DBS digiPortfolio Review

Long story short: DBS digiPortfolio is an early but promising effort to offer retail investors a managed portfolio solution made up of entirely low-cost ETFs.

Retail investors today have more choices than ever before to invest in a diversified portfolio of securities at low cost. With DBS bringing their latest offering to the market, the industry is at an inflexion point where even the incumbents can bring innovative products to market.

DBS digiPortfolio

DBS digiPortfolio is DBS’ solution to professionally-managed investment portfolios for retail investors through automation, scale and low cost index funds.

It brings several great benefits such as portfolio management expertise from their investment team, incorporating viewpoints from their Chief Investment Office (CIO) at a flat annual portfolio management fee of 0.75%.

There are 2 portfolios to start – investors can start investing on their platform with capital as little as SGD and USD 1000 for their Asia and Global portfolios respectively, which I will explain a little bit more below.

Asia Portfolio

Their Asia portfolio is a portfolio of Singapore-listed ETFs constructed to provide investors with a geographical exposure towards Asia. You’ll get exposure to roughly 200-700 securities.

With a minimum of S$1000 to get started, investors first determine their risk level and appetite which determines the asset allocation of the portfolio. The lower the risk appetite/level, the greater the amount of invested assets allocated to safer instruments like bonds.

The table below shows the portfolio construction of the Asia portfolio as of October 2019 –

Risk Appetite Equities Fixed Income Cash No. of ETFs ETFs
Level 2 – Slow n’ Steady 15% 80% 5% 4
  • Nikko AM Singapore STI ETF
  • NikkoAM-StraitsTrading Asia ex-Japan REIT
  • ABF Singapore Bond Index Fund
  • Nikko AM SGD Investment Grade Corporate Bond
Level 3 – Comfy Crusin’ 50% 45% 5% 5
  • Nikko AM Singapore STI ETF
  • NikkoAM-StraitsTrading Asia ex-Japan REIT
  • Xtrackers MSCI China UCITS
  • ABF Singapore Bond Index Fund
  • Nikko AM SGD Investment Grade Corporate Bond
Level 4 – Fast n’ Furious 75% 20% 5% 4
  • Nikko AM Singapore STI ETF
  • NikkoAM-StraitsTrading Asia ex-Japan REIT
  • Xtrackers MSCI China UCITS
  • Nikko AM SGD Investment Grade Corporate Bond

Notice that the ETF composition of the portfolios are roughly similar, with the level 3 portfolio incorporating the MSCI China ETF for China exposure, and the level 4 portfolio removes the ABF Singapore bond fund from its holdings.

For all portfolios, cash is held at 5% of invested assets to take advantage of market opportunities and to cover the annual management fee.

No pre-qualification is needed, and investors without prior investment experience can also invest with them.

Asia Portfolio Returns

Historical returns vs risk (standard deviation) for the Asia portfolio
Graphing returns over time, by portfolio – Asia portfolio

Global Portfolio

The Global Portfolio is a portfolio of UK-listed, USD-denominated ETFs – which have lower withholding tax implications compared with their US-listed counterparts – constructed to provide investors with a global geographical exposure that is well-diversified across all regions. You’ll get exposure to roughly 5,000-13,000 securities.

It requires minimum of US$1000 to get started, and customers need to pass a customer account review to determine their suitability for this product. 

The table below shows the portfolio construction of the Global portfolio as of October 2019 –

Risk Appetite Equities Fixed Income Cash No. of ETFs ETFs
Level 2 – Slow n’ Steady 15% 80% 5% 4
  • iShares MSCI World UCITS ETF
  • iShares JP Morgan EM Bond UCITS ETF
  • iShares Global Corp Bond UCITS ETF
  • iShares Core Global Aggregate Bond UCITS ETF
Level 3 – Comfy Crusin’ 50% 45% 5% 7
  • iShares Core S&P 500 UCITS ETF
  • Xtrackers MSCI Europe UCITS ETF
  • HSBC MSCI AC Far East Ex-Japan UCITS ETF
  • Vanguard FTSE Japan UCITS
  • iShares JP Morgan EM Bond UCITS ETF
  • iShares Global Corp Bond UCITS ETF
  • iShares Core Global Aggregate Bond UCITS ETF
Level 4 – Fast n’ Furious 75% 20% 5% 5
  • iShares Core S&P 500 UCITS ETF
  • Xtrackers MSCI Europe UCITS ETF
  • HSBC MSCI AC Far East Ex-Japan UCITS ETF
  • Vanguard FTSE Japan UCITS
  • iShares Core Global Aggregate Bond UCITS ETF

Global Portfolio Returns

Based on historical data that was backtested, you can see how each of the different levels of the global portfolio performed when 2009 after the financial crisis.

Historical returns vs risk (standard deviation) for the global portfolio
Graphing returns over time, by portfolio – global portfolio

Portfolio construction and management 

DBS claims that both portfolios are meticulously selected by their discretionary portfolio management team for optimal risk-return trade off and portfolio resiliency during difficult times.

It also utilises expert opinions from the CIO team to evaluate macroeconomic conditions and investment environment to tactically and strategically adjust the portfolio to optimise the risk-return mix, so investors don’t need to worry about timing the market.

The objectives of both portfolios is to provide return over three to five years, while managing price volatility, through stable bond coupons and capital growth from equities.

Funding

You will need any of the following multi-currency accounts (individual accounts only) to fund the digiPortfolio –

  • eMulti-Currency Autosave (eMCA)
  • eMulti-Currency Autosave Plus (EMCA+)
  • Multi-Currency Autosave Plus
  • DBS Multiplier account

Currently, to increase the amount invested in digiPortfolio, you need to create a new digiPortfolio via Add Portfolio but DBS is working to bring the top up feature soon.

