SaxoWealthCare brings all your goals together in one portfolio or investment plan. We do this to help increase the likelihood of achieving your life goals. On the surface, it may seem to make a lot of sense to offer one portfolio for each of your goals. However, this requires you to decide on how much to allocate towards your goals, and when. This is a highly emotional decision as, if you get the allocation wrong, you may miss out on achieving all of your life goals.
SaxoWealthCare aims to make your life easier. Our smart technology allocates your funds optimally to increase the likelihood of you achieving your life goals. You simply need to share your goals and how much you intend to deposit then SaxoWealthCare allocate your funds to achieve your goals.
Overfunded and underfunded goals
Splitting your monthly contributions between goals can lead to underfunded or overfunded goals.
Most investors tend to distribute their deposits evenly or allocate them towards goals that they are most emotionally attached to. This can result in goals becoming overfunded or underfunded over time. It will likely cause you to not achieve your life goals.
For example, you wish to start with two goals and have decided how much you want to invest. The first goal (Loan repayment of SGD10,000) must be achieved in five years and the other (Tuition fee of SGD 20,000) in ten years.
You start with a total investment for the two goals of SGD 23,000. Of that amount, if you were to decide in advance how much to put into each 'pot', that's not an easy choice, because future returns are uncertain, and they will fluctuate. There are no guarantees for the future. You would be likely to put too little or too much toward your goal(s).
When you deposit into your SaxoWealthCare investment plan, you can rest assured that your funds are being well used to maximise the likelihood of achieving all of your goals.
Multiple goals in one portfolio
By grouping all your goals into one account, you can pursue multiple goals. SaxoWealthCare distributes your funds between stock and bond ETFs and rebalances accordingly over the term of your plan. When creating goals for your investment plan, we will ask you for the following information.
- The target amount which you need to achieve your goal.
- The date on which you would like to reach this goal.
SaxoWealthCare tests your goals for feasibility. If you see that your goals are achievable, our digital assistant will inform you that your goals are ‘looking good’. If they are ambitious and not completely achievable, they will be displayed as ‘action recommended’. This means you can confirm the goals, but they may prove unrealistic. It is up to you to decide whether to change your goals. If goals are unachievable, the digital assistant informs you of this and prompts you to adjust your plan accordingly.
Our digital assistant helps you create a life plan which generates wealth over the long term and maximises the likelihood of achieving your life goals.
All your goals in one account
All your goals are housed within one account. For each purpose, the following are taken into account:
- How much do you want to achieve?
- When do you want to achieve this amount?
- How important is it to reach that amount on that date?
- Adjustments for inflation
To determine the optimal distribution between equity and bond ETFs, we use the following step-by-step plan:
- Your risk profile determines your basic 'glide path'. What do we mean by that? The glide path has to do with the distribution between stocks and bonds based on your risk profile. In your basic slide path, your equity risk is gradually reduced. We do this by investing an increasing part of your assets in bond ETFs. The graph below shows the reduction of your risk towards the end date of your goals.
- For each goal, a specific glide path is determined based on your risk profile and the date on which you wish to reach your goal.
- Based on the different glide paths, one combined glide path is determined, whereby the degree of importance and the amount per target determine the weight.
Example
Suppose you want to take the above-average risk and you have set two goals.
- Your first goal is to have SGD 10,000 for your daughter’s wedding within 15 years, with a balanced risk profile. Because the risk profile of your target is lower than your personal risk preference, this target gets a higher scale of importance and thus a heavier weighting of 0.7 (on a scale of 0 to 1).
- For the second goal, you want to repay a loan of SGD 5,000 within 20 years, with a defensive risk profile. Since the risk profile of this target is even lower than your personal risk preference, the weighting for this purpose is set at 0.9 (on a scale of 0 to 1).
Because SaxoWealthCare combines multiple goals into one investment plan, your glide path may look like the chart below. You can see the percentage of equity ETFs within your portfolio in the image below on the vertical axis. On the horizontal axis, you see the years that remain until the end date of your goals. The two goals each have their own risk profile and glide path. The combined stock slide path shows the decrease in the percentage of stocks within your portfolio as a whole. As this image shows, the stock slide is a combination of both goals. In this way, the risk you wish to take is better taken into account, as is the feasibility of both goals.
