What's the difference between Simple and Simple Plus and Simple Guaranteed?
Both Simple and Simple Plus are cash management portfolios. Both have no minimum balance, no cap on the balance that can earn returns, no investment, insurance, or salary requirements, no restrictions on withdrawals or transfers. Simple Guaranteed too! Except there’s a lock-in of 6 months.
However, there are some fundamental differences between the three portfolios.
Simple provides a projected rate; an estimate of expected actual returns.
Simple Plus provides the yield to maturity, which is the total return anticipated on a bond if held until maturity, inclusive of the interest payments you’ll receive and any difference in the current price of the bond versus its maturity price (which is the same at the point it is issued).
Simple Guaranteed’s rate is the most straightforward – it’s guaranteed.
Risk: Both Simple and Simple Plus are ultra-low risks. However, Simple Plus carries slightly more risk in comparison to Simple. This is because it exposes the investor to a slightly higher level risk in order to seek slightly higher returns. What does this “slightly higher risk” mean for an investor? Well, in the span of a year, there is the potential for brief periods of slightly negative returns in the short term, and the same can be said for brief periods of exceptional returns (exceptional for cash management options, of course). Read more on the comparison of the risk of the two portfolios here. Simple Guaranteed has no exposure to market volatility, but is subject to underlying bank risk.
Recommended holding period: How long you want to keep your cash in Simple is entirely up to you, be it a day, a month or a year. However, with Simple Plus, there’s the potential for brief periods of slightly negative (and positive!) returns in the short term, therefore to reap the full benefit of the rate while keeping risk in check, we do recommend a holding period of at least 12 months. Read more about why here. Simple Guaranteed in contrast has a 6 month lock-in period.
Management fees: StashAway charges a management fee of 0.15% for Simple, and 0.2% for Simple Plus. There’s no management fee for Simple Guaranteed. And all rates for the three portfolios are net of fees!