Mutual Funds

Investors need fewer choices: Scripbox

Aarati Krishnan | Updated on April 03, 2013 Published on March 23, 2013

Sanjiv Singhal, COO, Scripbox

A new online platform for buying and selling mutual funds ( >https://scripbox.com) has decided to keep it simple by offering just four select equity funds at a time for people to invest in. Does this approach work? Business Line spoke to Sanjiv Singhal, Chief Operations Officer and one of the promoters of the portal to know more. Excerpts from the interview:

How is Scripbox’s online platform for funds different from FundsIndia and Fundsupermart?

There is a big difference in approach. While the end goal is the same — having people invest with convenience — we looked at the investing experience from a customer’s view point rather than a distributor’s. This leads to some fundamental differences. Everyone else approaches the problem of investing by providing more tools and more data. We’ve taken the approach of reducing the scope of the decision itself. We do this by applying scientific principles of investment selection. We are not trying to solve every problem of every kind of investor. We are focusing on a segment of investors with a common set of challenges with a single product.

This is a somewhat contrarian approach. We want a transparent jargon-free experience for customers. Among other things, this commitment is demonstrated in the one-page investor agreement (normal font!), complete disclosure of commissions and full accessibility to the team behind the service.

How many funds do you offer at a time? How often do you revisit this basket?

We offer only four funds at a time, out of the hundreds available in the market. We track the performance of the selected funds on a weekly basis. We have a mechanism to respond to exceptional situations. But normally the selection of funds is reviewed annually. This is in line with best practices of investing and also takes into account things that impact the customer — exit load and short-term capital gains tax.

What are the factors you look for while recommending these funds?

There are many factors that go into our selection. First, there are filtering criteria such as scheme objective, length of track record, size. We don’t consider funds with less than five years’ track record or less than Rs 250 crore assets. We only look at diversified equity funds because that is in line with the profile of our target investors. Then, from within this filtered list, we look at performance. We think spectacular performance is a one-off and usually happens when the previous year’s performance is not so good. This may actually be bad for the investor because it is not sustainable. The algorithm that we’ve developed looks at consistency of the performance. If fund returns fluctuate widely, we penalise that. It’s an unbiased, numbers-driven assessment of the performance of the fund manager.

Who are your active investors and how many are there?

It’s been just six months since we’ve gone live with Scripbox and I think we are ahead of the curve insofar as customer adoption is concerned. But an interesting fact is that a lot of our investors are first-time investors. Some of them have fairly high income and fall under the 35-40 age group. The fact that they are investing for the first time in mutual funds tells us that there is a need for a solution like Scripbox. There is scientific research to prove that investors are bewildered by the myriad choices thrust upon them. Sheena Iyengar, a senior behavioural economist at Columbia University, has proved that if the number of options available to investors increases, the number of decisions taken drops dramatically. We have used this and other behavioural finance insights to develop Scripbox.

Is Internet connectivity a constraint to online portals?

No longer. Let’s look at the two things that affect an online business — access to the Internet and comfort with Internet. Access to the Net is growing. A lot people are accessing the Net via mobile phones and tablets. We cater to them by designing a Web site that is easy to use on smaller screens.

From a comfort perspective, given the rise of social media and people using the Internet to keep in touch with their family and friends, the comfort is also increasing. It’s becoming like a telephone. I know people in their 70s who are comfortable using the Internet. But we are not trying to be everything to everybody. There will be some investors who will not be comfortable with the Internet and we cannot serve them.

How many investors have switched or will switch to the new direct plans?

We feel that investors will weigh the value they get from the distributor/advisor against the cost they incur. It’s not as if direct investing has no cost. There is a cost of inconvenience because you need to deal with multiple fund houses — either physically or on the Internet. Also, there is an assumption that the investor does not need assistance in his decision making.

Published on March 23, 2013
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