Smallcase is a platform built by a Bengaluru based company known as Smallcase Technologies. Smallcase offers users a basket of stocks that are based around a particular theme or idea. Smallcase does not hold any stocks for an investor as a mutual fund does. Rather, the stocks are in the Demat account of the investor. Dividend income also comes straight to the investor’s bank account.

Smallcase only offers the portfolio. The investing is done via its broker partners like Zerodha, HDFC Securities, Axis Direct, Edelweiss, and 5paisa. While many brokers offer the concept of investing in a basket of stocks, Smallcase is the first instance where a platform is dedicated to basket investing. Smallcase is the first case where one platform can be accessed by several brokers.

Our Ratings

Fee Structure – 4/5

Customer Service – 3.5/5

Usability – 3/5

Variety of Offerings – 4/5

OVERALL – 3.6/5

How does the concept of Smallcase work?

Smallcase uses its in-house research team and algorithms to construct portfolios around various themes. They study the macro-economic factors prevalent in the country, research industries, study business models, and find companies that will benefit from the prevailing conditions. Stocks are also screened using algorithms.

The stock portfolios put together by Smallcase are then periodically rotated and rebalanced as the economic situation evolves. The portfolios will list the stocks of companies along with each stock’s weight.

Hence, if an investor spots a particular trend and believes that the trend will last long enough to make a significant difference in terms of capital gains, then he/she can invest in such themes by using Smallcase’s tailor-made portfolios. The actual investing happens through a brokerage. The list and quantity of stocks are what Smallcase offers.

Investing in a diversified portfolio is always a better idea than placing all bets on a single company. The risk diversification and a thoroughly researched basket of stocks are what the concept of Smallcase offers.

Investors can customize their Smallcase portfolios if they wish to. Stocks can be added and removed. This makes Smallcase a flexible investment solution for the active investor.

Smallcase is a sort of middle ground between direct equity investing and mutual fund investing. Mutual funds provide a well-researched portfolio of diversified stocks while direct equity investing requires the investor to do all the work in picking out great stocks. Smallcase narrows down the stocks as per a selected theme. The job of the investor is to know about themes and understand the underlying drivers of such themes. It is a semi-active form of investing.

Various Portfolios

Smallcase has over 50 different themes and baskets in which you can invest. We have listed below some of the more popular Smallcases:

Top 100 Stocks

This Smallcase is a collection of the top 100 companies by market cap. These are all large-cap companies. Smallcap uses ICICI Prudential Nifty ETF and Reliance ETF Junior Bees to construct this basket.

Low-Risk Smart Beta

This Smallcase is a collection of what the company considers “low-risk” stocks. They are picked from the top 150 companies by market cap. The stock picks are some of the most liquid in the market.

Electric Mobility

A lot has been said and written about electric vehicles. Smallcase has made a basket with companies that are investing in their electric vehicle ecosystem and companies that are expected to benefit from the growth in electric mobility.

Growth at a Fair Price

This basket is made up of companies that are experiencing earnings growth and increasing RoC. The other criterion for selection is what Smallcase deems as “justifiable valuations”.

Affordable Housing

A Smallcase made up of companies that are expected to benefit from schemes like PMAY and a general push for affordable housing. Real estate players, construction materials companies, housing finance companies, and a range of other companies make up this portfolio.

Transporting India

GST and e-commerce are expected to transform the logistics sector in India. This Smallcase plays on that theme.

Smart Cities

Companies that are expected to play a major role in fulfilling the government’s mission of establishing a hundred smart cities across India are the focus of this Smallcase.  

Halal Street

As the name may suggest, this list focuses on companies that are “Halal” or compliant to Sharia laws related to business and investing.

Charges

Smallcase does not charge any fee individually for its portfolio. The fee is charged by Smallcase’s brokerage partner. All its partners, namely Zerodha, HDFC Securities, Axis Direct, Edelweiss, and 5paisa, charge Rs.100 as the fee for the first transaction on a particular Smallcase portfolio.

Once the investor has paid the Rs.100 fee after selecting a certain Smallcase portfolio, then no subsequent fee is charged for further investments made in that particular portfolio. For example, let us assume that an investor starts with a Rs.10,000 investment the “Smart Cities” Smallcase.

During this first Rs.10,000 transaction, a fee of Rs.100 will be charged. This Rs.100 is irrespective of the investment amount. The initial investment amount can be Rs.10,000 or Rs.50,000. The fee will remain Rs.100 for that first transaction.

Subsequently, if the investor invests another Rs.1 lakh, then there will be no Smallcase fee. Only brokerage and other charges, as charged by the broker, will be applicable.

If that same investor also invests in another Smallcase portfolio, like “Smart Beta”, then another Rs.100 will be charged for the very first investment made in “Smart Beta”. Then, subsequent investments in “Smart Beta” or “Smart Cities” will not attract any Smallcase fee. All investment transactions, however, will attract brokerage-related charges.

