Think about stepping into a modern day supermarket.
You want to buy the best malt based drink for your child. All you have to do is head over to the section where they keep malted drinks and pick one. How complicated can it be?
How do you choose?
It turns out, it’s not that simple. With several choices for malt based drinks, it’s really hard to choose. Some claim using their product will make your child taller, some claim your child will have high energy levels, while others claim your child will have a sharper mind.
The simple task of choosing something now becomes extremely complicated. When choices becomes too much, you either don’t choose anything at all or end up constantly worrying if you have made the right choice.
This is the paradox of choice- more is not necessarily always good!
The same principle applies to all walks of your life. Whether you want to buy a mobile phone, TV, car, house, or financial products, there are simply too many choices.
That brings me to one of the most common questions our customers ask us- "why do you have only few funds? Why not have the entire spectrum of mutual funds and let me choose?"
Why We Consciously Chose To Have A Limited Set Of Funds Even Though It Means Less Business.
You see, from a business point of view, it makes a lot of sense for us to have all the mutual funds made available to you. If you don’t invest in our recommended portfolio, we can still generate revenue through commissions when you invest in your chosen funds.
But, we decided to give up that option because we care about how your investments are doing.
At Scripbox, we believe in a simplified investment approach. We strive to give you an automated and simplified way to invest. After all, we all have much better things to do in life than worry about how our investments are doing all the time.
Given too many choices, chances of investors making the wrong investment choices is very high. Instead of trying to make more money, we decided to take the longer route and help you grow your money by limiting choice and thereby reducing margin for error.
What’s The Benefit of Having Only A Curated Set of Funds in Your Portfolio?
#1: Start investing in less than 10 minutes
By giving you only four pre-selected funds, we eliminate 2 common problems investors face
- Which mutual funds to invest in?
- How many mutual funds to invest in?
You don't have to spend days researching the best funds. In less than 10 minutes, you can set up your account and schedule your investments.
#2: Achieve the right amount of diversification
One of the main advantage of mutual funds is that, for a small amount of money, you can achieve diversification. However, one of the common myths prevailing even now is that the more mutual funds you invest in, the better diversified your portfolio.
To achieve diversification, invest across suitable sub-asset classes (fund categories). The number of categories and amount in each category will depend on what your objective is. Our plans will recommend the right number and type of sub-asset classes and then a scientifically selected set of funds for each sub-asset class.
Based on our extensive analysis, we have found out that having more than 4 funds in your portfolio for a particular asset class does not give you any additional benefit of diversification. Instead of giving you the false image of highly-diversified portfolio, we decided to give you the best funds every year.
#3: Manageable portfolio size
Managing 4 best funds vs managing 10 average funds- the math is simple and pretty straight forward. All of us could use the extra time we save from fund management and use it to spend time with our family.
What’s The limitation of The Curated Fund Approach?
It wouldn't be fair if we just told you what makes our only-four-fund approach great. To truly understand if this approach is for you, you should also understand the potential limitations.
The curated-set-of-funds approach is best suited for people who
- Want to ensure that they have the best funds in their portfolio every year
- Believe in automating their investments and not micro managing them every day (set-it-and-forget-it approach)
- Think long-term when it comes to investments
- Believe that the quality of funds in your portfolio matter and not the quantity
It's not suited for people who are very advanced investors and prefer to make buy and sell calls based on market conditions (also referred to as timing the market).
While it’s good to have a small number of funds, it’s equally important that you always have the right funds. That’s why Scripbox does an annual review of all mutual funds and prompts you for a portfolio change if required. This ensures that you have the best funds every year.
(This blog was updated on December 24, 2018 to reflect the availability of standardised fund categories which help in achieving diversification)