It is estimated that only 2 percent of Indians invest in stocks, and Ashish Kumar Chauhan, CEO of Bombay Stock Exchange (BSE) is quoted as saying in a Quartz report that Indians have a love-hate relationship with the stock market. The average Indian investor often finds himself working on limited information and knowledge, having to rely on the advice of possibly equally ill-informed acquaintances or opaque institutions. Mumbai-based Research & Ranking aims to change this scenario by busting the myths about equity investing and providing investors with tech-enabled solutions.
Story so far
Research & Ranking is a SEBI-registered robo-advisory venture that advises retail investors on how to create and sustain wealth through long term investments into equity markets. The beta version of the platform was launched in January 2016, and the venture finally went public in October 2016.
Manish Goel, Director at Research & Ranking, says that he and his team decided to enter this space looking at the overall market size and common problems faced by equity investors, and also to bust myths and wrong perceptions around equity investment. He adds,
"Equity as an asset class is not looked at the right way in India. Long term performance data, across several asset classes, has proven that equity beats all other asset classes in the long run. But people are generally not aware of how to go about investing."
Headquartered in Mumbai, Research & Ranking is a part of Equentis Group, which has two main companies – Equentis Capital, which was started in 2009, and Equentis Wealth Advisory Services, which was started in 2015. The venture currently has a team of 30, with core team consisting of Manish, Anju Prashar, Jeetendra Nair, Ritesh Jain, Gaurav Goel Pankaj Jain and Mayuri Yadav.
R&R took a few months after the beta launch to test its technology system and get the right team in place, and then in October 2016, started the sales process and onboarded clients. Says Manish,
"We approached our clients personally to understand their feedback about our product and the work we are doing. The feedback we got was positive, and most of the clients appreciated our concept of C.E.R.T.A.I.N and our end-to-end wealth creation solution approach."
How Research & Ranking works
Research & Ranking has two main offerings-
- 5*5 Wealth creation strategy
R&R helps investors identify stocks of well-run and growing businesses and create a personalised portfolio that has the potential to grow up to four to fivefold or more in five years, based on the investor’s risk assessment. Manish noted that such companies typically exhibit the twin traits of –
a. Consistent above average growth rates, and
b. Are run by management of exceptional pedigree.
As a part of this strategy, R&R’s research team and algorithms monitor portfolios of different stocks regularly to book profits in existing opportunities and replace the underperformers with better opportunities. To churn out non-performers quickly R&R sends recommendation alerts to the customers through SMS and email and then updates their dashboard simultaneously.
The portfolio’s growth is tracked every quarter based on stock price and detailed quarterly results analyses. Based on the progress, portfolio rebalancing is advised, as required, to make sure that yearly growth is captured along with the long term growth in the businesses.
One may choose to stay invested for any period of one year and above, but the team encourages investors to subscribe to this strategy for the medium to long term, with the aim of wealth creation. Manish noted,
"It is a general myth that equity investments can’t be done based on your personal goals, needs, and objectives. Investors usually think that for goal-based investments, fixed income options are the best way to go. Our strategy tracks business growth and has a fair idea of how much the portfolio can grow. Our singular focus is ‘Wealth Creation’, which we strongly differentiate from Wealth Management."
2. Customised research reports
R&R also offers investors access to customised reports about any company that they are interested in. Manish noted that, upon request, R&R does extensive market research for a few months and then presents a report that includes parameters like management pedigree, key financial parameters, business outlooks, and recommendations on whether to buy, sell, or hold a particular stock.
R&R offers these services at a half-yearly or annual subscription, and also has a more premium plan, if one doesn’t wish to subscribe.
Guiding principles of Warren Buffett and Paul Samuelson
Manish noted that their guiding principle is captured by Paul Samuelson – “Investing should be more like watching the paint dry or watching grass grow. If you want excitement, go to Las Vegas.”
He believes that value investment is the right way to create wealth, and that wealth creation beats wealth preservation. The key objective for wealth creation is to purchase sound businesses run by competent management at a price that represents a material discount to their long term intrinsic value. This then allows the business value to surface over time through “Investment Discipline” and the “Power of Compounding”. He added,
"Our approach for finding out the value opportunities and staying invested in them for the long term, with a lot of patience, is broadly aligned with the philosophy of Warren Buffet and Benjamin Graham."
Sector overview and future plans
According to reports by KMPG, financial majors like Wells Fargo, Bank of America Merrill Lynch, and Fidelity Investments have discussed or announced automated financial advisory services.
India, however, is estimated to has among the lowest mutual fund investment rates (7 percent), with mutual funds accounting for only 3.4 percent of total investments by individual investors (including HNIs and retail). So, during the initial stages, incumbents (or banks and larger financial institutions) will be the early adopters of robo-advisory solutions, before it hits the ancillary markets. AdviseSure, part-human, part-robot finance advisor, is a player in this space that offers counsel at Re 1 per day. Then there are players like Wixifi and TrakInvest that demystify stock trading. According to YourStory Research, there are close to 50 Indian early-stage startups flocking to the robo-advisory space.
Manish noted that Research and Ranking’s focus is on reaching the milestone of 20,000 customers in FY17-FY18. R&R also aims to come out with new tools and services, like a dashboard that compares one’s R&R portfolio to a mutual fund run-rate.