‘Index funds are low-cost, simple for retail investors to understand’

Pratik Oswal, head, passive funds at Motilal Oswal AMC, says goal-based investing is the most effective type of investing. Glide Invest, the robo advisory agency that he has arrange, suggests portfolios for passive funds and is geared toward retail buyers. Edited excerpts from an interview.

When did you begin Glide Invest?

 I used to be really working for an automatic wealth advisory platform within the US the place we have been doing fairly properly. We raised a number of enterprise capital, all of that. And once I got here again, I noticed the ability of serving to buyers routinely spend money on financial savings into capital markets. I feel direct plans have been simply launched at round that point. But I noticed that there have been not that many merchandise out there available in the market. That’s what prompted me to launch these passive funds. And that’s how  I’m right here and heading the passive funds enterprise at Motilal Oswal AMC. 

We began engaged on this on the finish of 2019. The product is similar to a robo advisor within the US. But in contrast to the US the place there’s a marketplace for wealth administration throughout completely different spectrums, wealth administration in India is pretty concentrated on the high, say, 1% or 2% of the inhabitants. You have to have the ability to make investments ₹30-40 lakhs to have the ability to get the providers of somebody who involves your own home or involves your workplace and offers you customized recommendation. And what concerning the investor who desires to speculate say ₹10,000 or ₹20,000? There is not any assist. And that is going to be most of India’s inhabitants. So that was the kind of alternative that we’re focusing on. 

You provide index funds in your portfolios?

Yes, precisely. Index funds are used because the core of your portfolio, and it’s because they’re very long run. There’s actually not any want for buyers to promote index funds, as a result of they don’t underperform the market. Obviously, you might have some monitoring error, however over time, it’s principally betting on market returns. So there’s no dangerous efficiency of index funds. They’re low price, they usually’re comparatively easy for a retail investor to know. So that’s why we’re providing these index fund portfolios. 

Index funds have constructed a monitor report in India on the fairness facet and debt facet, what’s your pondering? 

On the debt facet, to be trustworthy, there aren’t many index funds. So I feel you will note over the subsequent two or three years much more innovation taking place on the debt facet. So far, the innovation has occurred on the held to maturity (goal maturity) kind of debt funds which expire. And the issue with expiring debt funds is that, as a long-term investor investing for, say, 10-15 years, you’ll find yourself having a tax occasion when the fund matures. Then you make investments that again into debt funds. So we use these funds because the debt allocation. But in comparison with say about 4 years in the past, there are much more choices immediately. 

So how do individuals make investments by means of Glide? 

Glide make investments is primarily a business-to-consumer (B2C) app. Unlike most startups, we don’t spend on advertising and marketing. So a number of the expansion that you simply’ve seen is totally natural. The thought is that potential buyers come to the app and reply a couple of questions there. Those questions enable us to know the kind of investor you’re and, relying on that, we are going to provide suggestions. The second factor is when a buyer is available in with a sure aim in thoughts. I strongly imagine that goal-based investing is the most effective type of investing. Even retirement is definitely a aim, technically. And, we additionally account for a buyer’s danger profile. We advocate a conservative portfolio for somebody who is just not in a position to take as a lot danger and an aggressive portfolio the place somebody is ready to take much more danger. So it’s customized and low price. 

What sort of AUM (property underneath administration ) or buyer base do you might have? 

We have about 40,000 prospects proper now. We constructed that during the last yr and a half. Most of those prospects are already invested in direct plans in mutual funds. So that’s the phase that we’re searching for. We additionally provide a platform on the app that helps you spend money on direct funds. 

You don’t settle for prospects of Motilal Oswal group entities? 

If you’re already a buyer of Motilal Oswal broking or every other enterprise, then technically you’re not allowed to even be a buyer or consumer of Glide Invest, as per Sebi laws separating distribution and recommendation. So we’re not in a position to onboard any prospects who’re already throughout the ecosystem, which has been a little bit of a problem as a result of these are clearly simpler to transform. AMC (asset administration firm) buyers can, in fact, be shoppers of Glide make investments. 

How do you keep a kind of a Chinese wall between the AMC and Glide Invest? 

The groups are utterly separate. There might be some Motilal Oswal funds in our portfolio however we provide different AMC funds as properly.  Our backend engine additionally gives some tax optimization. Your incremental investments will change, relying on the place cash ought to go. So suppose tomorrow, you might have a 50:50 portfolio between fairness and debt and it turns into 60:40, routinely your recent investments will get deployed in debt fairly than fairness. Most of our buyers are SIP buyers and therefore this sort of tax-efficient rebalancing works properly for them. 

What are your prices? 

Currently, it’s free. But we hope to start out subscription plans over the subsequent 8-10 months.

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