WealthBaskets: What, Why and How

We all have been seeing a massive surge recently in the advertisements, social media posts, notifications for courses, etc for stock market investments, specially from the ‘finfluencers’, however, it’s not surprising that India still has a very low penetration rate for equity investments. 

Although many new demat accounts have been opened recently with a total tally crossing 11.4 crore, around 75% of them are inactive. If you speak with your parents or uncles, most of their investments would be in physical assets such as real estate and gold. If they had some financial assets, they were dominated by fixed deposits and money-back insurance policies.

Rise of financial assets

Nonetheless, one thing is for sure that over the last few years, more retail investors have recognized the need for equity investments. Most of it started post March 2020, when the world was under lock-down. Equity markets just kept going up after a massive decline in March 2020.

Any random stock pick would have given one decent return. That led to the newbies believing they can do it themselves. They think they can pick the right stocks, buy them at the right time, at the right price, in the right quantity, and exit timely making good profits..

Investing in equities requires two things: skill and time (and of course capital).

Even if you have the skills to invest in equities, do you have the time? You might have a full-time job that doesn’t allow you the extra time and energy to do the research. Or, you might have plenty of time, but don’t know how to do the research. 

When the stock market up move halted in October 2021, together with ease of lock-down, people going back to offices and being busy, there came a reality check.

If you fall into the latter category, i.e., having a lot of time but no skill, chances are high that you may become a victim of illicit stock tips from fraudsters.

However, there are many who accept that they can’t manage their own portfolios, hence they  outsource to an expert. This is where mutual funds come in.

Mutual funds have come a long way in the last few decades, with nearly ₹40 lakh crores in assets under management, of which around ₹20 lakh crores are in equity-focused mutual funds. 

Many of us fail to recognize the importance of portfolio based investment which helps in diversification of risk and ensuring optimum returns. The need for portfolio based investment was solved by Mutual Funds.

However, there is a significant gap in focused strategies, theme-based opportunities, transparency of stock holdings and control over investments in mutual funds.

Need for WealthBaskets

There lies an opportunity for investment avenues for those who want to diversify away from Mutual funds, and can’t make their own portfolios. WealthBaskets, to an extent, is the answer. They are designed to provide an add-on or alternative to traditional mutual funds in India and bring best in the industry money managers to help you build a portfolio. WealthBasket platform allows SEBI-registered professionals, or WealthBasket curators, to offer their curated WealthBaskets to the investors.

These WealthBaskets consist of a bundle of stocks or ETFs in a specific proportion researched by the curators, for a fee. The full-time job of these curators is to keep an eye on the markets and help you to make the best investment choices. Now you see, these curators have both time and skill. So they are in the best position to make those choices.

On WealthBaskets platform, once the investor completes the onboarding process, they can pay the fee and gain access to the carefully picked stocks in that proportion. The investor can then execute trades with a few clicks through their broking account.

From time to time, the curator may rebalance the WealthBasket based on their research, and an immediate notification is sent to the subscriber through email and SMS. The subscriber can then adhere to the rebalancing recommendation with a few clicks on their broking account.

This model has several benefits, including transparency, as all stocks reside in the subscriber’s demat account, and the subscriber can always see what stocks they hold.

While alpha is not a guarantee with WealthBaskets like any other financial product, this model can provide some diversification to the portfolio and an enhancement to the risk-return profile of the investor.

Simple, isn’t it?

Yes it is. But it needs some discipline from your end. In the next post, I will explain how to best make use of these WealthBaskets to be added to your overall portfolio.

WealthBaskets: What, Why and How

WealthBaskets: What, Why and How

Reach out to the author