Is StashAway Simple Risky?

Jun 26, 2020Blog0 comments

Is StashAway Simple Risky?

StashAway Simple is an investment, so there is always a level of risk involved, but the risk is extremely low. 

The StashAway risk index for StashAway Simple is only 1.8%.  What does it really mean?

That means you have a 99% chance of not losing more than 1.8% of your AUM in a given year. 

What you might not aware of is that StashAway Simple is as risky as investing in a fixed deposit issued by licensed financial institutions. The underlying fund in StashAway Simple, Eastspring Investments Islamic Income Fund, invests in Islamic money market instruments (fixed deposits) issued by financial institutions or their parent companies with a minimum credit rating of A3 or P1 by RAM Rating Services Berhad. Hence, the risk is the creditworthiness of the institutions such as AmBank Islamic Berhad, Public Islamic Bank Berhad and Maybank Islamic Berhad which were the top 3 holdings as of March 2020.

Okay, now you understood that there is risk involved in StashAway Simple, but it is extremely low as fixed deposit.

What is StashAway risk index then?

You’ll see that your portfolio is qualified by the StashAway Risk Index. This is the measurement StashAway uses to determine how much risk their system should expose you to, which then determines your portfolio’s asset allocation. We gave it our own name not to be fancy, but because it’s a specific application of a fairly common risk metric, Value-at-Risk.

To calculate the potential loss of a portfolio in a year, StashAway uses Value-at-Risk (VaR). At StashAway, they use 99%-VaR, which can be interpreted as a portfolio having a 99% probability of not losing more than a given percentage of assets in a year.

Here’s an example: a StashAway portfolio with RM 100,000 and a StashAway Risk Index of 10% has a 99% probability of not losing more than 10%, or RM 10,000 in a year. In other words, there is 99% probability that your portfolio’s value won’t decrease below RM 90,000 if you select a 10% StashAway Risk Index.

So, as you can see, 1.8% of risk index is an extremely low risk, and it is as low risk as fixed deposit. 

The only differences between the fixed deposit and StashAway Simple are. 

StashAway Simple requires:

  • No minimum balance
  • No limit on the balance that can earn a projected rate of 2.4% p.a.
  • No deposit requirements or withdrawal restrictions
  • No investment portfolio requirements
  • No management fees
  • No setup or exit fee
  • Unlimited transfers in and out of StashAway portfolios
  • Accepts SRS funds
  • No asterisks. No catch.

On the other hand, fixed deposit binds with restrictions and terms and conditions which StashAway Simples doesn’t have to.