Medhini Scan – Smallcase vs Mutual Funds
1. In this article Medhini Scan – Smallcase vs Mutual Funds. Let’s start. Smallcase is a specific investment option based on any specific idea, strategy, theme or sector. These focus on current trends of market and KRAs of government. It enables individuals to buy & sell stocks(securities), where the mix and set is already decided.
2. Origin – It is a Bengaluru based firm that has collaborated with seven brokers to offer this platform. These brokers are Kotak Securities, HDFC Securities, 5paisa, Edelweiss, Zerodha & Axis Securities.
3. Managed by – SEBI registered officials. They will manage your smallcase and in case of any change they will recommend you to repair the basket to change the stocks within it by simple buy and sell.
4. Example – Suppose, Miss Intelligent wants to invest in Green Energy sector as she is quite sure of the growth of the sector. The growth is evident to her from recent budget allotment of the government to solar sector. She will now search for Green Energy tracker type of smallcase. So, by this method Miss Intelligent will be able to diversify her investments in the field. This will reduce the risk due to any one particular stock. This will be the screen when she visits the smallcase website. She will get the option of login with broker and that of continuing with smallcase itself.
Say her account is with Zerodha then her page of smallcase would somewhat be as under
5. Creating a smallcase – There are various ways by which a samallcase can be created. It depends on broker to broker. Some offer already sorted smallcase while some let you to personalize them. Say a smallcase named IT Tracker, it comprises of 11 IT companies to start with.
If we click on stocks & segments, then the pie chart shows us the % of stocks that will be invested in.
Similarly, we will be able to see how much of them are in Large cap, Mid cap or Small cap. Once any of the smallcase is finalized then Miss intelligent will be directed to payment gateway. Overall price during payment will depend on the price of the individual stocks in the smallcase.
6. Medhini Scan – Smallcase vs Mutual Funds
| FACTORS | MUTUAL FUNDS | SMALLCASE |
| CHARGES | Includes expense ratio in addition to brokerage charges | Likely only brokerage charges and no expense ratio. |
| WE HOLD | Part of fund units but no stocks | Shares (reflected in Demat account) |
| INVEST IN | Fund | Ideas |
| START WITH | Any one broker (online/offline) | Either with one of seven collaborating brokers or with smallcase itself |
| REDEEM | Flexible (based on lock in period) | Flexible and can be tracked in real time |
| HOW MANY STOCKS | Flexible (Part of funds) | Upto 50 stocks (only those listed on NSE) |
| CONTROL | Limited control over the investment of money. Maximum one can select the Market Cap, sector or type of Mutual Fund. Any stock if not performing well can’t be removed. | Complete control over where the money will be invested. We can select each and every stock. Sell any stock if not performing well. |
| DIVERSITY | Excellent | Limited as only 50 stocks of NSE |
| MONEY REQUIRED | Less (as low as Rs 5000 for one time) | More (as the price depends on the price of stocks) |
| LOCK IN | Yes (where applicable) | No |
| RETURN | 8-12% normally depending on market performance | Slightly high risk. Returns depend completely on market. |
| OUR RESPONSIBILITY | Buy and Forget | Regular monitoring of market to ‘Repair’ the smallcase when required |
| KNOWLEDGE REQUIRED | Limited as Mutual Fund managers are responsible to manage the Funds | Comparatively more knowledge required as we have to keep a track of the market ourselves. |
7. Conclusion – Medhini recommends Mutual Funds over Smallcase due to the following observations:-
Average person has limited knowledge of stocks and performance, making it difficult to take decision to sell or buy. Mutual Funds have the upper hand of being actively managed by experts. While in smallcase the owner has to actively monitor. Minimum investment amount required in smallcase is higher as compared to Mutual Funds.
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Caution – The views presented in this article are the self analysis of writer and further the advise of Financial experts may be taken.