There is no lock in period for your funds and you can withdraw anytime.

Fees

There are no sales charges, platform fees and switching fees typical of the mutual fund industry. There are also no account opening and withdrawal fees.

In exchange, DBS charges an all-encompassing fee of 0.75% of invested assets (or portfolio value) per year. For a $10,000 portfolio, that is a monthly charge of $6.25, which covers buy/sell transactions, rebalancing and portfolio management.

Fees are calculated based on the portfolio value at the end of each day, which are accumulated over time, then deducted from the cash portion of your portfolio after the end of the calendar year or upon closure of the account. The fees are subjected to GST.

What they don’t tell you on the website is that there is also an implicit underlying ETF fee (varies for each ETF, but between 0.2% to 0.4%) payable to the ETF manager annually, paid regardless of platform used when you buy ETFs (even if you do it yourself).

The all-in fee or total expense ratio is about 1% of invested assets per annum, excluding foreign exchange gains and losses if you invest in the USD-denominated global portfolio.

DBS digiPortfolio vs mutual funds

As mentioned above, mutual funds favouring active portfolio management and bottom-up portfolio construction come with higher fees, typically around 1.5%-2.5% total expense ratio consisting of annual management fees, rebalancing fees and switching fees.

Some platforms also charge you a platform fee annually for using the platform to purchase the mutual fund and sales charges (typically 1%-5%) when you buy into the fund.

If you’re paying so much in fees, you’d be expected to make a higher return net of fees. But according to research, 85% of active fund managers have underperformed passive indexing strategies in the past ten years.

Of course, there is always another side of the story – where passive investing has been called a bubble.

DBS digiPortfolio vs other Roboadvisors

In my personal opinion, the DBS digiPortfolio has the advantage of a strong financial institution backing its operations and processes with decades of experience, strong reputation and deep talent pool for building and refining its products and services.

You also can access their digiPortfolio portal through your existing DBS login, saving you the trouble of creating and remembering another set of login details.

Unlike a roboadvisor run by a fintech startup, DBS might be less agile in its processes and pace of innovation, meaning that it might take a longer time for products and features to be launched.

For example, platform functionalities such as partial withdrawals, portfolio top ups, regular deposit plans, multiplier investment categorisation are all still in the works, and retail investors must be prepared to wait a little longer before these features go live.

The explicit portfolio management fees are also comparable to other robo-advisors in the local market, although lower than what the other 2 local banks have to offer –

  • DBS digiPortfolio – 0.75% p.a.
  • StashAway – 0.80% p.a.
  • AutoWealth – 0.50% p.a. plus annual fee of US$18
  • Smartly – 0.80% p.a.
  • OCBC RoboInvest – 0.88% p.a.
  • UOB uTrade Robo – 0.88% p.a.
  • FSM Maps – 0.50% p.a.
  • Endowus – 0.60% p.a.
  • Syfe – 0.65% p.a.
  • SquirrelSave – 0.50% p.a. plus 10% performance fee on positive returns

Note that the above fees do not reflect the all-in fees including fees of the underlying funds which might vary depending on many other factors (e.g. domicile, liquidity, fund manager etc).

DBS digiPortfolio vs DIY

DIY investing is still not intuitive to the average retail investor. For many who do not even know the differences between a stock and bond, or mutual fund and ETF, or debit and credit, portfolio construction and asset allocation are still abstract concepts.

The digiPortfolio also appeals to investors who don’t have time to actively manage their portfolios, restricted by regulations to trade or invest in the markets (e.g. those working in banks), or those who don’t know how to construct a well-diversified portfolio suitable for them.

However, for the savvy ones, DIY investing might still be attractive if they are well-aware of the options available in the market and what’s suitable for their personal risk profile. For those who regularly keep in touch with macroeconomic conditions, ensure diversification at the core of their investment strategy and perform timely rebalancing and stay the course in the long run, then cost savings from doing it yourself might outweigh the managed service by DBS.

Will I be using?

Ah, the most important question – after going on for quite a while.

For me, I like their SGD-denominated Asia portfolio, as the asset mix and ETF selection is something that no other solution in the market can provide right now. For example, InteractiveBrokers (IB) doesn’t allow me to buy Singapore-listed ETFs, and StashAway’s Income portfolio is far too conservative for my liking.

But 5% cash holdings seems excessive, especially if it’s for ‘taking advantage of market opportunities’ – so much for not timing the market.

I also feel that 0.75% p.a. in management fee for ETF selection is far too expensive for my liking. The pricing is on par with many robo-advisors in the market, but its product is still nascent in its development.

All in all, I am on the fence because I do like some aspects of it… but at this juncture it’s still a little early. Let’s see.

If you’re interested, feel free to head over to the DBS digiPortfolio website to register your interest.

Derrick is a digital native, finance geek and avid photographer. He loves spontaneity but is a control freak at the same time.

2 comments On DBS digiPortfolio Review

  • If I have to recommend this DBS product, I would recommend the Global portfolio over the Asia one, as it may not be so easy to use any of the local brokers to RSP into a bunch of diversified LSE listed ETFs with 0.75% transaction costs or less.

    Of course for DIY’ers, it’s much cheaper to use IB for buying on LSE (0.05% !) or other overseas markets (now free for US !).

    For the Asia portfolio, it’s too easy & cheaper to just DIY using any one of the local brokers. Not worth paying 0.75% year-in year-out for this.

    All these products & robo-advisors in S’pore are also targeted towards investors in accumulation phase, hence to re-balance a DIY portfolio of 4 or 5 locally-listed ETFs is easy. Just adjust your buy-in amounts when it comes time to re-balance in order to bring the allocation back to plan.

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