[July 2021 Update] StashAway Simple is not that simple after all

This is an updated article from the original article posted on Feb 2021. Before continuing with the post below, it is highly recommended to read the first article here to get a deeper understanding on StashAway Simple.

On 18th June 2021, StashAway officially announced that the underlying fund in StashAway Simple will be changing from Eastspring Investments Islamic Fund to AmIncome Fund. The change was because of the uncertainties in how the original underlying fund in StashAway Simple will be taxed in the future. The change was completed on 25th June 2021.

As of today, StashAway Simple projected rate remains at 2.4% p.a. despite the change of the underlying fund. You will still earn returns every day, but returns will be paid out on a monthly basis. However, I realize that there are other changes that are not being highlighted.

Hence, I decided to share more on the changes and its impact to the investor.

Let’s take a look on the details of its underlying fund – AmIncome Fund

Which fund performs better? Eastspring or AmIncome?

Below is the short-term and long-term performance returns extracted from their fund factsheets.

So, what are the other major changes?

1. Shariah compliant -> Non-shariah compliant

The investment strategy of Eastspring is to invest in Islamic money market instrument and/or deposits. As for AmIncome Fund, it is a conventional fund with a mix of short-term to medium-term corporate bonds and money market funds.

Is it better to put your money in Shariah-compliant or conventional fund?

As of today, there are no specific indication that returns from Shariah-compliant funds are higher or lower than conventional funds in Malaysia. You may read more here.

2. 100% money market -> 50% corporate bonds, 46% money market, 4% commercial papers

What are corporate bonds? Is there any difference between money market fund and corporate bond? Well, previously I’ve written an article on things you need to know about money market fund. Read here.

As for corporate bond, it is a debt instrument which investors lend money to corporations. In return, the bond issuer (corporation) will pay an interest (also known as coupon) to the investors. Interest payments are at predetermined intervals, usually annually or semiannually. At maturity the bond issuer will make repayment on the principal amount.

It is different compared to loan as bond is highly tradeable. It means that you can either opt to sell the bond at a bond market prior to its maturity or await for bond redemption on maturity.

AmIncome Fund has corporate bonds with CIMB, Hong Leong, DRB-HICOM etc. The weighted average interest yield for corporate bonds is 3.45% - 3.49% as of 31st March 2021.

As for commercial papers, it is similar to bonds. However, its maturity is much shorter, which is normally around 270 days or less.

3. StashAway Risk Index (SRI) 1.8% -> 0.1%

StashAway Risk index is a simple indicator to help us visualize how much risk we would be exposed for respective investment. It basically answers, “how much could I possibly lose on my investment in any given year?”. To be precise, SRI 0.1% denotes a 99% chance of us not losing more than 0.1% of our investment.

AmIncome fund has a lower risk index due to different investment strategy as compared to the previous fund. The investment strategy of AmIncome focus on investing short-term and medium-term bonds with good credit ratings that are deemed to have a superior to adequate capacity of meeting their financial obligation to their investors. Moreover, in the event that the credit rating of the bond instrument falls below the minimum rating, the fund may dispose of the investment.

4. Net fee 0.125% -> 0.5%

Net fee = Total Expense Ratio – Rebate from Fund Manager

It is surprisingly that the projected return rate remains the same at 2.4% despite net fee has increased significantly due to the change of underlying fund.

*Information provided by StashAway customer service representative.

My actual experience with StashAway Simple

To validate the projected rate of 2.4%, I ran a pilot account with StashAway Simple with RM500 deposited in January 2021. Here is the return obtained so far:

Capital – RM 500.00

Total 3-month return – RM 2.85

Rate of return (% per annum) – 2.28%

As you can see above, the return is accrued daily and paid out monthly, while rebate is only refunded on a quarterly basis. With consistent reinvestment of dividend and rebate, I believe subsequent dividend and rebate payout will be higher down the road, and eventually achieve its projected rate of 2.4% p.a.

Hotcup’s Verdict

Despite the changes, StashAway Simple is still one of the best ways to save your emergency funds or extra money to generate some returns. For newbie investors, investing in money market fund is definitely a good way to kickstart his/her investment journey due to its low initial investment.

Remember, regardless of the investment type, do your research before you invest!

Disclosure: The accuracy of the material found in this article cannot be guaranteed. Past performance is not an assurance of future results. I am neither an expert nor certified trader, and the views contained in this post should not be taken as an indication to buy or sell. This article is solely for reference only.