Did you recently hear about smallcase investing? Do you want to expand your knowledge about them? Probably, this is why you are here.
In this post, we will discuss smallcases, their benefits, the investment process and much more. Join us on this journey to enhance your knowledge about smallcases. Let’s dive in!
What is smallcase Investing
smallcase investing refers to the investment approach offered by the Indian fintech company called smallcase.
The company offers predesigned baskets of stocks/ETFs/REITs curated by professional SEBI-registered investment advisors. These baskets or portfolios of securities are bundled together based on specific investment ideas, themes, strategies or sectors.
For Example: If an investor wants to invest in a particular sector such as energy, pharma or technology, there are smallcases (portfolios of selected securities) that target those specific sectors. Investors can invest in them with just one click.
How Does Smallcase Investing Work
Let’s assume an investor wants to invest in equities. He has multiple ways to do that. He can either directly invest in the stocks or through mutual funds or replicate a portfolio predesigned by an expert.
smallcase investing operates on the principle of replicating pre-designed portfolios created by experts.
An investor can choose from the smallcases available and buy them with a single click. All the stocks of that smallcase will reflect in the investor’s Demat account shortly.
Moreover, having the stocks in your Demat account gives the flexibility to sell or buy individual stocks of the smallcase portfolio.
It is also worth noting that investors may get rebalancing notifications periodically. Rebalancing involves buying new shares and selling existing shares within the smallcase portfolio.
This rebalancing process aims to enhance the potential for higher returns and mitigate losses by ensuring the portfolio maintains its desired composition and alignment with the investment strategy.
Smallcase Vs Mutual Funds
Even though both smallcases and mutual funds provide investors with convenient and diversified investment options, they differ from each other on several vital aspects discussed below:
A. Portfolio Composition
The portfolio of a smallcase is designed based on a strategy, idea, theme or sector. However, mutual fund managers compose a mutual fund’s portfolio based on their preferences.
B. Customization Flexibility
smallcases offer its investors the flexibility to create customized portfolios or modify the existing ones based on preferences & strategies. In contrast, a mutual fund’s portfolio is customized or modified by fund managers.
C. Transparency & Control
smallcases provide transparency in terms of portfolio composition, holding period, modification history etc. On the other hand, the level of transparency in mutual funds can vary based on regulatory requirements and the fund’s specific disclosure practices.
D. Cost Structure
smallcases charge a fee for using their platform and brokerage charges when you buy or sell smallcases. In the case of mutual funds, a yearly expense ratio is charged for management and other costs for running the mutual fund.
Benefits Of Smallcase Investing
- Professional Expertise: Investors can leverage the knowledge and experience of market experts as smallcases are indeed curated by professional SEBI-registered investment advisors.
- Convenience: Instead of buying and selling individual securities, smallcases offer the convenience to buy or sell a complete portfolio of securities with ease.
- Rebalancing: With the rebalancing feature, investors may ensure that the portfolio remains aligned with investment goals.
- Cost Effective: smallcase investing is often cost-effective compared to investing in individual stocks or actively managed funds. The overall costs can be lower compared to traditional investment options.
- No Lock-in Period: There is no lock-in period in smallcase investing, you can exit anytime without having to worry about exit loads.
Know The Risks
- Market risk: The value of smallcases can fluctuate with the stock market.
- Manager risk: The performance of a smallcase can depend on the skill of the portfolio manager.
- Liquidity risk: smallcases may be less liquid than mutual funds, which means that it may be more difficult to sell them if you need to access your money.
How To Invest In Smallcases
smallcase investing is as easy as recharging your mobile data plan. You can invest in smallcases of your choice in 3 steps.
1. Login To Smallcase Website
First of all, you need to log in to the smallcase website using your mobile number verification method.
2. Find Your smallcase
Upon successful login, you will land on the collection page. On this page, you can navigate through different investment options. You can also see all smallcases and filter them out using filtering & sorting tools. Choose your desired Ssallcase(s).
3. Complete the purchase
Once you make a clear decision of buying a smallcase, click on the “Invest Now” button. Upon successful purchase, the constituents of the smallcase get credited directly into your Demat account.
It is to be noted that you need to link a broker account to facilitate the buying and selling of smallcases.
Currently, smallcase has partnered with 13 brokers including Zerodha, Upstox, Groww etc. You can also open a new brokerage account on the platform if you don’t have one.
Related Read: How to Invest In USA Stocks From India
Per Transaction Charges: The charges for smallcase investing are as per the broker’s guidelines and only apply when you transact. For a general idea, it can range from ₹50 to ₹100 + GST & sometimes more.
Premium Subscriptions: Many managers offer their premium services through subscriptions. Investors can leverage their expertise by subscribing to their premium plans.
FREE smallcases: The platform also offers some smallcase free of cost. Any one can invest in the free portfolios designed by experts.
What is the minimum investment required for Smallcase investing?
The minimum investment can vary depending on various factors such smallcase you choose, the broker etc. However, It can be as low as ₹ 5000 to 10000 or more.
How often are Smallcases rebalanced or updated?
Rebalancing also depends on various factors. Some smallcases may be rebalanced monthly while others may be annual.
Can I invest in multiple Smallcases at the same time?
Yes, you can invest in multiple Smallcases at the same time.
What factors to consider before Investing In Smallcases?
Just like any other investment, investors must consider investment goals, risk tolerance, time horizon, performance of investment vehicle, portfolio composition, fees & charges etc.
If I sell an individual stock from my smallcase, how will rebalancing work?
Selling an individual stock from your smallcase may affect the rebalancing process. In such cases, rebalancing leads to the purchase of additional shares. In other cases, investors need to manually rebalance their portfolios.
Can I do SIP in smallcase?
Yes, investors can set up a SIP for a disciplined investment in smallcases.