Should you go for WealthBaskets on Paytm Money?

Digital wealth management platform Paytm Money has partnered with WealthDesk to offer curated investment portfolios called WealthBaskets.

The readymade investment portfolios market already has smallcases by smallcase technologies, Stockbaskets (Samco Securities), One Click Equity (ICICI Direct), Theme Investing (Fyers) and Intelligent Advisory Portfolio (Motilal Oswal), to name a few. Here we review WealthBaskets on Paytm Money.

WealthBaskets decoded

Each WealthBasket is marketed as a research-backed mix of stocks or ETFs which aim to give you diversification. They are managed by SEBI registered professionals.

WealthBaskets are classified as per their risk, market cap and tenure. Wealthdesk says that the portfolios are backtested for many years of performance.

A WealthBasket reflects a particular investment theme/idea (Digital, Consumption, Make in India) or sector (Chemicals, Pharma, Banking & Finance) with a set of stocks/ETFs along with their respective allocation percentages.

For instance, the Stable Momentum portfolio currently has 10 stocks (with different weights) and a certain cash component which is kept in broking ledger and available for any future portfolio updates.

All the baskets are subject to rebalancing at monthly or quarterly frequency. Each rebalancing may involve tax implications. There are no restrictions on withdrawal, at the moment. The stocks/ETFs forming part of your WealthBasket reside in your demat account.

Paytm Money's partnership with WealthDesk is the first step towards creating a wealth and investment advisory marketplace on its platform. At the moment, there are 13 core, thematic, sectoral and model-based investment portfolios on the platform --- all managed by Quantech Capital.

For investors, Paytm Money is the transaction platform. WealthDesk is Paytm Money's technology partner for WealthBaskets. Quantech is the SEBI registered investment advisor (RIA).

WealthDesk, founded by CFA Ujjwal Jain who has previously worked in D.E. Shaw and MSCI, is a unified wealth interface on top of broking ecosystem platform. Quantech Capital is led by Sujit Modi, a CA and ISB alumnus who has worked at Deutsche Bank for 10 years including as VP in the asset and wealth management team that was managing over $10 billion in quant strategies. Modi later worked for over 3 years in index solutions provider MSCI as part of their factor research team.

Plans and pricing

The WealthBasket offering is sold under 3 plans on the Paytm Money app (see table).

Minimum investment amounts for the 13 portfolios range from ₹1,000 to ₹25,000.

The free/starter plan is aimed at stock market newbies. The core plan is for investors who are active investors in MFs, direct stock and ETFs, and who are interested in premium portfolios. There are a total of 7 portfolios under the 'core' plan.

The highest-tier is the 'pro' plan and it includes portfolios from the 'free' and 'core' plans. It is for investors who are interested in building a premium core-satellite portfolio with thematic, sectoral etc. exposure. All the 13 portfolios are accessible to 'pro' customers. By paying for 6 or 12 months at one go, one can get 40 per cent off on the subscription for core and pro plans.

There are no percentage-based commissions, as in some curated portfolios in other platforms where up to 2.5 per cent (of the investment value) can be charged as access fee. In such a case, the access fee can be ₹12,500 for portfolios that require ₹5 lakh as minimum investment.

Apart from the subscription plan fee, regular brokerage including taxes, may be charged during transactions. Payment gateway charges may be applicable depending on the subscription fee payment mode.

Our take

With WealthBaskets, Paytm Money is providing users access to curated advisory services and products on its app. The flat-fee pricing approach is affordable for investors irrespective of their wallet size.

We like the fact that the portfolios have avoided the standalone midcap or smallcap bias, and instead have gone for a multicap approach. This is important given that many young and millennial investors who constitute a lion's share of the Paytm Money user base (aged under 35) may think they can take higher risk, but wouldn't have actually experienced large drawdowns in their short investing experience.

Do note, the past returns of portfolios now are without adjusting for subscription fee and transaction charges, but there is a plan to include all costs in future..

Also, some portfolios can be quite concentrated that may go against the diversification purpose but are necessary to generate higher than market returns as we see in some MF and PMS structures.

As of now, there are 13 portfolios and all are managed by one RIA. This could be due to the fact that Paytm Money is choosing to play it safe. Competing curated investment platforms have allowed scores of RIAs, some even with sub-optimal research bandwidth with regards to active portfolio management.

Paytm Money would do well not to walk down that path as it onboards more advisors and portfolios.