‘Infinite’ By Grip Invest: A Detailed Review

In an industry-first move, SEBI-registered fixed income platform Grip Invest had launched a tool named ‘Infinite’ last month. Infinite automates the reinvestment of your monthly returns from Bonds and SDIs (Securitized Debt Instruments) into debt mutual funds, helping you compound your returns.

So in this blog of ours, we will deep dive into how Infinite works, why it was introduced, and what we like and dislike about it.

What is Infinite?

Infinite is a feature introduced by Grip Invest, which enables you to set up a SIP for your Bond/ SDI returns into a debt mutual fund. Every month the returns you get from the Bond/ SDI get auto-invested into a mutual fund of your choice, through SIPs.

Let’s dig deeper and help you understand how it works.

How Infinite works

If you invest in Bonds or SDIs, you must be knowing that getting monthly returns is the norm, right? But with Grip Invest’s Infinite tool, the monthly interest or payouts from eligible Bonds and SDIs that are credited into the investor’s savings account don’t just sit idle. Instead, these monthly returns are automatically transferred to a chosen mutual fund via the SIP route.

The reinvestment amount adjusts for any variation in bond interest or loan prepayments by SDI issuers, which is why investors need not monitor or update the SIP themselves every month.

And once the underlying bond or SDI matures, the SIP concludes automatically. The investor can choose to stop, modify, or withdraw that mutual fund investment any time before that as well.

We tested Grip’s Infinite feature, but before we dig deep into our review about it, let us bring to you a real-world example to give you a fair idea regarding how much more returns you can potentially earn with vs without activating Infinite:

Assuming you invest Rs 88,500 in an SDI deal at Grip with a tenure of 1 year. After the end of the tenure, you would have gotten back totally Rs. 94,500 – making the YTM as 11.6% and absolute return as 7.1%, when Infinite is not activated.

But if you choose to activate the Infinite feature, all your interest payouts get reinvested into a debt mutual fund. Assuming the returns on the debt mutual fund chosen by you is 9% p.a., in total, you get back Rs. 98,500 after a year (SDI payout + debt fund returns), implying a 12% return overall.

So in terms of absolute returns, you as an investor get approximately 70% more returns by activating the Infinite feature, vs a non-Infinite deal.

Now let's come back to our review of the ‘Infinite’ feature. Here’s what we like and dislike about it:  

What we like about Infinite

• Potential to earn higher returns

  The core benefit and aim of Infinite is to make your money earn higher returns for you. While Grip Invest claims an average of up to 30% more v/s a non-Infinite investment, this figure can vary depending on which debt fund you choose, the coupon payment, whether it’s a bond or an SDI etc. But largely, the concept in itself is impressive and holds the potential to boost your portfolio’s returns.

• No manual effort

  The convenience of not requiring any manual effort every month for reinvestment is a big plus in case of Infinite. Once you activate Infinite by doing the one-time activity of choosing the debt fund to reinvest your monthly payout, the rest happens on auto pilot.

• Adds diversification to your portfolio

  Investing your payouts from bonds and SDIs into debt mutual funds through SIPs helps in adding a layer of diversification to your portfolio.

• Automatic adjustment of SIP amount

  Another key benefit of Infinite is that if there is any variation in the bond/SDI’s monthly payout, it gets automatically adjusted in the SIP. For example, in the case of bonds, the interest amount may slightly vary every month, depending on the number of days in that month.

Whereas in the case of SDIs, the returns tend to see principal prepayments happen when borrowers pay back their loans earlier than scheduled. In both the cases, the SIP amount will automatically adjust to match with the monthly payout received, without any manual intervention required from the investor's end (shown below).

• Flexibility to sell anytime

  The combination of zero lock-in period for Infinite and the availability of the sell anytime feature on Grip’s platform offers investors the flexibility to withdraw their investment whenever they want to.

What we did not like about Infinite

• Eligibility restrictions

  Given the nature of the Infinite feature, it is currently available only on Bonds and SDIs that offer monthly returns. So, not all bond/SDI deals on Grip’s platform are eligible for auto-reinvestment through this feature, which can limit diversification or choice of investments.

• No option to invest in direct plans

  The debt mutual funds in which you get to invest while choosing the Infinite feature on Grip’s platform are regular plans and not direct ones. This can mean relatively lower returns for investors, since direct funds by definition offer higher returns than regular funds due to lower expense ratios.

• Market volatility

  Depending on which debt fund is chosen by the investor, it may be subject to variations in returns , which may not always give you a high delta on your returns.

• Less suitable for lower investment amounts

  Given that the minimum investment amount in SIPs is Rs 100, an investor investing a small amount in bonds would not be able to hit the minimum SIP amount every month. For example, if you invest Rs 10,000 in a bond which has face value of Rs 1,000, coupon rate 10% p.a. (payable monthly), your coupon payment per year would be Rs 1,000, which comes out to be roughly Rs 83 per month as interest payout.

  Now, when you activate the Infinite feature for this deal by choosing a debt fund to invest your monthly interest in, the minimum amount for monthly SIP is Rs 100, but your monthly interest payout is less than that. Hence, you as an investor would need to invest the difference amount as well every month, which, in this case, comes out to be roughly Rs 17. So, throughout the tenure of the bond until maturity (35 months), you would be investing approximately Rs 595 more through your monthly automated SIPs along with the interest that will keep getting reinvested every month.

Having said that, the minimum amount is set by SEBI, so there’s not much Grip can do here.

Conclusion

It’s fair to say that Grip’s Infinite feature is indeed innovative, and does create a streamlined process for reinvesting your monthly returns from bonds and SDIs, into debt mutual funds. This mechanism offers the potential for higher returns, convenience through automation, and added portfolio diversification.

However, it's noteworthy to consider this feature’s eligibility restrictions, lack of direct plan options, and the suitability for higher investment amounts before enabling it.

Please note that this is an opinion blog and not an official research or investment advice. This blog aims to help retail investors make an informed decision when considering Grip’s Infinite feature. The blog neither encourages nor discourages you from investing in any particular asset class or platform or feature.