Equity markets have attracted a lot of investors around the country. In comparison to other countries, our participation is still pretty low but we are growing rapidly.
Motilal Oswal Financial Services reports that as of February 2024, there were 148 million demat accounts in India. A major reason for this has been mutual funds.
Mutual funds investments have been on the rise since 2020 but there is another similar asset in the equity category that’s been getting a lot of attention.
It’s the one you have been seeing in the ads during the IPL- smallcase investment but what is smallcase? Let’s find out!
What is Smallcase?
Smallcase is a recent addition to the Indian investment landscape. It represents a modern concept. A smallcase consists of a collection of stocks based on a particular investment theme or strategy.
Investors can easily acquire a complete smallcase, with individual holdings securely stored in their demat accounts.
This innovative approach facilitates thematic investing, providing investors with targeted exposure to specific sectors, strategies, or ideas.
How does smallcase investment work?
If you are wondering how to invest in smallcase, here’s how smallcase investment works:
- To start, go to your broker’s smallcase platform or download the smallcase app.
- Pick a theme you like and check stocks and their proportions in the portfolio along with the investment rationale.
- You can customise this smallcase by adding or removing stocks.
For example, if you’re interested in companies benefiting from green energy, try the Green Energy smallcase. However, if you are interested in adding a stock that isn’t there already, you can add it.
- Once you’ve made your choices, buy the smallcase. The minimum amount depends on stock prices and weights. The platform will execute buy orders immediately.
- If some aren’t filled due to some issue, you can ‘repair’ the smallcase later by placing fresh orders for those stocks. Repairing ensures your portfolio matches the original theme.
Note: You need smallcase subscriptions to access premium smallcases crafted by SEBI-registered professionals.
Smallcase Vs Mutual Fund
While in meaning they sound the same, smallcase and mutual funds are pretty different.
| Particulars | Smallcase | Mutual Funds |
| Process | Directly shares are allotted. | Here mutual fund units are allotted and not shares directly. |
| Control | Higher control as shares are in the investor’s demat account. Thus, it can be sold. | Not much control as they cant directly select the individual shares in which these funds will invest. |
| Diversification | Focused on a particular strategy or theme. | Offers broad diversification. |
| Charges | Subscription charges or expense ratio | Expense ratio + exit load. |
| Flexibility | Easily invest or sell, no exit load. | Not that flexible, exit load may apply. |
| Risk | More risky as it has direct exposure to the market and is also less diversified. | Less risky as compared to smallcases due to diversification and constant rebalancing. |
| Taxation | STCG and LTCG applicable on the sale of equity. | Depending on type- equity or debt, STCG and LTCG are applicable. |
| Management | Smallcase investments aren’t actively managed. | Mutual Funds are actively managed. |
Also read: What is asset under management (AUM) in mutual funds?
Conclusion
A major issue with smallcase investments is that they aren’t actively managed, unlike a mutual fund manager who rebalances the portfolio regularly.
In a smallcase, the portfolio is rebalanced from time to time and in that too you will have to manually do it because they can’t automatically buy and sell shares for you.
Smallcase is a relatively newer investment avenue hence if you are not too sure about it, you can stick to mutual funds.
However, if you are confident about a particular industry’s growth in coming years, smallcase can be a game-changer for you.
So pick your poison based on your risk appetite and convenience.
Disclaimer: The above content is for informational purposes only. The 1% News suggests consulting a SEBI-registered investment advisor before investing in smallcases.
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