If you’ve been active in the personal finance and fintech scene, you would probably hear about the latest Robo-advisor in town: Wahed Invest. To be honest, I just knew about Robo-advisor in the middle of last year through a podcast. Little did I know that they have been around since 2010.
One of the Robo-advisor had already invaded Malaysia in 2018 and known as StashAway. But Wahed Invest is different because it is American-based and focuses on Shariah-compliant investment. Say Whaattt?
What is Robo-Advisor?
The short version is that they are a robot which gives wonderful advice to customers. Financial advice. The longer version: Robo-advisor is a platform which offers financial and investment advice based on mathematical algorithms and software. If they sound fishy to you, just know that the scientists, economists and mathematicians are the one behind the algorithms. Sounds convincing… right?
Traditionally, banks and/or institutions provide these services through their advisors, agents and fund managers. These intermediaries add to the overall cost which makes them expensive. Robo-advisor eliminates these intermediaries and provides the same service at a much lower cost. Lower cost equals a higher return for us. Yeah!
Also, Robo-advisor helps to allocate investments into assets such as stocks, Sukuk (bonds) and commodities based on the client’s risk appetite and goals.
Wahed Invest invested their client’s money into a bunch of ETFs. Which brings us to…
What is the ETF?
ETF or Exchange Traded Fund is an investment fund which is traded on the stock exchange such as Bursa Malaysia. A simple analogy to describe an ETF is that they are a basket which holds a collection of securities. Refer to my colourful drawing below:
Basket A is an ETF which holds a collection of stocks and ETF B holds a collection of bonds (Sukuk). They are not only restricted to hold only one type of assets but can be a collection of different assets (Basket C). ETF are generally favourable due to the lower fee, diversification and the ease of exchange that they offer.
Enter, Wahed Invest
Wahed Invest is one of the first Robo-advisor that focused on investment in Shariah-compliant assets. The firm was established in the United States in 2015 and expand into other countries shortly after. In Malaysia, they were licensed by the Securities Commission (SC) and started to operate on 30th October 2019.
Naturally, I was drawn to give them a try and in December, I opened my account with Wahed Invest. Here is my journey so far..
My Journey with Wahed Invest So Far…
I started my Wahed Invest journey back in December 2019. After a few days of waiting for account verification and fund transfer, I am ready.
The overall experience was quite eventful due to my compulsiveness in checking my portfolio every hour. After a while, I noticed that Wahed only updates your portfolio at night, around 8 PM. After that, I only checked my portfolio once every two days.
Below is the breakdown for each month starting from December:
As per the graph in the screenshot above, my portfolio turned negative on my first day of investing! It took a few days to recover but eventually, my portfolio climbs higher and ended on 30th December with 2.69% return. This is back when the initial wave of Coronavirus was discovered and the gold price increases.
I started in January with a little bit less than 2.69% and ended on 29th January (I didn’t have the screenshot for 31st Jan) with a total gain of 6.23%. The large spike in the graph was me depositing additional funds. The rather large gain from December was because of the RM 40 referral bonus being deposited during mid-January.
The peak of my portfolio gain was on 19th February, which made a 7.78% return. Pretty solid return, considering it has only been 2.5 months since I started.
Where Did Wahed Invest invested My Money?
So, where did Wahed Invest invest my funds to get such a good return? At present, there are 5 categories which Wahed Invest allocates my portfolio into. They are:
- US Stocks
- Malaysian Stocks
However, Wahed Invest did not allocate my funds equally in these assets. Instead, the percentage allocation for each category depends on our portfolio selection from Very Conservative up until Very Aggressive.
I choose an Aggressive portfolio and below is how Wahed Invest allocates my money:
If I choose a Very Aggressive portfolio, the percentage allocation will be:
On the other end of the spectrum, if I opt for Very Conservative portfolio, the percentage allocation will be:
It is very difficult to change your portfolio after you have made your decision. Therefore, carefully evaluate your risk tolerance before choosing. A general rule of thumbs is high risks offer a high return, but the potential loss is also high.
Let’s take a closer look at the ETF that Wahed Invest choose for each of the categories.
