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The Love Triangle of Retail Investment Services, Fintech and Tweens

With the working age population set to rise to 64 percent by 2021, India is poised to become the youngest country in the world with an average age of 29 years. India's large tween youth population, though it presents its own very unique challenges, would redefine the way young India invests and would lead to a spurt in the usage of personal investing solutions.

In India, S&P BSE Sensex has delivered 9x returns in the last 20 years. However, a very small set of the population stood to benefit from the boom because of the extremely low participation percentage of retail investors in the Indian stock market. According to a Security and Exchange Board of India (SEBI) report, there are about ~18 million equity investors in the country out of 1.2 billion plus people which equates to an extremely low participation of  1.5% as compared to China and US with 10% and 18% participation respectively. So, SEBI is pushing for more retail participation in stock markets through a new set of laws and regulations along with a host of initiatives aimed at increasing financial literacy.

The average retail investor can also benefit from this growth but for that he needs to invest and not be a bystander. We will explore in this post how the recent wave of fintech solutions make it easy, inexpensive and less time-consuming for the twenty something investor to start investing as soon as s/he gets her/his first paycheck and the importance of saving more and investing early. Until now, the high fees of mom and pop financial advisors along with the long regulatory paperwork was a deterrent in attracting the young generation to investing, but now technology is democratising investing for an average investor by bringing everything online and making the verification process digital using eKYC.

Young investors benefit more as compared to other investors because of the time period they can keep their money invested in and thanks to the power of compounding, we see how a small amount of Rs 500 invested per month can grow to a corpus of Rs 34 Lacs in a time span of 30 years considering modest returns of 15%.

Compound interest is the eight wonder of the world. He who understands it, earns it... He who doesn't, pays it.
                                                                                                                                                                                                                                                      -Albert Einstein
Power of Compounding (Individual Invests Rs. 500/month)
Power of Compounding (Individual Invests Rs. 500/month)

The startups coming up in the personal investing space do not require the investor to be a financial whiz and are making investing effortless and inexpensive for the average investor. They are democratizing the investing process for an average investor by offering high quality portfolio management services at a fraction of the cost of a human advisor by leveraging the power of algorithms and automation to manage portfolios and even re-balance them according to changing market conditions and investment goals. This is why they are termed as robo-advisors. Though there are a lot of players in the Indian market, we are yet to see a pure robo-advisory model (without the slightest bit of human intervention) like US .

Let's look at some of the hand-picked names in this space:

OroWealth
This platform is one of the best platforms out there because it addresses the pain point of people who are looking for an alternative to MF Utilities platform for investing in direct mutual fund plans or systematic investment plans (SIPs). OroWealth also offers portfolio management advise at a fraction of the amount of the savings achieved by investing in direct plans. 

Direct Plans vs Regular Plans
There are higher returns in a direct plan because the distributor commissions in between are eliminated and the commission which the mutual fund house was giving to the distributor is passed onto the investor resulting in higher returns. However, the investors should prod with caution because the myth that direct plans investing is better than regular plan investing does not hold true for everyone. It is better to be invested in a regular plan with high returns than in a wrong direct plan with low returns. However, if you can do a little bit of due-diligence and choose funds on your own to design your portfolio, direct plan is highly recommended. 

Unovest

Similar to OroWealth, Unovest is a direct mutual funds investing platform. Unlike OroWealth, which charges a fees as a percentage of investment amount, Unovest  charges a fixed yearly fee. It also offers portfolio management advise.

Invezta
India's only "pay if it works" platform, Invezta offers a DIY platform for investing in direct mutual funds and also offers advisory services for a slightly more fees. One of the best user-interface and user-experience in class and a very easy hassle-free on-boarding process.

Scripbox
Sit back, relax! That's what Scripbox promises. This platform invests your money in pre-selected best tax-saving mutual funds selected algorithmically based on the investment time-frame. The platform charges no fees because it invests in regular plans.

FundsIndia
FundsIndia is a mutual fund marketplace which offers regular MF and SIP plans. The website offers free portfolio management service, trigger based investing and a whole lot of other premium services for free because it enrolls the investors in regular plans.

There are many other Indian platforms like
Wealthy, Wixify, RoboAdviso, AdviseSure which are offering similar set of services with different objectives ranging from tax-savings to wealth maximisation. A little amount of effort in choosing a platform and getting to know the clauses will go a long way in weeding out the unexpected hiccups from your investment journey.

With this post, I hope to have covered enough to motivate you to take charge of your finances, chart out your investment  goals and choose a right platform to invest based on your requirements.

What are you waiting for? Let's make investing sexy!

The writer is an undergraduate at the Pennsylvania State University, University Park majoring in Computer Engineering. He has previously worked with a large US Based Asset Manager & as an Investment Analyst with a leading seed/early stage VC Fund focused on mobile and internet startups. Follow him on Twitter @shauryarastogii.

All opinions expressed here are entirely his own. Inputs regarding various services mentioned in the article should not be considered as an endorsement by the author or the organizations he is associated with.


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Shaurya is a Co' 17 senior at the Pennsylvania State University, University Park majoring in Computer Engineering. He has worked with a large US Based Asset Manager & as an Investment Analyst Intern with a leading seed/early stage VC Fund focused on mobile and internet startups. Follow him on Twitter @shauryarastogii.

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