$$$ KPO and CZM $$$: Endowus CPF/SRS Review

Monday, December 2, 2019

Endowus CPF/SRS Review

When Endowus was marketing about the possibility of investing through CPF, it got me really interested. In addition, the fees are lower if one were to invest using CPF, hence I indicated my interest and was put on their waiting list.

Meanwhile, I was reading about Dimensional Funds here and there on Farma French, the various factors, etc. However, when it launched, I was slightly disappointed.

1. Underlying Funds are NOT Dimensional Funds

The above is a cash portfolio with a -40% loss tolerance. The underlying funds are made up of 80% Dimensional World Equity and 20% PIMCO Bond Funds.

The above is a CPF OA portfolio with a similar -40% loss tolerance. Look at the difference in funds being used. For instance, the Infinity US 500 Stock Index Fund simply tracks the S&P500 with a 0.69% fee/expense ratio (~0.4% after the rebate of trailer fees from Lionglobal) excluding Endowus fee. In comparison, any ETF that tracks the S&P500 will definitely have a much lower expense ratio excluding trading commission. Not even going to waste time elaborating further for the rest of the funds.

My guess is Dimensional Funds are not CPFIS approved, hence they are using unit trusts. You can refer to this - CPFISInvestmentProducts.pdf. This is probably why StashAway introduced SRS but not CPF investment too.

2. Fees
At one glance, it seems that you would be paying lower fees for CPF investment (0.4% vs 0.6% for cash). However, if you take a closer look at the above screenshots, you will see that the CPF portfolio has a higher total cost - 1.12% vs 1.06% for cash. In my opinion, it becomes a lot less attractive because there is already a guaranteed return of 2.5% by not investing/taking any risk. Most importantly, if one cannot predict the future/return of their investment, he/she can definitely control the fees/cost which will indirectly affect the return.

3. Misleading Risk Tolerance
The below shows a portfolio recommended for someone with an extremely high risk tolerance of -60% (losing more than half of the capital).

Despite selecting a loss tolerance of -45% (less than half of the capital), the exact same portfolio was recommended as above.

Anyway, these are the 6 different portfolios:
1. 100% Stocks: -45% to -60%
2. 80% Stocks and 20% Bonds: -39% to -44%
3. 60% Stocks and 40% Bonds: -33% to -38%
4. 40% Stocks and 60% Bonds: -27% to -32%
5. 20% Stocks and 80% Bonds: -20% to -26%
6. 100% Bonds: -13% to -19%
7. k thx bye: 0% to -12%

Endowus explained how their risk tolerance and asset allocation works in the FAQ

I pointed this out because it is not as intuitive as what StashAway is offering where every change in the risk tolerance/index will result in a different portfolio being recommended to the investors.

4. Buggy/Inconsistent Forecast (Fixed about 2 days after the initial post)
I played around with it and is no longer experiencing the inconsistent forecast. Long story short, they reached out saying it has been fixed but I was too busy to update. You can refer to our email conversation below.

### No longer valid
I am not sure if this is a "feature" or a bug but the forecast that was shown to me changes even if I kept everything (risk tolerance, initial investment, and monthly investment) constant. It looks like they are using some random generator to make the forecast appear different. Why???

This is an SRS portfolio with maximum risk tolerance (-60%). You can see that it is made up of 100% stocks and has a projected annualized return of 7.75% with a standard deviation of 13.57%. My initial investment will be $2,000 followed by $500 monthly. At the end of 30 years, my deposits/capital will be $182,000 in total. You can see that the forecast is showing an 18% probability that I will underperform a 2.5% return (CPF OA interest). The median/most likely outcome is that it will grow to $450,492.

Here comes the annoying part. To replicate this bug/issue, one can just type in the same amount into the monthly investment and the chart will refresh/regenerate.

Everything was kept constant but I am shown a vastly different forecast. The forecast is now showing a 5% probability that I will underperform a 2.5% return (CPF OA interest). The median/most likely outcome is that it will grow to $743,051.

StashAway forecast only changes when there is a change in the variables which make much more sense. Another interesting observation is StashAway 22% risk index portfolio median/most likely outcome is much higher at $966,801. Is it a case of fees eating into returns or a case of one being too conservative/aggressive in the forecast? I am too lazy to dig further.

Will I invest using Endowus? 
Yes and no. I will not be investing using my CPF OA because I feel that it just isn't worth the risk considering that I can always transfer to SA for a higher risk-free return of 4%. Alternatively, keeping the excess money in OA will provide the liquidity/buffer for our mortgage/housing loan.

I will not invest my cash as well given that the underlying portfolio will be identical when investing through SRS. Going the SRS route means lower fees + some tax savings while the trade-off would be losing the liquidity of your cash.

Since it is near the end of the year, I will most likely be topping up SRS and giving Endowus a try soon. Why not continue with StashAway? Initially, it was just out of curiosity on the possibility of investing using CPF OA then I read an article by Kyith on Investment Moat - Dimensional Fund Advisors (DFA) Funds for Singaporeans – My Comprehensive Guide and discovered something quite shocking - estate duty/tax. Shall keep that for another article!

There are two sides to every coin. Read this article by Endowus on why we should invest using our CPF OA - And this is why we advise people to invest their CPF

You might be interested in this too:

Anyway, Endowus has reached out and offered a masked referral link for our readers! You will get S$10,000 managed free for 6 months ($20 equivalent) and we will get $20 too!

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  1. any referal for endowus SRS? =)
    0.4% is much more palatable than the 0.75% DBS digiportfolio that alot of bloggers have been touting the sponsered post.

    1. Hi foolish chameleon,

      Yes, they do have referral as well - $10,000 advised for free for 6 months (equivalent to $20 in credit to offset your Access Fee) and unfortunately, I will not be sharing mine. My secret identity is worth more than that. Hahaha.

      Well. Like you mentioned, sponsored post. lol. I looked at it when it first launched too. Nothing really exciting. Given the size of the bank, they could have easily undercut all the robo with much lower fees to make themselves much more attractive. Plus the bank already have our deposit so people will be more willing to give it a try but 0.75% is just meh...