This is an affiliated post with Endowus. All views, opinions and research expressed herewith are solely mine. The intended audience of this post is for individuals who are below 55 years old. Disclaimer applies.
A while ago, I had talked about Endowus’ Fund Smart, where you can customize your own portfolio with their curated unit trust funds.
I had just created my second Endowus portfolio using SGD 10,000 (currently processing) from my CPF Ordinary Account (OA) funds, and here it is:
If you have noticed, the three mentioned funds are all equities, and you may wonder why this time I had chosen only from one asset class, since I am a believer of diversification. Well, back in May 2020 when I first introduced Endowus, a reader (thanks, Hello World!) gave me an idea of investing a portion of the CPF-OA with equities, while the remaining uninvested part would grow at CPF-OA’s 2.5%/3.5% returns per year.
I had contemplated in starting an experiment with allocating an initial SGD 10,000 from the uninvested part of the CPF-OA and make this a 50/50 equities/CPF-OA portfolio, and track its performance from there, thus creating some sort of a mini CPF-OA environment. However, it would be a bit tedious in maintaining and rebalancing it, especially with the actual calculation of the CPF interest. Therefore, this investment portion would form a sub-portfolio (along with my earlier Endowus one and vested individual shares/REITs) and form part of the overall CPF-OA universe.
Funds Rationale1
These three funds combined would provide me ample geographical, sectoral and economic development stage diversification. Geographical wise, the United States took up about 33.7%, with China coming in second at around 13.0%. The United States and China were ranked first and second respectively in nominal GDP2, a metric commonly used to measure economy size, and I foresee they will continue to hold sway over the global economy. Their combined percentage of 46.7% is enough to expose the portfolio to the two behemoths, yet there is still room enough for exposure to the other economies, like third largest Japan (5.48%) and other countries like India, Australia, etc.
The sectors and industries are distributed, too, with information technology at 22.25%, financials at 18.38%, healthcare at 8.60%, industrials at 7.53%, and so on. This broad approach has an advantage of lowering concentration risk on any one sector.
For economic development stage, as pointed out in the previous section, 50% and 25% of the portfolio is allocated to developed and emerging markets respectively, with some overlap into both from the FSSA fund. On added note, the inclusion of the FSSA Dividend Advantage Fund, besides the overlapping feature stated above, is also due to the fund’s regular distributions, and its selection of companies based on their potential dividend growth and long-term capital appreciation.
Happy Lunar New Year!
Past performances of the funds stated in this post do not guarantee future results.
Click on this link and get SGD 10,000 managed free for six months (SGD 20 equivalent).
Just for the month of February 2021, you can start investing in Endowus with a minimum investment amount of SGD 888. Click on this link to start! (Terms and conditions: #1 – You must be a new Endowus client; #2 – Create an Endowus account from now till 14 February 2021 using the link; #3 – Fund your account with SGD 888 before 28 February 2021).
1 – Information obtained from the funds’ respective fact sheets dated December 2020 (accessed 11 Feb 2021)
2 – Silver, Caleb. The Top 25 Economies in the World. Investopedia. 24 Dec 2020. https://www.investopedia.com/insights/worlds-top-economies/ (accessed 11 Feb 2021)
why not just use the 100% equities (aggressive) managed portfolio? wont that be the same?
ReplyDeleteHi foolish chameleon,
DeleteThanks for your comments.
I had considered it but that would mean an overweight on US-based equities (>50%). In this portfolio, I had selected the Infinity Global over the Infinity U.S. 500 as I would like a more global representation.
Also, this served as an experiment to see if my picks are correct, while earning more returns at the same time.
Cheers!
hi bedokian, interesting school of thought there.
Deleteby using fund smart via your methodology, would it lower the overall TER, as compared to using the managed portfolio? since there are now 3x funds, instead of 4x funds in the latter?
Hi foolish chameleon,
DeleteThanks for asking.
It depends on the individual funds’ expense ratios and their weightages in the portfolio. We can work it out based on the expense ratios and management fees featured in the factsheets.
I am not sure if I am allowed to share Endowus’ “very aggressive” 100% CPF-OA equity portfolio here, since the weightages are shown in the portal after signing in, but after calculations (using the fund factsheets), my overall aggregated expense ratio is slightly higher than theirs by a few basis points, which I find it still acceptable. This is before the trailer fee rebates, which are varied across the funds, so the final results for both combinations might change.
To add, I had considered a few factors when building the portfolio, which includes expense ratios and fund exposure, so some compromise is needed when building that wanted portfolio.
Cheers!
hi B,
ReplyDeletethanks for replying.
i am a existing endowus SRS user. so far been using their 100% equities aka aggressive portfolio, which has been above expectation.
hence thinking of als adding on to using their cpf oa. but still on the fence if should be using managed or fund smart. my only concern are the additional layer of cpf fees, which adds on to the expense. thats why thinking if lowering the TER would compensate for it. but going fwd once, the invested OA amount gets larger, these extra fixed fees will be a smaller percentage.
btw, not sure if you noticed, the funds are also not the same, even if both cpf oa and srs are under the same 100% equities aggressive mode.
Hi foolish chameleon,
DeleteThanks for replying, too.
Yes, investing through CPF would have additional charges. For me (I use UOB CPFIA), each monthly contribution would add in SGD 2.14. Also, a service charge of SGD 2.14 is levied per quarter, per Endowus portfolio, so the total fixed charges would be SGD 2.14 x 12 months + SGD 2.14 x 4 quarters = SGD 34.24. And I agree that as the quantum gets larger, this fixed amount would become a smaller percentage as time goes by.
Yes, noted on the fund difference between the SRS and CPF-OA 100% equities aggressive portfolios. This is understood as the funds for CPF would need to be evaluated by them. The Endowus CPF-OA funds can found in the following PDF:
https://www.cpf.gov.sg/Assets/members/Documents/RCSUT_ListA.pdf
Cheers!