Screener Plans

Smallcase Zerodha offers certain screening functions for which it charges a subscription fee. There is a free option and a paid option. The free screener has limited filters and restrictions on how many screens can be saved at a time.

The paid option is more extensive. It has a range of screening filters. There are no restrictions on exporting the screened lists as well. For the paid option, there are 4 plans:

1 month: Rs.118

3 months: Rs.336

6 months: Rs.637

1 year: Rs.1133

Account opening charges

There are no account opening charges specific to Smallcase. There may be account opening charges associated with Smallcase’s partner brokers Zerodha, HDFC Securities, Axis Direct, Edelweiss, and 5paisa. Each one of these brokers will have their own account opening charges.

Brokerage Charges

Smallcase does not charge any brokerage of its own. The brokerage charges are charged by Smallcase’s partner brokers Zerodha, HDFC Securities, Axis Direct, Edelweiss, and 5paisa. Each one has its own brokerage charge structure.

Transaction and Government Charges

Smallcase does not charge any transaction or government charges of its own. Those charges are charged by Smallcase’s partner brokers Zerodha, HDFC Securities, Axis Direct, Edelweiss, and 5paisa. Each one has its own transaction charge structure. Government charges tend to be the same for everyone.

What are the steps to invest in a Smallcase portfolio?

Smallcase has created over 50 different baskets of stock portfolios. Each one is based around a particular idea or theme. For the investor to access these portfolios, they have to first log in to their brokerage account.

Smallcase has partnered with Zerodha, HDFC Securities, Axis Direct, Edelweiss, and 5paisa. After logging into any one of these brokerage accounts (wherever the investor has an account), there will be an option for Smallcase investing.

Note that one cannot log into or sign up for a Smallcase account. One has to open a brokerage account to access Smallcase portfolios.

Selecting the Smallcase option (normally in the research section), the investor will be taken to a page or section where all the Smallcase portfolios will be listed. There are over 50 different types of portfolios covering current themes, sectors, risk levels, and other such criteria.

The investor can click on any particular theme and then view the stocks that are recommended for that basket or portfolio. Along with the stock names, the weights in which each stock is to be bought will also be listed.

For example, if you select affordable housing as the theme, then you will find stocks of cement companies, housing finance companies, housing product companies, and consumer appliance companies. Depending on the investment amount that the investor enters, the Smallcase selection will list the number of stocks of each company that need to be purchased.

An investor can either add the selected Smallcase portfolio to his/her watchlist or actually go ahead and invest. The investor can simply select the “Buy Smallcase” option and all the stocks in their respective weights will get purchased.

Investors can even make SIP investments in Smallcase portfolios. Periodic and regular amounts can be invested in a chosen basket built around a particular theme.

Pros and Cons of Smallcase

Smallcase offers a reasonably well-rounded and innovative investment solution to anyone who is interested in growing their wealth without doing extensive research on individual stocks. While there are plenty of benefits attached to Smallcase’s offerings, there are some minus points as well.

Advantages

  • You own the stocks, which is very different from owning units of a mutual fund.
  • You enjoy tax-free dividends (up to 10 lakhs as per new tax rules).
  • Smallcase uses technology and algorithms along with research to build and rebalance its portfolios. You do not need to perform any research work on which stocks to pick.
  • The rebalancing feature solves one of the biggest dilemmas of every investor – when to sell. Investors also know when to enter a stock with Smallcase.

Disadvantages

  • One has to pay tax and brokerage during every rebalance. In a mutual fund, investors don’t have to pay tax (or brokerage) when the fund manager performs rebalancing transactions.
  • The charts which show past performance are only a backtest of the selected portfolio of stocks. They don’t include brokerage and tax expenses. They are not an accurate representation returns.
  • Investing with Smallcase portfolios is not passive investing. One has to regularly churn the portfolios and keep an eye out for such notifications. There is some element of active investing involved.

Conclusion

Overall Smallcase offers a pretty unique value proposition. One can basically build a readymade portfolio without doing extensive research. Once the portfolio is built, it is important to religiously follow the rebalancing periodically.

While taxes and brokerage during every rebalancing transaction will eat away some of the returns, the returns can be quite satisfying if the concept is diligently followed. With smallcase portfolios, you do not pay expense ratios to anyone, as in a mutual fund.

The best part is that with Smallcase, you actually own the stocks in your own Demat account. That way, you get to receive dividends straight to your bank account. There is no tax on those dividends either. With mutual funds, dividends are subject to dividend distribution tax.

If you like to be a semi-active investor and can find enough time to follow your investments in a basic way, then Smallcase is a very innovative and valuable service to have. Smallcase makes sense for investors who understand the various economic themes and their underlying drivers. People who keep a track of such themes will find Smallcase quite productive.