isn't a casino 😀.
Practicing point 1 and point 2 enables me to leave the portfolio alone for long periods of time without active monitoring. My downside is protected by having a balanced fund and also buying at dips. That gives me more energy to concentrate on other investment vehicles (futures, stock market trading) that requires higher level of monitoring and active participation.
All these methods/strategies can also be used for mutual funds/unit trusts but is more suitable for robo advisors as robo advisors for the following reasons :
1) no sales charges (lower entry)
2) invests into basket of assets instead of individual stocks (eg ETFs, PNB funds)
3) seamless and fast to execute investments from mobile app
"Sikit sikit lama lama jadi bukit->gunung 😀 ⛰️"
One thing clear is you can't make a quick buck investing in robo advisors, a lot of people think the robo advisor is some magical black box that will automate your profits quick after investing money in it In reality, robo advisors are using your investments and further investing into baskets of funds (ETF, mutual fund, unit trust) which are already diversified by itself already. This will reduce the volatility in your investments (eg investments going up and down) by protecting the downside risk but it will also not create extraordinarily leapfrog profits.
The world we live today is about instant gratification, everyone wants things fast but robo advisors are not the magic pill to financial freedom. Robo advisors cannot give you crazy returns like other speculative investment schemes because their investment products are baskets of stocks/funds (eg ETF, unit trusts) which by itself is very diversified. You should just automate your investing in robo advisor, just put in lump sum or DCA and forget about the investment, let the robo advisor do its job, then you focus on your purpose in life whether is building a family, going up the career ladder or doing business.
"Automate your savings with robo advisor and focus on your purpose "
I've included links to my articles written on all the robo advisors in Malaysia below ⬇️.
*Dollar Cost Averaging Definition
Dollar-cost averaging (DCA) is an investment strategy in which an investor divides up the total amount to be invested across periodic purchases of a target asset in an effort to reduce the impact of volatility on the overall purchase. It basically means you periodically add in investments over a period to average out your cost of investments. Losses won’t be too big and profits also won’t bee too high but is safer than doing 1 lump sum investment.
.................................
⚓ Links
👉Raiz Invest (Australia)
https://propfessor.blogspot.com/2020/06/raiz-invest-fomerly-acorns-malaysia.html
👉Wahed Invest (US)
https://propfessor.blogspot.com/2019/11/wahed-roboadvisor.html
👉Stashaway (Singapore)
https://propfessor.blogspot.com/2018/11/stashaway-roboadvisor-referral-link.html
👉MyTheo (Malaysia/Japan)
https://propfessor.blogspot.com/2019/10/mytheo-reboadvisor-referral-code.html
👉Akru (Malaysia)
https://propfessor.blogspot.com/2020/10/akru-now-malaysias-home-grown-robo.html
📜Ads
I'm also involved in micro-investing with Raiz Invest robo advisor where you can easily invest your spare (in PNB variable rate funds) change from your Maybank account. If you join using this link, we will both get RM5 when you use my invite code👉 https://links.raiz.com.my/aTYk
