Smallcase Review in ’21 – Should You Trust Smallcase?

In recent years the concept of ‘STOCK BASKET’ has caught traction in India. And SMALLCASE is a company who make such ‘BASKETS’. When it comes to your money in the stock market, you cannot blindly trust whoever comes up with a stock market investment product. Many brokers provide similar kind of basket idea to their clients, but this is the first time in India, a separate company is providing stock idea in the form of ‘STOCK BASKETS’.

So in this Smallcase review, we will be discussing in details
What is Smallcase?
Should you trust Smallcase?
If yes, then you need to know
What is the idea behind STOCK BASKET?
How to open a Smallcase Account?
How to invest through Smallcase?
And much more. So stay with us till the end of this Smallcase Review to get all your Question and Queries regarding Smallcase answered.

What is a Stock Basket?

Stock Basket is a collection of stocks. These stocks are put together because they are similar when following a particular theme. A Stock Basket is made when two or more companies fall into a similar theme.

Let us understand this concept of Stock Basket through an example –

A Stock Basket related to the housing sector will contain stocks of cement companies, tiles companies, paint companies and a lot of other stocks which are related to the housing sector.

So the common theme of the Stock Basket of the above example was Housing. But it does not have to be just a sectorial theme. The theme can be on the basis of fundamentals, growth prospect, dividends, goverment policies, etc. The theme can reflect any kind of idea.

So Stock Baskets are different ready-made portfolio based on different themes for different investment appetites.

What is Smallcase?

Smallcase is a company who makes Stock Basket for investors to invest in. Smallcase’s main aim is to make direct equity investment for retail investors easy.

Smallcase makes these Stock Baskets based on different themes, ideas and strategies. The underlying investment asset of these Stock Baskets are either Stocks or ETFs, sometimes both.

Is Smallcase Safe?

Smallcase started in collaboration with Zerodha, the premier discount broker in India. That is why it was first called Zerodha Smallcase. Later they added other brokers.

Stock Baskets in Smallcase are made by SEBI registered financial experts and broking Houses. Some big companies like HDFC AMC, ICICI PRUDENTIAL, AXIS SECURITIES and others have joined Smallcase and have made some Stock Baskets of their own.

You can check who are creators of Smallcase by visiting this page.

You need to understand that Smallcase is just the ‘middleman’, helping you choose the securities. Smallcase is no way involved in handling your assets or money.

So Smallcase as a stock advisor is relatively safe, but we suggest our readers do their own research before investing in the Equity Market through any Stock Baskets.

What is the Difference Between Smallcase vs Mutual Funds?

The main difference between Smallcase vs Mutual Funds is OWNERSHIP.

When you buy a Stock Basket, you are actually buying the Stocks or the ETFs present in the Stock Basket. It might sound similar to Mutual Funds but it is not.

You become a direct shareholder of those companies present in the Stock Basket when you invest ‘through’ Smallcase. But when you invest ‘in’ a Mutual Fund, you are just buying the Units of Mutual Fund and not the stocks that make up the portfolio of the fund, so you do not become a proud shareholder of a company when you invest in a Mutual Fund.

When a Mutual Fund buys or sell any stock from their portfolio the tax burden is not carried by the Mutual Fund Unitholders but when a Stock Basket is re-balanced, the tax burden that comes with the re-balancing falls on the portfolio owner. We will talk more about this disadvantage of Stock Basket later.

How many Smallcase Stock Baskets are there?

There are 38 Stock Baskets in Smallcase as of writing this Smallcase Review. These 38 Smallcase Stock Baskets are divided into 8 main categories. Smallcase keeps on adding new baskets and make new categories on a regular interval.

