Managing money has been among the biggest concerns for everyone at any time and it only got amplified with Covid 19. People have had to cope with worries of lower incomes, job losses, smaller savings, increasing health outlays, leaving little room to invest if any. Yet these are also the times to make carefully calibrated investment decisions which might pay off in the long term. Prateek Mehta, co-founder and Chief Business Officer, Scripbox says in an e-mail interview, “If history is any indicator, over long-term, volatility tends to go down and deliver healthy returns.” Bengaluru based, 2012 founded Scripbox provides wealth management services with a focus on mutual fund investments on its platform. Mehta discusses the current environment for investing, what products to invest in and more. Edited excerpts:
Covid 19 has brought about all round uncertainty and most people would like to hold on to cash or invest in safer avenues like PPF. What would your advice to them be?
Investing should be looked at from a long-term perspective. For example, the Sensex was at about 17,650 in January 2008, and crashed all the way down to 8,700 points by October 2008. Fast forward 10 years later to September 2018, and the index more than quadrupled to about 38,000 points. Markets are unpredictable, and we can expect volatility to continue for the immediate future until the impact of Covid on the Indian and global economies has clearly been established. At a time like this, investors should focus on longer investment horizons. If history is any indication, over long-term, volatility tends to go down and deliver healthy returns.
PPF continues to remain an attractive option for small investments (up to Rs 1.5 lakh) even though the returns have come down in recent times. You can think of PPF as part of the debt allocation for your portfolio. However, do remember that the minimum duration of a PPF account is 15 years, so investments in PPF will have a lock-in period.
“At a time like this, investors should focus on longer investment horizons. If history is any indication, over long-term, volatility tends to go down and deliver healthy returns.”
In the past, investing in fixed deposits and PPF’s were considered the safest options, but they may not be the best solutions for investors to reach their long-term financial goals. Safer instruments like well researched short-term debt funds and liquid funds result in better post-tax growth than bank deposits, thanks to indexation. You are taxed only once on redemption, unlike bank deposits that attract TDS every tax season.
Which are some of the asset classes you would recommend and what percentage of savings should be deployed in these?
One’s choice of asset classes is a function of their required growth rate, their intended investment horizon and how much liquidity they need in their investments. From the three primary asset classes i.e. equities, fixed income and real estate, equities tend to yield the best growth but over at least a seven-year period.
Good equity growth, over time, can be achieved through broad based diversified funds which also have the flexibility to invest in multiple strategies (like mid cap, growth, sectors, etc). Fixed income investments, as an equally important asset class, are good for meeting short-term goals given the liquidity and stability. However, they tend to stay behind or at inflation, especially on a post-tax basis.
Irrespective of your investment style, it is recommended to take a systematic approach to investing. Systematic investment plans allow you to manage volatility better. You can also increase, decrease or pause your SIP investments depending on your financial situation.
Another option is to invest in a calibrated manner via a Systematic Transfer Plan or Principal Protection and Growth Plan. These options let investors benefit from cost averaging by transferring a fixed amount into equity on a monthly basis. This is a smart way to invest your idle money kept in savings accounts.
What kind of returns can investors expect in equity mutual funds over the next 2 to 3 years? Is it a good time to start or continue SIPs?
In the long-term which is 7-10 years, investors can expect 10-12% annualised growth on equity mutual funds. Market dips are a part of long-term investments. The next 2-3 years will be a period of economic uncertainty. The returns will be a function of resilience of the economic demand and ability of Indian and global economies to bounce back.
It is always a good time to start with mutual funds SIPs as long as you are aware of your objectives and asset allocation plan. However, it is important to be patient and invest with a long investment horizon.
What value proposition does Scripbox offer to investors?
Our goal is to help people worry less about money. We offer scientific and curated solutions, so everything we recommend is unbiased and transparent. That being said, digital wealth management is more than just providing online channels for transactions; instead it’s about leveraging technology to offer more value, and reshape an investors wealth creation journey.
When we launched in 2012, most of our client base were millennials, and over the years they have grown with us, and our long-term investors have achieved their desired outcomes. Today we are able to combine technology and digital solutions to meet our customers’ wealth creation needs. At the end of the day, the customers time, peace of mind, and ability to see what they have is the real value we deliver.
What key trends have you seen in the last 6 months. Have Scripbox investors reduced their investment in risky market linked assets?
Over the past 6 months, we have seen that clients have had concerns and anxieties stemming from uncertainty in the economic scenarios and at times, even stemming from personal contexts. However, gaining financial security has been a clear need that many of our clients have felt.
Despite the volatility seen and overall economic scenario, investors have stayed steady with their investments and many have actually increased their SIPs as they understand the value of long-term investing. We have also seen a healthy growth in offerings like the Systematic Transfer Plan and Principal Protection and Growth plan.