01 September 2020
Note: As of 1 March 2021, StashAway Simple™ has a projected rate of 1.2%. Read about it here.
From 1 September 2020 onwards, StashAway Simple™‘s projected rate will be 1.4% p.a.
As many of you know all too well, the world is facing uncertain economic times. To stimulate the economy, global central banks keep lowering interest rates. Although this is great news for people looking to borrow money, the lower interest rates also make it more difficult to earn rates on cash.
After continued analysis of the economy and central banks’ decisions, our investment team believes that interest rates likely won’t go back up for the foreseeable future, meaning the underlying funds will be earning less. Given the lower interest rates around the world, the projected rate that we expect StashAway Simple™ to deliver is 1.4% p.a., and that rate will be effective starting September 2020.
You may have noticed that the 1.9% p.a. wasn’t being earned by the funds alone recently. So, instead of lowering the rate a few months ago when the funds weren’t performing as well, we added a rebate to bridge the difference between the projected rate and the actual rate. This is part of our promise of complete transparency to you: We haven’t, and we won’t, communicate a projected rate that we don’t expect to deliver. We also don’t offer a range that you might expect, because we simply aim to give you what we tell you.
Now, you might be asking, “Why doesn’t StashAway just invest in different funds to earn a better rate instead of now offering a lower rate?”
The answer is simple (no pun intended): We fundamentally believe that cash management should simultaneously serve two equal purposes: First, it should keep your cash away from risk; and second, it should grow your cash. In other words, we don't believe in increasing your risk exposure just to grow your cash by a few more basis points, as that would compromise one of the two core principles of cash management. That’s why, for instance, StashAway Simple™ isn’t made up of Fixed Income funds with “variable NAV”, but only selects funds with “stable NAV” pricing. Anything with a floating NAV is not a suitable cash management option, but rather more suitable for medium and long-term investments.
You also might be asking, “Why doesn’t StashAway keep offering a rebate to maintain the 1.9% p.a.?”
Recently, the interest rates have become lower, meaning the rebate would have to be too large for us to sustain. While this product is free to you, we also don’t earn any money on this product. Any rebate we receive from the underlying fund managers is fully reimbursed to you.
We designed Simple to deliver the best possible return with the lowest possible risk point. The math on the projected rate of returns is quite straightforward: StashAway Simple™ returns are the sum of the amortised yield of the two underlying funds, minus fees that the underlying fund manager charges, plus any rebates from the underlying fund manager.
Every week, our investment team reviews the projected rate from our fund managers. In the case that Simple’s projected rate changes, we’ll either inform you ahead of time of a change in projected rate, or, instead of delivering a lower rate to you than the currently communicated one, we may decide to rebate you an amount in order to deliver the projected rate (in 3 decimals).
StashAway Simple™ will keep returning 1.9% p.a. until 31 August. So, this means, for example, that money in StashAway Simple™ from 1 July to 31 August would still earn 1.9% annualised returns. That 1.9% p.a. includes the rebates we calculate daily, and distribute quarterly. We’ll distribute the next round of rebates at the end of October.
Keep in mind that we won’t always give rebates, but it’s our commitment to deliver the Simple rate we advertise.
Though you may be able to find better-projected rates, remember, as we always encourage you to do, to consider the risk that you’re exposing your money to. Not all cash management options out there are the same. Your cash is not part of your financial plan that you should be looking to grow by taking on risk.
If you find yourself open to more risk with your cash, and you have enough set aside for your emergency fund and short-term needs, then you alternatively might want to consider a low-risk investment portfolio instead that would better meet your return expectations. We have investment options with a StashAway Risk Index as low as 6.5%, compared to Simple’s 0.1%.