Are you planning to invest through smallcase? Read this article on how to get started
Smallcase is the new investment vehicle trendy among the investors who understand the market reasonably well but do not have time to maintain their portfolio. It is a Bengaluru-based startup paving the way to invest in professionally tailored baskets of stocks that reflect a strategy or an idea. Various brokers might be collaborating with smallcases, but there are 7 brokers affiliated with the company.
How to invest in a Smallcase?
– Since Smallcase allows you to invest in stocks directly and gives you an option to buy/sell anything from the basket, a trading account and a Demat account is required. One should have an account with any of these brokers: Kotak Securities, HDFC Securities, 5paisa, Edelweiss, Zerodha and Axis Securities.
– Go to the smallcase site and log in with the credentials provided by your broker. To access the service, one should use above mentioned broker
– Once logged in, go to the Discover tab and choose from various themes such as all-weather, smart beta, Dividend and Income, etc.
– You will now see smallcases with the different risks associated with it; one can go through each of them to learn about the research and rebalancing time associated with it. Some brokers might allow you to create your personalised smallcase.
– Once your smallcase selection is final, you will be taken to the payment gateway. There will be a minimum amount one should pay, as explained by the price and weights of individual stocks. Once the payment is complete, the broker platform will place buy orders for all stocks, which will be executed as soon as possible.
– If illiquidity leads to the non-fulfilment of a few orders, the investor will be able to go back and repair the order.
It is effortless to invest in smallcase after following the above steps, but an investor must understand the rationale behind using this investment tool and the charges, risks associated.
Why should you choose Smallcase?
– Investment in equity mutual funds attracts expense which is roughly 1-1.5%. This expense ratio is deducted annually from the portfolio, thus reducing the returns. However, smallcases do not charge any fund management fees except the small initial charges.
– Investment in mutual funds gets you fund units, and you do now have the ownership of shares; smallcase investment puts shares in your Demat account. It is beneficial as one gets tax-free dividends directly in their bank accounts.
– With smallcase, an investor can track investments in real-time during market hours.
– Redemption request with mutual fund usually takes three working days. In smallcases, a bid for redemption is placed in real-time, which in turn facilitates quicker redemptions.
– These are portfolios of equities or exchange-traded funds with an underlying theme or strategy. One needs to have a long-term view towards investing if one wants to put their money in smallcases. Mr. Kamath said “Most smallcases are designed as long-term investment products and may not perform as expected in the short run. If investors don’t have a long-term horizon, they should consider other alternatives”
It should be noted that the smallcase services may not be suitable for a new investor, as they may not be able to comprehend the risks associated with the product.. It is suggested to consult a financial advisor or do a proper research before investing via this product.
These is a one-time fee for getting access to a smallcase:
– For All Weather Investing and Smart Beta smallcases: Rs 50 + GST
– For all other smallcases (thematic/sectoral/model-based, equity & gold smallcase): Rs 100 + GST
The regular brokerage charges for buying and selling stocks will be deducted for every order. For every rebalance, the current market price of a stock is chosen, and brokerage charges also apply for every new stock picked up. It will also be subjected to the short term capital gains taxed at 15%, if the gains happen.
Overall, a person may choose to pay up these charges in exchange for the ease of the professionally tailored portfolio. With good research and understanding of the stock market future outlook, one can decide to invest in a particular idea