Co-founder and CIO
If you were to compare your StashAway portfolio to your friend’s StashAway portfolio, you’d most likely notice that you each have different percentages of different ETFs to make up your individual portfolios.
This is what is referred to as your ‘asset allocation’, and we design it to best suit your unique risk tolerance, time horizon, and deposit plan. Why does this matter? Because it’s important that the particular asset allocation (percentage of a security, and in StashAway’s case, an ETF) is maintained, because over time, the value of your portfolio will grow as a function of market and economic dynamics, and how our investment strategy manages the portfolios throughout time.
Portfolio fluctuations aren’t a bad thing - they're natural! But, how a manager handles the fluctuations is what differentiates a good manager from a great one. Your portfolio’s value will grow as a result of the increasing value of the underlying assets (the different ETFs in your portfolio). In other words, as your ETFs increase in value, your portfolio will also grow. However, not all securities’ values increase proportionally. That means that, depending on market activities and economic trends, the value of one security may skyrocket, while another security may not change very much. This occurrence is a result of how different asset classes perform in different economic environments. The reasons for that are absolutely fascinating, but for another conversation at another time (hint: check out more in the StashAway Insights to learn all things investing, personal finance, and StashAway).
What you need to know here is that our technology checks your portfolio every day to make sure that no security has any significant swing in value. What’s considered ‘significant’, you ask. Great question. We adjust this swing in value when the security change deviates more than our predetermined percentage from the target allocation. This is called ‘rebalancing’, and with us, it’s automatic, intelligent, included in the low fee, and spot-on accurate.
There is also the chance that our investment team decides that your portfolio’s asset allocation - the combination of ETFs that we selected - needs to change drastically. This is completely normal, and the portfolio change is a good thing. It’s not a preventative measure, and it’s not a ‘oh no we messed up and need to fix this’ measure.
It’s like putting in players with different skills against a team that can’t compete with those skills. The change doesn’t happen often, though. We change portfolio asset allocations for all portfolios (if you elect to allow us to do so, which we strongly recommend) when there are major economic shift indicators. You don’t have to worry about what those indicators are to understand that we will make sure you always have the most ideal asset allocation to withstand and perform in any given economic environment.
We call the process of rebuilding a new portfolio ‘re-optimisation.’ This is the bread and butter of what we do, and is what makes our investment strategy so much more advanced than other managers’. Traditionally, only high net-worth individuals and institutions had access to this level of investing.
Now, we’re bringing it to you, because we believe that everyone should have access to efficient, intelligent investing. We call it ERAA (Economic Regime-based Asset Allocation), and it’s really cool.
To learn more, check out our investment strategy explanation here: https://www.stashaway.sg/r/stashaways-asset-allocation-framework.