No investment instrument is perfect. Everything you can invest in has its set of pros and cons. We look at those pros and cons and decide whether the pros outweigh the cons.
What is the basis for evaluating investments at Scripbox?
When we evaluate investment alternatives (especially at a product level), we ask the following questions:
- Does the Product have a long enough history?
- What is the return profile of the product?
- What is the risk profile of the product?
- Does the product give investors access to expert management?
- Does the product have market-discovered pricing?
- Does the product have daily pricing mechanisms?
- Does it offer adequate liquidity?
- How easy is it to transact?
- Does it have favourable tax treatment?
- Is it simple and easy to understand?
- Is there an underlying value associated with the product?
We have evaluated over 50 investment products and we continue to evaluate them on an ongoing basis. The product suite / offerings have been selected upon evaluation and careful consideration.
So why do we recommend Mutual Funds?
Mutual funds offer a very attractive medium to participate in growth assets. Some of the advantages of mutual funds include (and are not restricted to)
- Access to Expert Management
- Favorable Tax Treatment : Investor Level Not Fund Level
- Ticket Size for transactions
- Ease of transactions
- Low Management Fees
What we don’t recommend
Why does scripbox not recommend Sector or Thematic funds?
Investing in sectoral/thematic funds will require investors to have a unique insight into the specific areas of investment focus. In addition, the investor will need to have the ability, inclination and expertise to monitor the prospects closely.
The idea of engaging a fund manager is to delegate the management to a professional team. In our view, a mutual fund with a broad investment mandate will give fund managers flexibility to move to segments where opportunities exist and that we believe is the best way to engage an expert.
Investors are, therefore, better off investing in diversified funds rather than choosing a specific sector or a theme.
Why does Scripbox not recommend Alternative Investment Funds (AIFs)?
AIFs do not meet some of the key criteria for evaluation eligibility. These are mentioned below:
- Most AIFs are reasonably new and do not have adequate history.
- A minimum investment of 1 crore, may not be possible for all our users.
- Exposure to a single fund manager with a large investment can be risky.
- It is a complex financial product that is suitable for only a select group of investors.
Why does Scripbox not recommend bonds?
Bonds do not meet some of the criteria to be eligible for evaluation. Some of them are mentioned below:
- The Indian debt market, especially private bonds, does not have adequate liquidity.
- It does not give access to expert management.
- There is a reinvestment risk.
- It is not tax efficient since the coupon payout is taxed at your slab rate
- Individual bonds have their own terms and caveats and there is a very high level of customization, making them unsuitable for a structured like-for-like evaluation.