In the case of long-term goals, you can afford more equity exposure whereas, for short-term goals, you would require a more fixed-income-oriented portfolio. According to Atul Shinghal, founder and CEO, Scripbox, investors must be aware of their objectives, risk profile and financial goals while selecting between equity funds and debt funds.
In an interview withMintGenie, Shinghal said that investors must be aware of which assets they own and why.
Q. Your online platform helps investors choose between different investment options. How do you advise investors to decide on their investment portfolios?
To begin with, defining a clear goal and setting financial objectives are of utmost importance in making sound investment decisions. Another significant thing to consider is how long are you planning to stay invested. In the case of long-term goals, you can afford more equity exposure whereas, for short-term goals, you would require a more fixed-income-oriented portfolio.
At Scripbox, we understand that everyone has unique goals so we offer personalised investment solutions to help you achieve what you want to. Whether the aim is to fund a child's education, plan for retirement, or create long-term wealth, our range of offerings helps investors fulfil their desired investment objectives. We also recommend a risk profiling exercise to ensure that their portfolio is personalised, diversified, and unbiased.
Q. So many AMCs are out with their mutual fund products. How should investors decide between equities and debt fund instruments?
With 40 asset management companies (AMCs) and more than 1300 individual funds to choose from, the sheer volume of available options can be overwhelming for investors. To navigate better, we recommend that investors seek out a trusted partner who prioritises their best interests and provides valuable guidance.
There are different factors such as investment objectives, risk profile, expected returns, the criticality of the end use and investment horizon to be considered when selecting between equity funds and debt funds. Each element plays a crucial role in determining the most appropriate investment strategy for a particular investor.
With careful evaluation of these factors and expert advice, investors can make well-informed decisions that align with their goals and preferences. It is crucial for investors to know which assets they own and why.
Q. Most personal financial experts advocate long-term investing behaviour. How should investors decide on long-term and short-term options?
Investment choices strongly depend on how successfully one has set financial goals and time frames.
For short-term goals (less than five years from the date of investment), fixed-income investments may be the most suitable choice. However, investors need to be mindful of the right categories and appropriate fund selection to ensure that the interest rate risk and the credit risk are managed well. For longer-term goals, an asset allocation approach that includes Indian as well as global equities, precious metals, and other diverse investment options are more appropriate.
An assessment of different investment approaches indicates that investors with longer investment horizons tend to have a higher likelihood of achieving satisfactory outcomes. We have developed solutions and automated the best practices to simplify wealth management for our customers to create hassle-free investment journeys across life stages.
|Nifty 50 (Dec-94 to date)
|Three-year CAGR (in %)
|Five-year CAGR (in %)
|Seven-year CAGR (in %)
|10-year CAGR (in %)
As the above table indicates, longer investing horizons correspond to higher average returns and increased predictability of returns. This can be observed by the decrease in the standard deviation of returns over time.
When evaluating different asset classes, it's crucial to consider data covering multiple market cycles and spanning a long timeframe. This would enable investors to gain a more accurate understanding of average returns and predictability of returns, which can thereby ensure that their planning assumptions align with reality.
Making informed investment decisions requires careful consideration of a range of factors, including risk tolerance, investment goals, and market conditions. By working with trusted partners, investors can create strategies that are tailored to their unique needs and have a higher potential for long-term wealth creation.
Q. So many investors have lost money due to market turmoil in the past few days. In these times of economic meltdown, what investing strategy do you advise?
It is disheartening to witness investors incurring losses, particularly in light of the recent market turmoil and external events that have significantly shaped the current conditions.
While it is true that “Bottoms in the investment world don't end with four-year lows; they end with 10- or 15-year lows”, we are far away from such a situation and would like to caution against using alarmist language such as "meltdown” for the current market condition. At present, we are 10% away from the all-time high on the Nifty50, and over the past 2 years, we have remained within a range of 14,300 to 18,800.
While this may feel like a difficult stagnation period compared to the meteoric rise that we witnessed after the Covid lows in March 2020, it's important to take a measured and strategic approach to invest. At Scripbox, we believe that investors can benefit from:
- Adopting an asset allocation approach to long-term investing
- Incorporating a safety margin when planning finances and utilising conservative return expectations.
- Applying principles of diversification
- Using fixed-income instruments that manage interest rate risk and credit risk effectively
- Seeking the help of a trusted partner
Investors should also focus on their long-term goals rather than allowing themselves to get impacted by the short-term market noise.
Q. People talk about savings and investments. However, very few talk about focusing on the need to earn more. What is your take on the same?
At Scripbox, we firmly believe that your earning capacity and savings rate are critical factors. It's essential to maximise the primary source of income. For one to stay relevant amid today’s economic condition, I would strongly advise upskilling at the current job, earning a higher salary and investing it well. So instead of working harder for your money, let the money work for you and invest it systematically in an asset allocation model.
Having said that, being able to live within one's means, spending prudently and not relying on debt beyond a point are equally important. Spending less is perhaps an understated but powerful action that has the potential to impact your financial situation for the better.
By prioritising earning capacity and continuously striving to enhance skills, individuals can increase their income potential and create more significant opportunities for wealth creation.
Q. The American banking sector is facing a crisis. Do you think this would have a significant impact on the Indian banking sector?
The Indian banking sector is resilient and reasonably isolated from the market turbulence we've seen in the recent past. The Reserve Bank of India’s approach to managing the economic fallout post-pandemic has helped to insulate our banking industry to some extent.
Having said that, in today's interconnected world, complete decoupling is not always possible. If the current market stress spreads to a broader set of financial institutions, there could be some ripple effects on the global financial services industry.
However, global governments have learnt from the past and we have seen instances of quick government intervention in recent times, such as in the United States and Switzerland, which have helped to contain the fallout from bank failures.
Going forward, remaining vigilant and closely monitoring the evolving market conditions would be critical to make informed investment decisions.
Q. How do you advise people to achieve financial independence early in life?
Starting early and being consistent in your investment approach can lead to significant wealth creation in the long run. Financial independence isn’t just about reaching a specific number, but also about having the right mindset. Even if you start by saving a small amount, the power of compounding can do wonders over time.
Remember that time is the secret sauce that helps money grow and allows investors to build wealth over the long haul. The longer your investment stays in the market, the more time it has to grow. So, if you want to reap the benefits of compounding and achieve financial independence sooner, it's better to start early and stay consistent with your investment plan.