Are Smallcases a good investment?
As financial innovation reaches a crescendo worldwide, many sophisticated asset allocation structures and products come to the fore. One such instrument is Smallcase – a bundled investment product that consists of stocks and ETFs. The clubbing of securities is done by experienced financial superminds based on predefined themes or ideas.
Truth be told, every investor wants to know how to manage their shares effectively, but few individuals know how to find trusted advisors, act on their advice, and/or could afford a service that can handle parts of the investment process for them in a sustainable way. And that is exactly what smallcase delivers. Touted as the investment product that aspired to make portfolio management services (PMS) a realized reality for scores of investors previously left at the door, Smallcase is a disruptive financial instrument, to say the very least.
What is a smallcase?
Smallcase provides a user-friendly platform where everyday stock market investors can put together a portfolio of stocks and ETFs, either by themselves or invest in pre-prepared packages created by a multitude of financial advisors.
Each smallcase by TejiMandi combines a portfolio of tactical bets with long-term winners to ensure optimum returns.
Do take a minute to check out TejiMandi’s exclusively hand-crafted smallcases – the Teji Mandi Flagship and the Multiplier – that we have put together with careful study of the markets to fetch you index-beating returns.
Moreover, Smallcase’s structure is such that it allows the entire portfolio to be exited like a single stock without the hassle associated with trading multiple instruments.
All in all, Smallcases bring much-needed simplicity into otherwise complex financial instruments and asset allocation methods used by the investor.
However, being disruptive and innovative is one thing; being viable to the common man/woman is another. As Smallcase gets ready to revolutionize the structure of financial innovation, there are many investors who have doubts about this new product. Some experts believe that Smallcases will bring about a sharp decline in mutual funds and ETFs, making these investments redundant. Against this background, let us try to understand if investing in smallcases is actually worth it or not.
First of all, there are several advantages to investing in smallcases.
For most new-age investors, ease of buying and selling assets is second to none. The Smallcase platform allows investors to take positions as well as offload them at the click of a button. Other investment structures such as index funds and mutual funds are somewhat lacking when it comes to the simplicity of investing.
Smallcase investors can track the performance of their investments instantly and throughout the day, ensuring that investors make decisions based on real-time financial data. Moreover, investors would be able to see how prices change and adjust their portfolios accordingly.
Smallcase investors can hold their investment managers accountable for their actions as there is a fixed structure associated with the model portfolios on smallcases. The qualified portfolio manager actively engages in the composition and management of the portfolio and provides justification for buying and selling securities within the portfolio in the form of updates. This ensures that investors understand the rationale for the moves and helps them make informed decisions within the Smallcase ecosystem.
– Cost of Access:
While most mutual funds charge under 2% of the total fund value as expense ratio at worst (most expensive), the cost structure for Smallcases depends on the asset management company formulating the strategy.
For example, Teji Mandi has a flat-fee model that is independent of the investment amount. It is Rs 149 per month if you opt for a 6-months plan, or Rs 199 per month should you choose a 3-months plan. Investors may invest as much as they want, the prices remain the same.
Some other Smallcases charge between 2-5% of investment corpus on a minimum investment of INR 50,000 – 1,00,000. These costs may eventually extend the threshold for investment profitability and may render Smallcases unsuitable for small investors or short-term investing or both.
This brings us to the main question elaborated in the title of this blog-
Are Smallcases a good investment for you?
The short answer is yes- provided you find a smallcase/(s) that match your goals. Let’s look at a few investment profiles Smallcases may be ideal for:
1. You have a greater-than-average understanding of stock investments.
Smallcases may have the potential to achieve better returns than mutual funds and ETFs; however, these returns are not guaranteed. There is always a risk involved in investing in the stock market, and smallcases are no different. As a financial instrument, Smallcases are ideal for investors with a better-than-average understanding of the stock market since the stock-picking method is based on a certain degree of subject matter expertise. For example, if as an investor you are bullish on new dotcom business that service an urban middle class population, this theme can be better addressed by a smallcase compared to a mutual fund. A smallcase will help you double down on your investment strategy and win big if you’re right, but also lose big if you’re wrong.
2.You have designated purposes from your investment portfolio
Every asset allocation structure fulfills a certain purpose. Smallcases are no different, although they might be in a unique position to fulfill a combination of outcomes through a single investment. For example, there are dividend-yielding mutual funds available in the asset management space for investors looking for a fixed income, commodity ETFs that can help you stay invested in precious metals, and small-cap funds that deliver multi-bagger returns while mitigating a higher than average risk denomination. Smallcases can help you marry two or more of these objectives through a single financial instrument. This, in turn, will save you the costs of being over-diversified while fulfilling all your investment goals.
3. You have already allocated corpus in existing traditional investment structures and are looking for more specific, riskier assets
As an investor, you can only take a certain degree of risk depending on your income and your life’s needs. If you have safeguarded the basics, i.e., allocated for the cost of living, saved up for expensive milestones, put aside a corpus for your retirement- you can delve into specific riskier investments to achieve higher than average, multi-bagger returns. Having money to play with is and will always be a sweet place to be for any investor.
4.You are a long-term investor with a 10-year plus investment horizon
Adam Smith has famously said, ‘In the long-term, we’re all dead.’ While the saying is true, we’d like to augment that by saying that those who survive in the long term and stay invested are incredibly rich. This phenomenon could not be truer than in the case of Smallcases. Theme-based investing takes a bit of time to pan out, but when they do, they compound returns like little else. If you stay invested in smallcases in the long-term with a handful of select, good-quality companies, you could gather unprecedented wealth. This strategy will demand your interference when it comes to cutting losses, while you must do exactly the opposite with your winners. Easier said than done (we know!), but this is the truth, regardless.
Smallcases can be a wonderful alternative for people looking for managed services to diversify their stock portfolios and seek better returns. Although there are certain factors that an investor should keep in mind, smallcases can definitely give mutual funds and ETFs tough competition as the concept evolves. A long-term mindset, though, is absolutely imperative for success.