1. US Stocks – MyETF Dow Jones U.S Titans 50 (MyETF-US50)
MyETF-US50 tracks the performance of the 50 largest Shariah-compliant companies in the US. The ETF was launched in Bursa Malaysia 2018 and allows easy access to the US market. Sector allocation within this ETF includes technology, energy and consumer staples. And no, Tesla is not included in MyETF-US50 😛
Example: Intel, Alphabet, Facebook, Apple, Microsoft, 3M, Nike, Coca Cola.
2. Malaysian Stock market – MyETF MSCI Malaysia Islamic Dividend (MyETF-MMID)
MyETF MMID tracks the performance of MSCI Malaysia IMI Islamic High Yield 10/40 index. That’s a pretty mouthful, but they are essentially the top companies with high dividend yield within Malaysia Shariah equity market. The sector allocation within this ETF includes in healthcare, utilities, construction, telecommunication and media.
Example: Maxis, Petronas Gas, TIME Dotcom, Hartalega and Nestle.
3. Sukuk – RHB Islamic Bond Fund
Sukuk is an Islamic financial certificate, just like a bond. The issuer of a Sukuk sells the certificate to investors in order to gain money to put into assets to generate profit. The investors will receive a margin of that profit based on the pre-agreed ratio.
The RHB Islamic bonds allocate the fund into assets in the energy, infrastructure and utility sector.
Example: Quantum Solar Park, Maju Expressway, Southern Power Generation
4. Gold – TradePlus Shariah Gold Tracker
This ETF tracks the performance of gold price. According to the prospectus, the fund manager used 95% of the funds to purchase physical gold from the London Bullion Market Association (LBMA). 5% of the remaining funds are invested in Islamic money market and/or deposit.
A certain percentage of your funds are left as cash for liquidity in case you are withdrawing your funds.
Great! How to Start investing with Wahed Invest?
So, if investing with a Robo-advisor sounds great, you can give Wahed Invest a try. To start, simply download Wahed Invest apps from Google Play or Apps Store now. Below is a step-by-step guide to setup your Wahed Invest account.
The interface might be slightly different if you are using iOS.
Sign up by filling in your email and creating your password. You will be using this email and password as your login credentials. Next, fill in your location and whether you are a US citizen or not.
Next, you need to answer a questionnaire for Wahed Invest to suggest you a suitable portfolio according to your risk profile. Do note that you can choose a different portfolio than what Wahed Invest suggests. Your selection will be permanent so, think carefully before choosing.
UPDATE (18th March): Wahed now allows you to change your portfolio but it will take about 7-14 days for the change.
Fill in your residential address, mailing address, phone number and answer some question to proceed.
Review and ensure your details are correct then, scroll down the screen and click at “Do you have a referral code?” Enter my referral code, mohbin241 to earn an extra RM 40. Do note that you have to deposit a minimum of RM 100 within 30 days to receive the RM 40 bonus.
DISCLAIMER: I will also receive RM 40 referral bonus but the money is not from your fund. They are from Wahed Invest for helping them to refer to more people. Hope this helps to clarify.
UPDATE (18th March): Wahed now has reduced the referral bonus to RM 20 instead of RM 40.
Lastly, verify your identity by providing your IC number and the picture of either your passport, driver’s license, IC or residence permit card.
Investing with Wahed Invest is simple because everything can be done through the apps. The apps itself is clean, minimalist and easy to understand.
Information such as funds selection, earning breakdown and monthly statements are well-documented which increases confidence and transparency to the investors. In addition, it is easy to deposit funds into your account and you can also set for automatic recurring debit.
In the long term, I will continue to hopefully grow my investment with Wahed Invest and review my portfolio performance again after 1-year.
ACTIONABLE TIPS: If the idea of giving away your money to a robot for an investment sounds scary, start researching on your own. This is a great article on Robo-advisor from iMoney. If it still doesn’t sit well with you, there are still tons of other ways to start investing. I will make sure to share more on the next posts. Until then, keep on hustling!
Have you invested with Wahed Invest? Share your thoughts, progress and questions in the comment section below. Do share this post with your social circle so they can start investing with Wahed Invest.