Different Categories in Smallcase

1. Ideal For New Investors – This category as the name suggests is for the newcomers, who are just starting into Direct Equity Investment. There are 6 Baskets present at the moment in this category. Most of the Stock Baskets in this category contains Big, Established, Bluechip Companies.
2. Smart Beta – The baskets on this category are mainly for passive investors. The Stock Baskets in the Smart Beta category mostly consists of well established Large Cap companies. This category aims to provide a market-beating return at low risk.
3. ETF Smallcase – As the name suggests, Stock Baskets in this category are made out of ETFs or Exchange Traded Funds. The baskets are more geared towards general market investing. As the cost of each ETF Unit is low so does the baskets in this category.
4. Long Term – This category mostly contains baskets oriented around the public consumption sectors of the economy like Private Banking, Logistics and Transportation, Purchasing Power of the Indian Middle Class, etc.
   Stock Baskets from this category are designed for Long term investment. An intermediate investor who will not panic during a crisis like the Pandemic should invest through the baskets present in this category.
5. Dividend Income – By far the favourite category of ours.
   The Stock Baskets in this category are made to provide Investors with a regular income in the form of Dividends. These baskets again mostly contain Big, Established, Dividend Paying Bluechip Companies and some of them have paid dividends to their shareholders for more than 10 Years.
6. Sector Trackers – The baskets in this category are simply different economic sector tracker. In this category, Smallcase has a basket starting from Auto to FMCG to Infra to Pharma to Realty.
   As Sectorial Investing comes with its own set of risk, these baskets are not ideal for any Begineer Investor.
7. Goverment Reforms – By the name you can understand that this category contains Stock Baskets that are focused on the Goverment Policies and Reforms. All the positive initiative from the goverment will reflect in these baskets.
8. Growth Investing – Baskets in this category are made following any particular famous ‘Methodology’ of Investing. As the stocks in these baskets are chosen because of their Growth Potential, the risks associated with these baskets are high too.

And along with all these categories when you login in with a particular broker, you will find some more Category or Stock Baskets which are associated or might be developed by that broker.

For example – If you log in with your 5paisa Account, you will find a Stock Basket named “5paisa Beginner’s Choice Portfolio” which is associated and developed by 5paisa and visible only to their clients.

How to open a Smallcase Account?

You do not have to open a separate account for accessing Smallcase. You just need a Demat Account with any of the 9 Brokers that Smallcase allows to invest with.

How many brokers does Smallcase Support?

Smallcase at first just allowed Zerodha as a broker to invest with. But now Smallcase supports 9 brokers with whom you can invest in Smallcase’s Stock Baskets. They are continuously adding new brokers to invest with.

List of All Brokers Allowed in Smallcase –

1. 5Paisa
2. Alice Blue
3. Axis Direct
4. Edelweiss
5. HDFC Securities
6. IIFL Securities
7. Kotak Securities
8. Trustline
9. Zerodha

If you have a Zerodha Demat Account or a 5Paisa Demat Account, you can access Smallcase with the login credentials of those accounts.

How to login into Smallcase?

In this section of the Smallcase Review, we show you how to login into Smallcase using any one of the allowed brokers.

For this example, we will be using Zerodha as a broker to login into Smallcase. You might choose some other broker to login into Smallcase but the process will remain the same.

Step 1

Visit the Smallcase Website.

Step 2

Click on the Login button present in the Top Right Corner.

Step 3

Click on the Logo of any one of the brokers you have an account with. We will be choosing Zerodha in this case.

Step 4

Now enter your User ID (or email in some cases) and your Password in the login page.

After you have entered your User ID and Password, click on the Login button.

Step 5

Next, in case of some brokers you will need to enter your 2 Factor Authentication PIN to login.

After you have entered your 2FA PIN, click on continue.

Once you click on continue, –

Welcome to Smallcase!

How to Invest through Smallcase?

After you have logged into Smallcase using your preferred broker. Now you can invest through Smallcase.

Step 1

From the “Discover” page, Choose a Smallcase you want to invest through. You can either choose from any one of the categories or click on “All Smallcase” to see all the available Smallcase for investing.

Step 2

After you have chosen your Smallcase, click on the Smallcase to learn more about the basket.

