Endowus CPF investing during COVID-19

In January this year, I wrote about my mum’s foray into CPF investing with her OA monies with Endowus.

Endowus was (and still is) the only roboadvisor that Singaporeans can use for a globally diversified stock and bond portfolio for CPF monies at low cost (0.4%++) compared to other options.

Most other platforms such as FSM or your traditional brokerage allow you to invest your CPF monies under the CPF Investment Scheme – but they do not allow you to easily invest in a globally diversified portfolio in a single transaction with automated rebalancing.

In this article, I wanted to share more details about her CPF portfolio performance and how it did during this COVID-19 period where the markets saw significant volatility and declines.

Endowus 60/40 CPF Portfolio

To provide some more context, her CPF portfolio is a 60/40 equities/bonds mix with an initial total investment target of $30K.

We chose a 60/40 mix that’s in-line with her risk appetite, accounting for her maximum unrealized loss tolerance and her existing equities-heavy cash portfolio of her own outside of CPF.

Her investment target of $30K was arbitrarily chosen to explore the platform, bearing in mind that she has fully paid off the house and has sufficient amounts in her CPF SA.

Instead of investing it all at one go, we decided to implement an average-in strategy with an initial lump sum given that markets was at an all-time high then.

In January 2020, she contributed an initial investment of $15K from her OA and then proceeded to dollar cost average into the portfolio by adding $2K every month, up to her target amount.

Investment plan from January 2020

During this period, Endowus launched an upgraded CPF portfolio in April 2020 with a new passive index fund for global developed market exposure through the Infinity Vanguard Global Stock Index Fund.

This involved a portfolio adjustment that did a fund swap, selling some of the funds in the portfolio and buying new funds with the proceeds.

Fund swap selling some funds
And buying some other funds

That portfolio change theoretically would have led to an improvement of returns, lower risks and lower costs in the long term, based on Endowus’ projections and simulations.

At the same time, the portfolio change definitely made it more diversified, as the Infinity Global Stock Index fund has a more diversified global portfolio of 1663 holdings compared to the Harris Associates Global Equity fund, which had less than 50 holdings.

Despite the heavy unrealised losses after the market crash, we agreed to the proposed fund swap as a more diversified portfolio with lower total expense ratio is ideal for the long-haul, and it’s a little no-brainer since you get something more diversified and cheaper.

The fund swap also kept her portfolio out of the market between 3-5 days, as it redeemed old funds and purchased new funds, and there might have been some days where it did not participate fully in the upside of the markets.

On the portfolio level, the platform automatically keeps the asset allocation in-line with her target (i.e. 60/40) and if it drifts too far from intended, it automatically rebalances the holdings.

As of this post, the snapshot taken of her holdings shows the asset allocation in-line with her target with a small variance.

Endowus CPF Portfolio Performance

CPF Portfolio Performance (since inception)

Overall, the CPF portfolio performed pretty well during the past six months.

You can see that there was a big dip in March 2020 where the portfolio came down about 25% from its peak before rebalancing on the 16th of March to keep the portfolio in-line with the allocation – this means buying more stocks and selling bonds to retain the 60/40 ratio of stocks and bonds.

Portfolio performance during the crash

Further analysing showed that the returns of the 60/40 portfolio has already turned positive despite the markets suffering from a dramatic once-in-a-decade crash and a huge lump sum investment just two months before the crash – talk about bad timing!.

Rebate of trailer fees further lower fees (and increases returns too)

Endowus promised in its product pitch that it would fully rebate 100% of its trailer fee commissions by fund managers to investors.

They did this last month when they rebated the trailer fees for each fund, transparently breaking down the holding period and weighted average holdings during the period.

Trailer fees rebates

I like how they break it down transparently showing the trailer fee received, underlying fund, estimated rebate and weighted average holdings for the fund for the period under assessment.

Don’t expect to find this level of transparency in your funds managed by insurance companies!

Automatic dividend reinvestment

Endowus also automatically reinvests dividends it receives from the funds, as in the First State Dividend Advantage fund, which was used to buy more units of the fund, while keeping your asset allocation in line with your target risk level.

Dividend reinvestment automatically buys new units of the funds

This is helpful, say, if I want to accumulate more units of the fund without being bogged down with manually transacting and making repeated orders every quarter.

Since this is a CPF portfolio, automatically reinventing the dividends means every dollar is automatically put to work without being left idle in your CPF accounts that you can’t touch anyway.

Looking forward and lessons learnt

I’d say that she’s quite pleased with the results that she’s getting with this allocation – given that a lot of her DIY cash investments into direct stock holdings are still underwater as of this post.

Since the events of the start of the year, she is slowly becoming more accustomed to the platform and also moved to include her cash and SRS assets (also 60/40) as well as the new Cash Smart portfolio to invest some of her idle cash.

The rest of her Endowus portfolios (investment amounts hidden)

Personally, I am happy that everything on her portfolio is showing positive returns now, and my duty is to help to do the due diligence and make sure that she is aware of the risks and that she chooses the appropriate risk level for her portfolios so that she can sleep well at night.

I leave everything else including rebalancing, fund selection, optimization, fees reduction to the roboadvisor to do its job. Obviously I cannot predict future returns, so I’ll leave that part of the discussion out.

At the same time, I also empathize that a lot of these concepts can be quite new, and trying out a roboadvisory service to manage her investments for the first time might seem a little daunting. But the first step (i.e. creating an account and giving it a try) is always the hardest.

I hope this article positively inspires you to either kickstart your investment journey or consider alternative ways to make your money – both for cash in your bank account and CPF – work harder for you.

The goal is to invest more of our monies in diversified, risk-managed and low cost portfolios over the long term to grow sustainably grow our wealth.

  1. Hi Derrick, I am looking to get started with Endowus as well using Cash. However, I am torn between an 80-20 (Loss tolerance up to 40%) or 60-40 (Loss tolerance up to 35%. allocation assigned based on the loss tolerance i indicate while filling up the questionairre) allocation for a 20 year investment horizon. Not sure how to determine my loss tolerance and I’m curious to know what is the thought process that helped you and your mum arrive at the 60-40 allocation mix (i.e. 35% loss tolerance). Hope you could share more on this. Thanks!

    1. Hey! Excellent question!!

      I think risk tolerance is quite an exploratory and personal concept where everyone needs to find their own sweet spot.

      If you’re risk averse – for example if you can’t sleep well if you see a 10% loss in your portfolio – then you would want to choose an extremely conservative allocation.

      10% might not be a lot in absolute terms, but in a $100K portfolio, 10% is still a $10,000 paper loss.

      One way to discover your risk tolerance is to create two portfolios and split your funds between them – the total cost is the same.

      During a bull market where the market tends to go up, the riskier portfolio will outperform. However, in a bear market or correction, see if you can tolerate your losses on the riskier portfolio – if you can, then you can safely move your funds from your safe portfolio over.

      The other way is to just start low and slowly fine tune the allocation over the months – there’s no hard and fast rule and allocations can change during your lifetime as well.

      1. Thanks a lot for your sharing, Derrick! That helps. Would probably go with two portfolios (60-40 and 80-20) to have a feel first before deciding on one.

  2. Hi Derrick,

    the screenshot of your mom’s Endowus CPF portfolio was showing a 1.4% gain ($404.95) with a investment value of $29,392.31.

    How does that work out if the total amount of CPF invested is $30,000? The remaining 0.1% cash component would be about $30 only.

    Thanks for the clarification.

    1. Hey Alvin, her total investment as of the date of the article was 29k (15K initial capital plus 2k per month).

      The number on the dashboard also adds returns like dividends and access fee rebates.

      Does it clarify?

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