Economic Regime-based Asset Allocation, or ERAA®, is the intelligent investment framework that minimises your risk and maximises your returns.
What is Economic Regime-based Asset Allocation?
Economic Regime Asset Allocation
We call this change to your asset allocation “Re-optimisation”.
- An economic regime change
- Uncertain economic conditions flagged by our Risk Shield
- A change in valuation of an asset class
More about ERAA® and our investment approach
Frequently Asked Questions
What are the assumptions of ERAA®, StashAway’s investment framework?
StashAway’s Economic Regime-based Asset Allocation (ERAA®) framework builds and manages portfolios by targeting different levels of risk, attempting to maximize net investment returns at each risk-point.
The framework is dynamic and strategic in nature, and it is built on 3 pillars: (i) Economic Regimes, (ii) Risk Shield and (iii) Valuation Adjustments.
The First Pillar (Economic Regime) is at the core of ERAA®’s portfolio construction logic and uses economic data to adjust the target strategic asset allocation at each risk level. The main assumption behind this pillar is that the economy ultimately drives medium-term markets’ returns.
The Second Pillar (Risk Shield) is the risk management layer of the framework, tasked with identifying cases in which economic data either are unclear or are not driving market behaviour. When the Risk Shield’s thresholds are breached, ERAA® immediately recommends to adjust portfolio composition to an All-Weather strategy, with the target of protecting capital during unpredictable times.
The Third Pillar (Valuation Adjustments) takes into account each asset class’ valuation to under-weight overvalued assets and discover opportunities to over-weight undervalued assets. Valuation Adjustments are based on economic regressions and therefore are anchored around ERAA®’s main assumption that the economy ultimately drives medium-term markets’ returns.
How did StashAway choose the ETFs that are in my portfolio?
StashAway chooses the best-in-class ETFs on your behalf. We choose the largest, most liquid, most tradable, and most cost-effective ETFs with the lowest tracking error to the index and a sufficiently long track record.
We choose simple ETFs, which means they have no leverage or complex payoffs and have no ETNs to avoid credit risk of issuers.
Why shouldn't I just invest in the ETFs you have chosen on my own?
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.
Is there a minimum deposit or fixed amount I need to invest?
The regulation requires us to verify your bank account. For us to do that, you'll need to transfer at least $10,000 HKD or $1,300 USD for your first deposit. StashAway does not impose any minimum balance and this is just a regulatory requirement for verification purpose. There is no minimum balance for your subsequent deposits with the same bank account. You have full discretion on how much and when you want to invest, including no minimum balance to maintain the account. You may also skip a month or two, resume, and withdraw whenever you wish. All without incurring charges or penalties.