Skip to Content

How Automation prevents you from opportunities to make questionable decisions

I share with everyone yesterday my experience from why I decide to replace my more expensive term policy with a cheaper one.

A lesson that wasn’t so obvious was what initiated the change.

Notice that I was paying my premium for 10 years when the bill came annually.

I reflected during this last session whether I am doing the right thing.

Think about this. If you are regularly buying into a low cost exchange traded fund such as the STI ETF, you will need to login to your brokerage account and key in a buy transaction monthly, quarterly or semi annually.

This seems OK if the market is doing well or doing nothing. When the market is down, every time you want to systematically buy, you go through that round of reflection or rationalization (depending on what you call it) of whether you are doing the right thing.

You start thinking “the market is going down more, let’s wait for it to go lower and then buy”.

When the market is up a lot you start thinking ” prices are getting frothy, perhaps I should scale back”

When human needs to make these decisions, every round becomes a trial and tribulation. The benefits of systematic dollar cost averaging fails to happen because our fear overrides that.

Automation perhaps helps a lot because it allows the investor to by pass the chances of us needing to go through these trials.

If my insurance premium were paid in GIRO, I might not have a chance to take the hard action to cancel.

This is where unit trust is somewhat better in that you can have a regular savings plan to automatically deduct your money and channel into the fund. You can also do that with your insurance endowments.

The POSB Invest saver let’s you automate and invest in a basket Singapore’s blue chips via the STI ETF via GIRO but its cost is 1%. The costs are much higher compare to the 0.5% of brokerages. (Read Why you should build wealth passively with POSB Invest Saver)

Cost matters in the long run (think of it as paying 2.6% on your HDB mortgage versus paying 3.6% and how your interest loss compounds over time) but sometimes I felt staying on the program is better than that.

Automation perhaps help you continue to channel money away from expenses and into wealth building, which otherwise you would not have done, had you pulled out halfway. You earn ‘returns’ from not spending it on frivolous things and although you won’t know if your returns are big small or negative, you end up at a better place than you would had you spend it.

Automation isn’t always the magic pill, you have to make sure that what you automate is fundamentally sound.


This site uses Akismet to reduce spam. Learn how your comment data is processed.


Thursday 6th of November 2014

Hi Drizzt,

I have been your regular reader and first time leaving my comments. I have also gone through the same thought process as you. I find that automation is like a real passive investment where it steals a small amount of money away every month and hopefully after some time, you will get a windfall from it. Have also blogged about it for your consideration:


Friday 14th of November 2014

Hi jes,

Nice blog you have there and that is a rather interesting way of putting things. I will visit your blog when i can. What kind of automation do u do

Matthias Kauer

Tuesday 4th of November 2014

I am not sure if I'm getting it right, but does this article say more than the famous (much shorter) Bill Gates quote: "The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency." I feel like you're jumping from yes to no somehow.


Tuesday 4th of November 2014

Hi Matthias,

Good one there! I find that I agree with the Gates quote and that you have to to ensure what you automate is fundamentally sound. a good example is automating credit card payment (if its possible) its half sound. to me its like you are not concious about your spending on frivilous stuff. so thats a bit unsound.

if you can automatically channel to a low cost world stock etf, then its fundamentally sound if you researched on this wealth building method well.


Monday 3rd of November 2014

Hi Drizzt, I'm finding it tough to decide whether to continue manually adding to SPDR STI ETF, or switch to OCBC BCIP in Nikko AM STI ETF. Its going to be a painful switch if I switch. (a) Continue manual but behavioural pitfalls vs (b) automatic but painful switch.

The ideal scenario for me is OCBC adds SPDR STI ETF to BCIP but that is unlikely to happen.

What say you?


Tuesday 4th of November 2014

Hi Momo, how much is the cost of the ocbc plan? i got an idea its as expensive as the POSB invest saver. My take of it is this: you are probably well informed about the behavorial aspects and you are aware that cost matters. i felt that you can use your past experience to gauge your behavioral tendency.

how are you feeling initiating the transaction yourself? what about the philips sharebuilder scheme with sti etf? is it cheaper?

Matthias Kauer

Tuesday 4th of November 2014

Why do you prefer SPDR anyway? Didn't Nikko have the lower fees? I remember I decided to go 50-50 on them after starting out with pure SPDR and now I don't remember why :>

This site uses Akismet to reduce spam. Learn how your comment data is processed.