It's hard to believe it's been five years since I dipped my toes into the world of robo-advisors. In July 2020, I started my journey with Endowus. My initial intention was to build a portfolio of 60% equity and 40% fixed income. However, I inadvertently set the allocation to 60% fixed income and 40% equity. This was corrected about a year later to my intended 60% equity and 40% bond mix. Throughout this entire period, my strategy remained consistent: a monthly DCA (Dollar-Cost Averaging) of SGD 300.
Now, five years on, it's time to review the numbers and, frankly, ask some tough questions. According to my Endowus dashboard, my total return after these five years stands at 16.47%. My own tracking, which I dutifully maintain, shows a very similar figure of 16.12%. Using the Endowus figure, this translates to an annualized return of 3.1% over five years.
Throughout this period, Endowus did prompt me with a few recommendations for portfolio changes. Some I accepted, believing in their data-driven approach, while others I decided against, sticking to my initial conviction.
The Curious Case of Underperformance
Here's where my eyebrows really started to raise. A quick check on the 5-year annualized returns for some major global indices reveals quite a contrast:
- S&P 500: 14.83%
- Hang Seng Index: 20.70%
- Straits Times Index: 13.84%
Now, I understand that my portfolio, even after correction, isn't a pure 100% equity play; it's a balanced 60/40 mix. However, given the risk I'm taking with 60% equities, I'm genuinely scratching my head as to why my portfolio is underperforming these major indices so significantly. An annualized return of 3.1% feels remarkably low in comparison, especially when looking at the double-digit returns of these major benchmarks.
Where's the Drag Coming From?
This immediate disparity leads me to ponder: What exactly is underperforming? While I initially wondered if it was my equities or bonds, a clearer picture is now emerging. It would seem that the major drag on my portfolio's performance comes from the fixed income (bond) portion.
Looking at the 5-year annualized returns of major bond funds in Singapore and globally, the returns have been remarkably low, often ranging from slightly negative to low single-digit positive (e.g., Singapore government bond indices at around 0-1%, some global bond funds even showing negative returns over this period).
A quick mental check reinforces this:
- Interest rates have been relatively high from 2021 to 2025, hovering around 4% or more at certain points. While this makes new bond yields attractive, the flip side is that rising interest rates generally cause existing bond prices to fall, leading to capital losses, especially for longer-duration bonds, which could have significantly impacted the overall 5-year return.
- The market, particularly equities, recovered quite sharply after the initial COVID-19 shock in 2020. My portfolio should have captured some of that upside, which suggests the equity portion might have performed decently, but clearly not enough to offset the drag.
- A possible, though not primary, reason for some drag could be the weaker USD to SGD exchange rate over parts of this period, impacting the performance of globally diversified funds when converted back to SGD.
Could it also be due to the DCA strategy itself? While DCA is generally touted for smoothing out market volatility, could it be a factor in potentially missing some of the sharper upturns, especially during a strong bull run post-COVID?
Coincidentally, my other investment with IGM (formerly MoneyOwl), which also utilizes Dimensional funds with the same 60/40 mix, has yielded almost the exact same annualized returns. This makes me lean away from blaming excessive robo-management fees as the primary culprit for the underperformance as MoneyOwl then do not call themselves a robo-advisor.
Time for a Re-evaluation
This experience has certainly given me much to think about. I need to deep dive into the individual funds within my Endowus portfolio to truly understand what's happening. While the bond portion seems to be the primary suspect for the drag, I'll still examine the equity funds closely.
One thing is becoming increasingly clear: I'm highly likely to pivot my strategy. The transparency and straightforwardness of an ETF, particularly one tracking a major index like the Hang Seng Index, is looking increasingly appealing. Understanding exactly what I'm invested in, without layers of fund management or specific allocations that might be underperforming, feels like a more direct path to potentially better returns, aligning more closely with the broader market.
Have you experienced similar situations with your robo-advisor investments? I'd love to hear your thoughts and insights in the comments below!
The thoughts and analysis presented in this blog post are my own, with assistance from AI in identifying potential reasons for underperformance and structuring the content.
