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Doesn't changing funds every year run counter to the notion of “long term investment”?

We believe that investors must invest for the long term to benefit from investing in stocks or equity mutual funds. (For more details on how long is long term, refer to this question). 

However “long term” is not the only criteria for getting returns. The quality of the chosen investment matters even more. A poorly performing mutual fund (or stock) would not give you good returns, how much ever long you hold it.

Not all equity mutual funds are created the same and, more important, do not stay the same over time. There is a wide difference in their performance and while the good ones should be held for long, the ones that don't perform need to be quickly replaced. The key, therefore, is to separate the idea of investing in the category of "equity mutual funds" from a specific "fund" or "scheme". What financial experts recommend is that you:

  • invest for the long term in equity mutual funds
  • monitor your investments, and periodically weed out relative non-performers
  • don't get attached to any individual fund or scheme

By investing for the long term we mean that when you sell those mutual funds, you MUST reinvest the sale proceeds back into another (better) equity mutual fund. This is the power of the Scripbox approach. You stay invested in equity mutual funds for the long term but you periodically change the schemes you are investing in depending on their performance.

Please note that the total amount remains invested in equity funds - which is your objective. But dropping an existing investment in favour of one that has better prospects based on a scientific analysis, turns out to be a better decision. Selecting which schemes to invest in, monitoring their performance. reviewing them and switching is all part of a disciplined investing process.

This is a lot of work and why very few investors are able to follow this discipline, even though every financial expert recommends it. With Scripbox, all this complication goes away and the discipline becomes automated. All you need to do is login, review and confirm the basket switch and start rebalancing. All the calculations as well as the activities of redemption and re-investing get taken care of by Scripbox. We'll even remind you when to do it.


Hope we helped! Why not get started with your Scripbox.
If you need further assistance please feel free to reach us at 1800-200-1265