Key Takeaways: What is Robo-Advisory and is it right for you?

Stephanie Leung, Director & Head of StashAway HK and Group Deputy CIO, explained to us what a robo-advisor is, how it works and what are the advantages.

Here are three take-aways:

  1. Biggest advantage of a robo-advisory: Saves time and efforts as you don't need to manage your funds yourself!

  2. Diversification is the only “free lunch” there is to protect your portfolio and maintain the potential for growth.

  3. You will benefit from constant monitoring, rebalancing and re-optimization to maximize your risk-adjusted returns through sophisticated algorithms.

If you are researching for a potential robo-advisory, you can ask (not only) the following questions:

  • How do they ensure the portfolio allocation they offer you matches your financial risk appetite and goals (e.g. via a questionnaire in the beginning)?

  • How do they ensure the right investments are chosen (e.g. via a professional investment team that continuously monitors ongoing developments and chooses providers)?

  • Can you access your funds all the time (e.g. is there a lock-up period or not)?

  • Is there a minimum investment?

  • Do you have transparency on the portfolio developments (e.g. in app, newsletter, statements)?

  • How high are the fees (between 0.2-1% seems market practice)?

  • Do they have thematic investment strategies that could be interesting for you (eg ESG, Crypto, new Technologies etc)?

  • Bonus: Do they offer educational sources, such as events, webinars, podcast etc.? That is always a plus and shows integrity.

Three of our own members shared their investing approach and they have helpful concepts to share:

  1. No need to be an expert to make smart decisions on how to manage our money, we all have the same questions to figure out.

  2. Create a bucket system for different goals which follow different strategies, for example;

real estate in 10 years vs retirement in 25 years.

  1. Use providers according to their unique advantage, for example when you find a service provider with special focus/knowledge in certain regions or industries that you want to diversify in.

  2. Make use of new technologies, such as Robo-advisors and automate the investment management, but find a provider that matches your individual needs.

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