A close friend of mine recently asked for the best option to invest some spare cash that she has just sitting around in her bank account, drawing miserly interest rates. As someone without any business or finance background, she preferred conservative and low-risk products, and was happy to consider investments with low potential returns of 3% per annum.
As an absolute beginner, my friend was not comfortable with investing her money actively via the stock markets or other active investments. However, she is also fully aware that keeping cash in saving accounts will simply erode their value over time, especially with the rising global inflation rates. I see this as a very common problem faced by many young adults – we know the importance of financial literacy, yet why is this not a key priority for so many of us?
Obstacles we face in managing our own personal investments
1) Limited Time and Energy – Prioritising families and careers
It can be tough juggling a full-time career and family life, especially if there’s children in the picture. The first few years of a child’s birth can be especially challenging for parents as they learn to cope with the young one in their lives. Sleep or even just time to recharge are often considered a luxury.
The period between 30s-40s is also when most people concentrate on growing their careers and climbing the corporate ladder to maximise their earning potential. With rising cost of living and pressure on household finances, many of my friends opt for the dual-income model with both husband and wife working to support their lifestyle. Work makes up a huge component of their lives.
Therefore, after a hard day at work, one wants to do nothing more than to kick back, relax, have a drink and watch some Netflix. Financial planning or investing tends to be neglected or brushed aside as an afterthought, just like any other New Year Resolution that gets thrown aside once we head into February.
2) Too much information for beginners to apprehend
There is so much information available online that a beginner investor often stumbles before he/she can get started. For the non-finance trained individuals, investing can be so boring and abstract that sometimes it feels as if we are all going down the rabbit hole. For there are a myriad of choices for investors, from traditional insurance plans to various asset classes like stocks/bonds/ETFs, to speculative investments like cryptocurrencies. It’s hard to decide which asset class or stock to buy, if we do not have sufficient knowledge and understanding of what we are investing in.
Robo-advisors – a popular investing option for beginner investors
The popularity of Roboadvisors have surged in recent years as investors are attracted to their low fees, diversified and passive investment nature. As the solutions provided by most robos are automated and algorithm-driven, they are able to lower their management fees drastically compared to traditional investment products. Most robos also have low capital requirements, drawing in new investors with small initial investment capital.
In fact, the Robo scene has expanded so rapidly in the last few years that it has become harder for beginners to decide which Roboadvisor is best suited for their needs. Time and effort are needed to compare and research into the different offerings, to review the various portfolio allocation and performance, and to make a decision as to which company to invest with.
Why I recommend DBS digiPortfolio
As a beginner investor with 2 years of active investing experience, I find DBS digiPortfolio very suitable for me:
1) Eliminate the Paradox of Choice
I really like that DBS offers 2 ETF portfolios to choose from – Asia or Global Portfolio. This eliminates the paradox of choice and helps with the decision paralysis that I personally encounter when confronted with too many thematic portfolios.
The Asia portfolio consists of Singapore-listed ETFs that track the performances of indices such as the STI, SGD Bonds and REITs which local investors are familiar with. And it comes with no pre-requisite like the Customer Account Review (CAR), making it ideal for new investors.
If you are a slightly more seasoned investor who appreciates a more diversified portfolio, the Global portfolio does just that even when you have only a small capital to start off with.
The only decision that I need to make is whether I want my portfolio to be Asia, or for it to be a Global Portfolio. This is as simple as it can get.
2. Trust in DBS
With its strong heritage, I have faith in DBS’ ability to ride through tough times. DBS has so far managed to tide-through COVID-19 relatively unscathed and has been recording strong growth in post COVID 2021. This gives assurance as I know that the bank that is managing my investment is well-prepared and poised for success.
3. A Hybrid Robo-Advisory Solution
Most Robo-advisors in the market provide automated, algorithm-driven investment services with little to no human supervision. DBS has gone one level up by using a hybrid approach, where they combine the efficiency of robo-technology with the best of human expertise from their team of portfolio managers and market insights from the Chief Investment Officer office. Retail investors, like you and I, now have access to the bank’s top experts through these curated portfolios that are managed by them. Coupled with the robo-technology, the team of experts at DBS ensures trades are carried out at scale and swiftly.
4. Flat Management Fee
There are no sales charges, platform fees and switching fees. All you need to pay is an all-inclusive 0.75% per annum management fee. If you dive deep into the analysis and comparison, you will realise that the fee charged by DBS is comparable to many of the other Robo-advisors when investing small sums of money. To achieve lower commission rates offered by other Robo-advisors, you might be required to invest an amount that is greater than $20k-$100k.
5. Start Investing From as Low as S$1000/US$1000
To cater to beginners who might not have much capital to start your first investment, DBS digiPortfolio allows you to start your investment from as low as S$1000/US$1000, depending on the portfolio you have chosen. Since there is no sales charge and platform fee, you can also choose to invest regularly every month or every other month, which acts as an enforced savings to reach your financial goals.
6. Convenience of DBS Ecosystem
Another key reason to recommend DBS digiPortfolio is the convenience of having all your investment under DBS/POSB. Most millennials’ first bank account is likely a POSB Savings Account that our parents opened for us when we were still a child, and the account has been with us ever since. As an existing customer of DBS/POSB, you’ll have a seamless investment and banking experience via the same log-in and DBS mobile banking app.
Starting your own digiPortfolio investment is so simple:
- After logging in to your DBS digibank account (you can do it on desktop or through the digibank app), select digiPortfolio under the Invest Option:
- Choose to invest in either Asia Portfolio or Global Portfolio:
- Select your risk level:
If you have a higher risk appetite, you can decide to take on a slightly higher risk profile and select Risk Level 4 (Fast n’ Furious) which is made up of 80% equity, 15% fixed income and 5% cash. More conservative investors can choose lower risk levels.
The Projected and Historical Performance for your selected risk level would be shown on the same page:
- Finally, just answer 1 simple question and you are now good to go.
7. Additional bonus – Multiplier account!*
A multi-currency account (MCA) is needed before you can start your digiPortfolio to handle the US$ transactions. As an existing Multiplier account holder, you will be pleasantly surprised to know that your digiPortfolio investment would qualify under the Investment category, helping you earn up to 3.00% p.a. interest on your DBS Multiplier account. Do note however that this increased interest would only apply for the month you made an investment and further investments are required in subsequent months if you want to use this to hit your Multiplier account’s Investment requirements.
Here’s why Alvin also recommended the digiPortfolio to his wife.
Overview
I think DBS fundamental objectives with digiPortfolio is to make it simple and easy for everyone to start their own personal investment journey. They have definitely managed to achieve that with every single touchpoint of the customer’s digiPortfolio journey.
You can find out more about DBS digiPortfolio here.
Disclaimer: This is a sponsored article by DBS. The views and opinions expressed in this post are my own and do not reflect the position or views of DBS Bank Ltd. DBS Bank Ltd does not act as adviser and does not assume liability for the information and opinions provided in this discussion. Any view, opinion or recommendation expressed in this post does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should seek advice from a financial adviser regarding the suitability of any investment product, taking into account your specific investment objectives, financial situation or particular needs.
*SGD deposits are insured up to S$75k by SDIC
