We’re excited to introduce our new cash management portfolio: StashAway Simple™ Plus. Simple Plus is our Singapore Dollar cash management portfolio that offers a projected rate of 4.6% to 5% p.a. on any amount you save.
Risk management has always been a core principle of portfolio management at StashAway. So when designing Simple Plus, our investment team made sure you’d get the best possible rate while minimising the portfolio’s drawdowns as much as possible. After all, it is a cash management portfolio!
You might be familiar with the adage, “high risk, high return.” The reality is that this applies just as much to bonds as it does to tech stocks.
On one end of the cash management spectrum, you have risk-free options, such as savings accounts, which provide guaranteed rates. On the other end, you have investments in low-risk securities, such as money market funds and short- and ultra-short duration bond funds.
Simple Plus’s underlying funds fall under two categories: short and ultra short duration bond funds. And the mix of the two provides you with the best possible return while keeping risk in check.
The three underlying funds for Simple Plus are:
LionGlobal SGD Enhanced Liquidity Fund (20%)
Nikko AM Shenton Short Term Bond Fund (35%)
LionGlobal Short Duration Bond Fund (45%)
Nikko AM Shenton Short Term Bond Fund and LionGlobal Short Duration Bond Fund are the short duration bonds contributing to the higher rate, but they also carry slightly higher risk.
LionGlobal SGD Enhanced Liquidity Fund is the ultra-short duration bond fund that helps to balance the risk.
(Read more about the types of underlying funds in different cash management options and their associated risks.)
With a diversified mix of high-quality short and ultra-short duration bond funds with great track records, Simple Plus sets you up for a competitive rate.
In an economic environment with looming rate hikes, it’s possible that Simple Plus could experience short-term losses, especially if central banks raise rates faster than markets expect. This scenario occurred in late 2021 and the first half of 2022.
Simple Plus is a great low-risk investment option, though the potential short-term volatility wouldn’t make this the best place to park the cash you need in a couple of months. But if you’re looking for a solid place for your cash, Simple Plus could be just what you’re looking for.
Simple Plus’s projected yield is a range because some of the underlying funds’ yields are sensitive to daily market movements. That means that your Simple Plus returns could fluctuate in the short term, and can potentially experience brief periods of negative returns. But, in the longer term, you can expect to earn the projected rate.
We recommend you hold your cash in Simple Plus for at least 12 months. Why? Remember, Simple Plus’s underlying funds can experience short-term volatility. So, be prepared to ride out short-term dips for longer-term gains.
Simple Plus has a higher projected rate of returns than StashAway Simple™. This is because it exposes the investor to a slightly higher level of risk to seek slightly higher returns.
What does this “slightly higher risk” mean for an investor? Well, in the span of a year, there can potentially be brief periods of slightly negative returns. But there can also be brief periods of exceptional returns (exceptional for cash management options, of course).
To compare Simple and Simple Plus, Simple earns a projected 3.3% p.a., while Simple Plus’s projected rate is 4.6%-5% p.a.
When choosing a cash management portfolio, it’s important not only to look at the rate. Instead, ask yourself, when do you need that cash? Just as any investment, if you need the money (liquidity) fairly soon, then a lower-risk option (StashAway Simple™) may be more fitting. And with longer time horizons, investors can afford to weather some ups and downs given that the long-term trajectory of the fund is upwards.
Simple Plus is free until 30 June 2023. Afterwards, the management fee will be 0.05% p.a. The fee will always be embedded in the projected rate of return, and the assets you have in Simple or Simple Plus won’t be included in your investment portfolio management fee calculation.
Ready to earn more on your cash?
Simple’s underlying funds have a very short duration, which means that its funds mature relatively quickly compared to long duration funds. Simple’s funds therefore roll over frequently to repay their principal and coupon.
Simply put, this short duration allows Simple to take advantage of increasing yields, and allows us to increase its projected returns. It’s also why we expect Simple’s rate to continue rising above 3%+ p.a. in the next few months.
Similarly to Simple, Simple Plus also benefits from increased interest rates, as its underlying funds’ investments mature and roll over into higher yielding ones. Simple Plus is able to achieve higher rates than Simple because it includes funds with slightly longer durations and slightly higher risk.
This higher risk can expose your portfolio to short-term losses in an environment with upcoming rate hikes. But, that volatility won’t affect your portfolio so long as the underlying funds are held to maturity, which ensures that they reap the principal and indicated yield back at the end of their duration. That’s why we recommend you hold your cash in Simple Plus for at least 12 months.
And, since much of the rate hikes have already happened, the general sentiment in the market is that interest rate volatility will reduce. Hence, we estimate that Simple Plus’ performance will also stabilise.
Based on market conditions as of 8 December 2022.