Step 3

Now you will be presented with a host of information about the Smallcase. Go through each of the section carefully.

1. Name of the Smallcase Basket.
2. Description of the Smallcase Basket.
3. Risk Category.
4. Compounded Annual Growth Rate.
5. Overview of the Smallcase Basket.
6. Methodology and Factsheet.
7. Back Testing.
8. Contents of The Portfolio and its Weightage.

You will not be able to see the complete list of all the Stocks and ETFs present in the basket if you are not logged in through any one of the allowed brokers.

Step 4

When you are satisfied with the Smallcase Basket and you are ready to invest, click on “Invest Now”.

Step 5

After you have clicked on “Invest Now”, a new window will open where you can select whether you want to invest regularly in the form of SIP or you just want a “One Time” investment.

You can also increase or decrease the Investment Amount. But remember, your Investment Amount cannot be less than the “Minimum Investment Amount” of the basket.

Step 6

Now when you have confirmed your investment amount and type, the last step that remains is, to click on the Confirm Amount Button. But before you confirm your investment, do check whether you have sufficient balance on your Demat Account for the Smallcase Investment.

After you have checked your Demat Account Cash Balance, click on “Confirm Amount”.

What are the Disadvantages of Smallcase?

We have talked about the Advantages of Smallcase in this Smallcase Review but now we are going to take a peek at the other side.

The main disadvantage of Smallcase is Portfolio Re-balancing.

Smallcase regularly updates their Stock Baskets on the basis of the market conditions and when you invest through a Stock Basket of Smallcase, you are prompted through your broker to make the same changes on your portfolio. You can either accept to make those changes on your portfolio or you can decline the offer.

But if you accept to re-balance your portfolio then Stocks or ETFs associated with the particular Stock Basket will be bought or sold according to the changes made in the Stock Basket.

It will cause your taxes to go up as you will be paying Short Term Capital Gains Tax on any stock sold within a year of buying. And it will also make your Turnover cost to go up if you are not investing through a discount broker like Zerodha or Upstox. (We did a full, in-depth review of Upstox)

And if any Stock or ETF previously present in your portfolio was in Red and if it was sold during the re-balancing act, then you have to carry the weight of the loss on your shoulder.

Who will find Smallcase Useful?

If you have already invested in the Equity Market through Mutual Funds for more than a year and now you are trying to dip your feet into the world of Direct Stock Investment then we would suggest you try Smallcase.

But with a little bit of a tweak.

How to Use Smallcase?

In this part of the Smallcase Review, we will show you ‘OUR’ way of using Smallcase.

We suggest not to invest directly through the Stock Baskets of Smallcase. If you do, then chances are your Taxes and Turnover Cost will go up due to regular Stock Basket updates and portfolio re-balancing.

Rather we would ask you to log in to Smallcase using any of the brokers which are allowed on Smallcase and go through the Stock Basket of your liking.

If you find any particular company of your liking in the portfolio of the Stock Basket then do your own fundamental and qualitative analysis on that company.

After you have done your own research on the company and you are satisfied with your findings then only invest directly into that company’s stock using your preferred broker.

Conclusion of This Smallcase Review

At the end of this Smallcase Review, we think the concept of Stock Basket is still new to India so we should see more and more companies like Smallcase growing up here in India.

Though on paper, the concept of Stock Basket sounds good, and it is to an extent helpful for retail investors, but the reality of investing through Stock Baskets is different.

Regular portfolio updates and re-balancing will take a chunk out of the investor’s profit in the form of Taxes. And not to mention the loss borne by investors due to selling of securities when they are in the red.

For us, Smallcase is a great tool to find new companies in different sectors and themes but it is not the right investment medium for Direct Equity Investment. We would use Smallcase as a Screener rather than an Investment Medium.

If you have any further questions or query, then please let us know in the comment section below. And if you liked this Smallcase Review, then please Upvote the article using the buttons below as it motivates us to make, more such Reviews.

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