A Mutual Fund is a professionally managed investment fund that pools money from many investors to invest in securities such as stocks, bonds, money market instruments and other assets. Mutual funds however have both advantages and disadvantages compared to direct investing in individual securities.
In India, Young people, millennials in specific, which are in their 20s and 30s don’t have complex financial needs and they largely keep themselves away from investing in Mutual funds, especially millenials in rural areas. However, now things are changing. Early this month, Alibaba and Softbank backed PayTm launched PayTM Money, its mutual funds app, which enables customers to buy and sell mutual funds and manage their portfolio on-the-go from a mobile phone.
And, as a matter of fact, demonetization in 2016 allowed apps like PayTM to reach into hands of masses which in turn allowed people in tier-2 and tier-3 cities to do things which earlier thought of as improbable.
Fintech startups are extending a helping hand to millennials who wish to save and invest in Mutual Funds. Millenials are very comfortable with the online financial ecosystem especially app based ones such as Paytm and similar apps and this trend has led to a slew of new startups.
Investing in the Indian stock market which has shown massive growth in recent decades is the best way to create wealth. The stock market has risen by about 800% since the turn of the century and in no way can that kind of growth be matched by staid old fixed deposits.
Millennials are dissociated from savings
It has however been an uphill struggle to get young Indians born since the mid-80s to get to participate in the stock market. Despite having high disposable income from jobs in lucrative sectors such as IT, ITes, banking, retail and advertising most young Indians below 40 do not save much. They have in effect a broken relationship with money since they have grown up in an era when consumerism is fashionable. The saving habit which was natural to the previous generation has bypassed millennials. At 35 most of them are very far away from financial freedom. Investing through traditional channels is tedious and few Indian startups have realized the gap that exists and stepped in to help millennials.
Apps to the help – Sqrrl, SaveAbhi and Scripbox
Fintech startups like SaveAbh, Scripbox and Sqrrl have stepped in and begun to provide much-needed help.
Sqrrl was founded by Samant Sikka, Dhananjay Singh and Sanjeev Sharma in 2016. The New Delhi based startup which has been created by investment from its owners has a novel way to get millennials to save. Samant Sikka a veteran of two decades in the financial sector saw firsthand the difficulty of marketing investment products in real life. One has to hunt out potential customers and convince them to make a commitment. It takes time, energy and resources that are just not available. Sikka sees the internet and especially smartphone apps to be a great force multiplier.
To help millennials across the country Sqrrl is going beyond the largest 15 cities which were till now the major market of Mutual Funds. Sqrrl puts away small amounts of money every month in a liquid savings account where it earns more interest than a normal savings account.
The other product from Sqrrl is Bring Your Own Dream (BYOD) which helps users save for some future target – a holiday or a gadget or for tough times. Their last product AxeTax is about investing in tax saving instruments. By making three simple offerings they have till now reached 28,000 users over 60% of whom live in smaller cities and save an average of Rs 1200 a month.
Bangalore-based Scripbox is an online mutual funds investment platform that offers a selection of mutual funds to its customers in India. A finance technology company, Scripbox helps consumers who are confused by too much information and vague investment advice. Users of Scripbox are able to start investing by signing up and selecting a category of mutual funds: equity, debt, or ELSS.
Priyank Barthwal and Vikram Malhotra of SaveAbhi offer a similar path. Every time a user pays for something SaveAbhi app rounds it up to next hundred and saves the change and invests it. Say someone buys a movie ticket for INR 560, SaveAbhi rounds it up to INR 600 and put the INR 40 in a Mutual Fund every time the savings reach INR 500.