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Scripbox – Fund selection algorithm

At Scripbox, we believe the following is the right path for long term inflation beating returns for investors:

  • For the long term (greater than a 5 year horizon), investing in the Indian stock markets is the wise thing to do.
    • Overall returns are expected to be better than alternative investment options,
    • provides daily liquidity and
    • it is also tax efficient.
  • Equity Mutual Funds are an efficient way to invest in the Indian stock markets
  • Using algorithms, we can choose the best available set of funds, based on data

Our algorithms focus on the following, in addition to various other factors. Selection is done based on rigorous data analysis:

  • Funds having a long track record (over 5 years)
  • Consistent track record of performance and doing better than the market
  • Have a reasonable size and scale

The funds in the portfolio over the last 2 years, have a long track records of providing inflation beating returns and market beating returns. These are seasoned funds, which have been around for several years and with consistent performance over the recent years and the years prior to those.

Data as on 31-Dec-2018

Our aim is to select funds with a consistent track record of performing well and there will be no compromise on the process. Equity markets by its very nature are volatility and unpredictable, but having a consistent approach is important for long term wealth creation.

Funds with Midcap focus have been weak in CY2018, but over the long term midcaps should do better than overall markets (based on historical evidence). Our portfolio construction is also such that the investor have an optimal mix of large and midcaps. Investing in funds with a great track record and a good mix and large and midcap should do well for investors.

Portfolio construction is not too different from selecting a cricket team. Look at the track record of the players, little bit more focus on recent track record, optimal mix of players with different styles and then let them play the series. Repeat the process at regular time intervals. 

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