Which Robo Advisor Should You Use In Malaysia?

Which Robo Advisor Should You Use In Malaysia?

You should start investing.

You know this, but the thought of it scares you. You have no idea how to pick the right investments, you don’t trust yourself with large financial transactions and you suspect that investing involves a certain proficiency in math that you don’t have.

If this sounds familiar, then a robo advisor could be what you need.


What is a robo advisor?

A robo advisor is a digital platform that uses algorithms to automate your investment portfolio. It automatically creates a portfolio for you based on your investing goals and risk tolerance, and periodically rebalance your portfolio.

Typically, a robo advisor uses your money to invest in exchange-traded funds (ETFs), which are groups of stocks, bonds or other investments.

But each robo advisor implements a different investing methodology – the underlying investments and allocation of your portfolio will differ based on the robo advisor platform you invest in.

What are the advantages of investing with a robo advisor?

  • Passive investing. If you’re not comfortable making investment decisions on your own, or you don’t want to (or can’t) spend a lot of time researching, monitoring and rebalancing your portfolio, then robo advisors could be a good alternative.
  • Diversification. Being diversified (i.e. having many types of investments versus just one type) helps you spread your risk. This means that if a particular investment in your portfolio performs badly, you won’t be greatly affected as you have other types of investments.
  • Avoid emotion-based investing. Some investors panic and withdraw their money in a downturn or pump in more cash when the market is rising. But timing the market is incredibly hard and can lead to smaller returns in the long run. With a robo advisor, you can take a ringgit cost averaging approach by investing a fixed amount every month, avoiding emotion-driven impulses to buy and sell based on market sentiment.
  • Low fees. Robo advisors charge management fees that are typically below 1% a year. charge relatively low fees. By contrast, if you invest in unit trust funds you may need to fork out 0.5% to 2.5% per annum. Some unit trust funds also charge up to 5% upfront in sales charge, and another 5% when you redeem your investment value.

What are the drawbacks of investing with a robo advisor?

  • Limited customisation. Robo advisors allow you to set certain things like your risk profile or investing goals, but that’s about it. You generally can’t tinker with the investment methodology, choose (or exclude) individual investments in your portfolio or adjust your exposure towards certain geographical regions.
  • Non-transparent investing methodology. If you’re a savvy investor, you may be interested in the specific criteria a robo advisor uses to select ETFs, or how a robo advisor chooses to rebalance your portfolio. However, this information is not always made available.
  • Dividend withholding tax. Some robo advisors invest heavily in securities listed in the US. However, as a foreign person buying US stocks, your dividends will be subject to a 30% withholding tax, although your robo advisor platform may be able to seek partial reimbursement of these taxes for you.

What robo advisor platforms are there in Malaysia?

While they’ve been around since 2008, the first robo advisor launched in Malaysia only two years ago. Singapore-based StashAway launched in 2018, while MyTHEO and Wahed Invest entered the market a year later.

Two more robo advisors – Raiz and Robowealth – are expected to launch in Malaysia this year.

Here’s how the MyTHEO, StashAway and Wahed Invest compare to each other at a glance:

PlatformLaunchedMethodologyMin initial investmentFees per annum
MyTHEO2019Uses proprietary algorithms to create functional portfolios that incorporate risk-based investing and “smart beta”RM1000.5% - 1%
StashAway2018Uses proprietary investment strategy that reacts to economic fundamentalsRM00.2% - 0.8%
Wahed Invest2019Optimises the investor's portfolio with Shariah-compliant investments using modern portfolio theoryRM1000.39% - 0.79%

Comparison of robo advisor fees

Portfolio sizeRM10,000RM50,000RM100,000RM1,000,000
Wahed InvestRM79 (0.79%)RM395 (0.79%)RM790 (0.79%)RM3,900 (0.39%)
StashAwayRM80 (0.8%)RM400 (0.8%)RM700 (0.7%)RM4,000 (0.4%)
MyTHEORM100 (1%)RM450 (0.9%)RM900 (0.9%)RM6,000 (0.6%)

For smaller portfolios (i.e. below RM100,000), the fees don’t vary much between the platforms, although MyTHEO is slightly pricier. This difference is more noticeable for larger portfolios (i.e. RM1,000,000 and above), where your choice of platform could mean a difference of thousands of ringgit in fees.

Although fees can make a huge difference to your portfolio over time, you shouldn’t pick a platform solely on who charges the least. You should also consider how the platform chooses assets to invest in, how it rebalances your portfolio and whether it provides any other services that could improve your returns.

