For the past few years, Scripbox’s algorithm is relentlessly looking at the performance of hundreds of mutual funds. It then advises users on investment. It’s scientific and unbiased fund recommendations have done more than 3% better than the market. As humans, we all bring our biases to the table which is where algorithmic/scientific approach helps to eliminate this bias, says Ashok Kumar E R, CEO & co-founder, Scripbox. In an interview to Kumar Shankar Roy, talks about competition from free MF platforms, why Warren Buffett is less apt as an investing role model for MF investors, and how his company's growth is linked to customers’ wealth growth. Read on.
As an online distributor of mutual funds, how has your journey been since inception?
As a leader in the space and a trusted online service used by Indians across 1250+ cities and towns, we play an important role in helping individuals build long-term wealth and achieve financial wellness. We pride ourselves for our education approach; talking to customers in a jargon-free manner and has attracted customers from all walks of life, young, middle-aged, retired, experienced as well as first-timers.
When customers’ wealth grows, we will grow, we are humbled by the response we have received since the launch. Scripbox has Rs 900+ crore in Assets Under Management (AUM). 70% of these customers are first-time investors. Over 60% of our customers are SIP investors who have committed over Rs 3500+ crore.
Scripbox takes a commission from mutual funds. But today we have seen a proliferation of online MF distribution platforms that are even foregoing commission. How are you preparing to tackle this competition?
We are in the business of creating value for our customers. Right from education – when, where, why, and how to save and invest to planning keeping his/her own financial situation in mind, to acting on the advice, we take our customers through a journey and help our customers to cultivate healthy financial habits.
We handhold our customers through every stage of their wealth creation journey and this includes periodic review of fund recommendations so that their hard earned money is invested in the best unbiased selection of funds only.
We ensure that our customers bear as little or no tax burden (if gains from investment are less than 1,00,000) as possible when exiting a fund.
We automate all the best practises and all the hard work so that building wealth is not only a stress-free experience but also, saves precious time.
Coupled with this, we believe that the difference in cost will be more than made up over time owing to our unbiased fund recommendations. To add to it, our revenue growth depends on customer’s wealth growth, and our business model is completely aligned to that.
Do you feel that you have the required capital and resources to handle new players at a time when MF commissions are said to be in a downward draft given the pressure on the AMCs to reduce costs?
As Indians we save $500 billion annually which is approximately 25% of India’s GDP and most of these savings are invested in fixed income assets such as fixed deposits, gold, and real estate. Only about $15 billion to $20 billion is invested in market-linked assets such as mutual funds. Thus, fixed income assets are the real competition and enabling people to invest in inflation-beating assets is the goal.
More players expand the market, which is great and what the industry needs. Players who add the most value will win good share of the market. Rigorous feedback mechanisms reaffirm our belief that our unique combination of educative approach and unbiased recommendations add significant value to our customers. Simplifying for the customer and doing right by them is what we stand for.
Can you tell us why investors should pick funds chosen by an algorithm compared to a human advisor or investing 'directly'?
As humans, we all bring our biases to the table which is where algorithmic/scientific approach helps to eliminate this bias. That said, when the market is up or down, greed or fear takes over our decision-making. How one handholds the customer through this journey and ensures long term wealth creation does not suffer is more important.
We have learnt over our 7-year journey of Scripbox’s approach combined with unbiased and algorithmic selection of funds is able to deliver significant value to our customers that is not just limited to performing 3% over the market.
Many say mutual funds work well when investors stay put for the long-term. If that is the case, how does changing funds every one or two years work for the investor?
We make portfolio changes annually and change only those funds which do not continue to meet our criteria. During the year we do watch for changes to the fund such as changes in fund mandate. If it adversely affects the fund, then we change that. And we have rules to say what action needs to be taken. In layman terms, money invested through Scripbox is in best funds throughout the investment journey.
You recently said Warren Buffett is less apt as an investing role model for MF investors. He is a legendary investors but then why do you feel so?
Warren Buffett has a lot to teach, but his lessons are far more apt for the fund managers managing the money of lakhs of investors like us. Whether it’s about choosing fundamentally good businesses or about choosing businesses one understands, his lessons are incredibly important for those whose job it is to choose companies to invest in.
Not as an investor role model, but as an individual there is a lot we can learn from him. Those who have studied Warren Buffett’s life often remark on his simplicity of living as well as his frugality. Leading a frugal and unassuming lifestyle is one of the key factors that decide whether someone retains the wealth they earn through their hard work.
Another key message from him which most people miss is getting rich slowly. Warren Buffett’s personal wealth has been accumulated over a period of 75+ years, starting at the age of eleven. And, 99% of his wealth was earned after the age of 50.
Compounding of wealth requires time and patience. No one teaches these two lessons with such effectiveness as Warren Buffett. And, as individuals, that’s what we all should take away from the second richest man in the world.
Do you want to remain as a distributor of only MFs? What are the other financial products that you may want to distribute online and why?
We are tirelessly working towards simplifying every single aspect of investing so that building wealth and transacting in mutual funds is as simple as shopping or purchasing movie tickets online. Scripbox’s growth is aligned to the financial wellness journey of its customers and as we grow and see increasingly diverse customers, we will continue to build and launch solutions to suit their needs.