Invest for the long game

To calculate the potential drawdownof a portfolio in a year, we use Value-at-Risk (VaR). At StashAway, we use 99%-VaR, which means a portfolio has a 99% probability of not losing more than a given percentage of assets in a year.

Here’s an example: A StashAway portfolio with $100,000 HKD and a StashAway Risk Index of 10% has a 99% probability of not losing more than 10% or $10,000 HKD in a year.

Rebalancing:

When a particular asset reaps significant gains relative to other assets in the portfolio, its market value weight increases above target allocation. Without rebalancing, the portfolio is increasingly concentrated in the outperforming asset class hence raising risks. Our algorithm checks customer portfolios daily, and performs rebalancing when allocations deviate from targets by more than our "optimised" bands. This can happen weekly, monthly or quarterly, depending on the markets' volatility and performance.

Re-optimisation:

Returns and risks of each asset class change when the economic environment changes. For example, between Jan-1982 and Dec-2016, the S&P 500 returned +16.4% year over year (yoy) in "disinflationary growth", -10.3% yoy in a "recession", +8.8% yoy in "inflationary growth" and 2.7% yoy in "Stagflation". To optimise customers' portfolios, StashAway builds portfolios that consist of a mixture of asset classes optimum for a given economic environment. Our investment framework, ERAA (Economic Regime-based Asset Allocation), identifies and signals a change in the economic cycle and our technology automatically re-optimises portfolios’ asset allocations. This change in asset allocation is important because it allows us to manage risk and improve returns in different economic environments. This change is "strategic" (can happen once a year to once every few years) but may be as frequent as 2-3 times a year if there is a lot of economic uncertainties.

When investing as an individual, there are minimum trade sizes and high transaction costs imposed on the account. This makes investing as an individual cost-prohibitive.

With StashAway, you will benefit from the constant monitoring, rebalancing, and re-optimisation that we provide. Moreover, StashAway is able to offer fractional shares to make your portfolio more precisely allocated, which is nearly impossible if you were to do it on your own.

A single return figure (Time-Weighted Returns vs Money-Weighted Returns) does not tell the whole story of how well a portfolio performs.

Returns are one thing but the level of risk exposure your portfolio has in achieving those returns is an entirely different matter. 

Remember to consider how much risk your portfolio manager exposes your money to in the name of getting your returns.

We have taken every possible measure to protect your assets, from requiring two-factor authentication for any changes and identity verification for withdrawals, building a secure server infrastructure to protect you from cyber attacks, and partnering with a large bank to store your assets.

To learn more, please visit this link.