Portfolio allocation

Here are examples of the most aggressive portfolios of each platform:

StashAway (Highest-risk growth portfolio)

Equity sectors (US stocks)iShares Core S&P Small-Cap (IJR)15%
The Communication Services Select Sector SPDR® Fund Communication (XLC)9%
The Energy Select Sector SPDR® Fund (XLE)3%
The Technology Select Sector SPDR® Fund (XLK)15%
The Health Care Select Sector SPDR® Fund (XLV)15%
The Consumer Discretionary Select Sector SPDR® Fund (XLY)15%
International equitiesiShares Core S&P 500 ETF (IVV)15%
Vanguard FTSE Europe ETF (VGK)12%
Cash (USD)-1%

StashAway’s highest-risk portfolio is almost entirely made up of equities, largely (86.5%) consisting of US stocks. This could be good for investors – the American stock exchange is the best-performing major stock market in the world, and has a great track record of returns (around 8% a year from 1957 through 2018).

But it also means that you’ll be betting heavily on America’s continued economic growth, instead of spreading your risk globally. You could also miss out on the opportunity for stock market gains in fast-growing emerging markets.

Head on to StashAway to find out more. As an iMoney reader, enjoy reduced fees when you sign up through this link. But as always, remember to do your own research before investing.

MyTHEO (“Growth” portfolio)

India EquityWisdomTree India Earnings ETF4.99%
Miscellaneous RegioniShares MSCI Australia ETF3.74%
Miscellaneous RegioniShares MSCI Canada ETF6.77%
Japan StockiShares MSCI Japan ETF16.08%
Miscellaneous RegioniShares MSCI Singapore Capped ETF4.78%
Miscellaneous RegioniShares MSCI United Kingdom ETF14.88%
Diversified Emerging MktsiShares MSCI Frontier 100 ETF4.99%
Small ValueiShares Russell 2000 Value ETF4.11%
Mid-Cap ValueiShares Russell Mid-Cap Value ETF19.87%
Large ValueVanguard Value ETF19.66%

Like StashAway, MyTHEO’s most aggressive portfolio setting is almost entirely made up of equities. Slightly less than half of that (43.5%) goes to US stocks, while 56% goes to international stocks. Big portions of that are made up of specific regions, such as a 16.08% allocation to Japanese equities, 6.77% to Canadian equities and 4.99% to Indian equities.

Having a more geographically diverse portfolio could cushion you if the US economy isn’t doing well. But in the past decade, you could have lost out on large potential gains if you had heavily diversified in other major stock markets.

Wahed Invest (“Very aggressive” portfolio)

Malaysian stocksMyETF MSCI Malaysia Islamic Dividend20%
US stocksMyETF Dow Jones U.S. Titans 5065%
SukukRHB Islamic Bond Fund12.5%

Wahed Invest only invests in four types of securities – three ETFs and one unit trust fund – all of which are listed in Malaysia.

Wahed also has a large exposure (65%) to the US stock market. However, information technology businesses make up around half of the ETF that provides the US exposure – Microsoft and Apple alone make up almost 20%. The tech sector has been the biggest driver of America’s stock market growth in the past few years, but this means that if the sector underperforms, a large portion of your portfolio may be affected.

On the other end of the risk scale, Wahed’s “very conservative” portfolio invests 90% in RHB Islamic Bond Fund, and leaves another 10% in cash. We’re not sure if it’s worthwhile signing up for Wahed if you plan to use the “very conservative” portfolio – it seems slightly more cost-effective to invest in the unit trust fund directly through a platform like Fundsupermart.

So far, Wahed is the only halal investment platform in Malaysia. If you want to invest exclusively in Shariah-compliant assets, then this platform could be a good choice.

Which robo advisor should you pick?

The best robo advisor for you could boil down to these investing preferences:

  • StashAway: if you want a larger exposure to the US market
  • MyTHEO: if you want a more globally diversified portfolio
  • Wahed Invest: if you want to invest in Shariah-compliant securities
These suggestions are based on each platform’s most aggressive portfolio settings, so they may only apply to you if you have a high risk tolerance. However, each platform allows you to adjust the risk profile if you are a more conservative investor, which will affect your portfolio allocation. Regardless of your risk profile, we recommend that you visit each platform’s website and learning pages to find out more before making a decision.

If none of these platforms appeal to you, you could even go the DIY route.

This means that you’ll have to sign up for one of these platforms, look at their portfolio allocations and replicate them yourself by buying individual ETFs. It’s a bit harder to replicate StashAway’s and MyTHEO’s portfolios as their ETFs are listed in foreign markets, but Wahed Invest’s portfolios could be replicated by buying ETFs off Bursa Malaysia and RHB’s Islamic Bond Fund via a platform like Fundsupermart.

A robo advisor removes a lot of friction – you can construct a complete portfolio with much less money, without having to manually calculate how much of each security you need to buy or rebalance your portfolio yourself. It also uses algorithms to respond to market conditions.

If you’ve been putting off investing because you find it scary, and if you value convenience over everything else, then a robo advisor could be what you need.

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