Cash management is important in financial planning, especially when you’re thinking about building emergency funds or saving for short-term goals. However, most people don’t think about how to maximise the value of their cash in their savings accounts. And for people who do want to maximise the value of their cash, the banks don’t make it easy.
Traditionally, getting the best rate on your money in savings accounts, fixed deposits, or savings bonds meant navigating confusing tier structures, credit card spending, minimum balances, or locking up your funds for an extended period of time to get the rate. We looked at those structures and knew that those restrictions weren’t necessary to deliver a good rate on a cash management product.
So, we introduced an entirely new product category to the cash management space, where you can earn a single rate on any amount without conditions or locking up your funds.
StashAway Simple™ is not a savings account; rather, it’s an ultra low-risk investment with two underlying funds that are extremely liquid and short-term.
As StashAway Simple™ is an investment, there is inherently some risk. Risk refers to the potential value you could lose, or your downside. At StashAway, we classify all of our portfolios by their potential downside. StashAway Simple™ has a StashAway Risk Index (SRI) of 1.7% meaning there’s a 99% chance you’ll not lose more than 1.7% of your entire amount in a given year. For instance, if you put $10,000 SGD into your Simple account, there is a 99% chance that you won’t lose more than $170 SGD in a given year.
Before you even think about rejecting Simple as a viable cash management option because of the risk, remember that keeping money in cash isn’t a zero-risk option. In fact, it’s a guaranteed loss. Idle cash in a savings account loses its value due to inflation, especially when that cash isn’t earning much of a rate, if any at all.
Simple fits into your overall investment portfolio as an ultra-low risk pocket of money for an upcoming expense, emergency fund, or however else you may want to use it. For reference about how it fits into a diversified investment plan, our investment portfolios range in SRI from 6% to 36%, and our Income Portfolio, which is great for dividend investors, has an SRI of 12%.
We’re able to deliver a rate with such a low risk point by investing in two specific investment vehicles. StashAway Simple™ is built with a money market fund (MMF) and an enhanced liquidity fund (ELF).
The MMF is made up of short-term money market instruments, such as commercial bills from financial institutions, and has a maturity of 0.27 years, and the ELF is made up of high-quality debt instruments, and has a maturity of 0.8 years. Using these two funds, we’re able to provide a projected rate that’s comparable to what the banks are offering without the unnecessary hassle of fulfilling conditions such as salary deposits, credit card spends, GIRO transactions, and so on.
The projected rate is a result of us being able to secure a lower expense ratio than what retail investors would have to pay. Additionally, we return to you any rebate that we receive from the underlying funds’ managers. You can learn more about how we allocate your funds and how we arrive at the projected rate here.
As StashAway Simple™ is an investment, the projected return on your investments is subject to change due to economic conditions and central bank actions. As the MMF and ELF invest in money markets, the underlying funds are affected by Singapore’s economic health and trajectory. Though, when applicable, our system will re-optimise your Simple portfolio to maintain the highest possible projected rate within a given economic environment. We will always notify you in the case of a change in the projected rate.
Despite this technically being an investment, we don’t charge you anything for the money you put into StashAway Simple™.
On top of that, the underlying funds offer rebates to the portfolio managers who buy the funds. In most cases, the retail investors don’t get to enjoy this rebate, but we’ve decided to pay forward the rebate back to you with StashAway Simple™, and this is part of the reason why you get an even better rate with us.
The expense ratio and the rebate are both included in the projected rate, you can learn more about the rate here.
If you’re as excited as we are about a new and hassle-free cash management alternative, you can start managing your cash with StashAway Simple™ here.