What is Smallcase Zerodha? How to Invest in 2023?

Bengaluru-based technology firm smallcase revolutionized the investment methods to invest in stocks, bonds, commodities by allowing investors to choose from professionally tailored products.

Currently, it is supported by 12 brokers – Zerodha, Upstox, 5paisa, Alice Blue, Angel Broking, Axis Direct, HDFC Securities, Kotak Securities, Edelweiss, IIFL Sec, Motilal Oswal, and Trustline.

What is Smallcase Zerodha?

According to smallcase, it is a 'basket of stocks that reflects an idea.' It allows the users to buy multiple stocks in one click, create a SIP, track them and create their own smallcase.

For example, COVID-19 created significant havoc in the world and bought many changes in our lifestyle.

So an investor thinks this impact will last for another 2-3 years, people are taking precautions for their health, and hence the pharma sector will see tremendous growth.

Then instead of searching for good stocks within the pharma sector, he can directly invest in 'Pharma Tracker,' a product that invests in 10 pharma and life science companies.

Image 1 – Smallcase Investment

An investor can invest with a minimum of Rs. 35,220, and the funds will be allocated to buy the shares with the predefined weightage. This product has given a 13.88% CAGR (returns on an average every year since Apr 4, 2016).

Smallcase has its own research team and takes experts' help to build the products on various concepts. These products are reviewed every month and rebalanced if there is a need.

How to Invest Using Smallcase?

It is effortless to find low-cost, diversified, and robust investment products with smallcase.

Below are the 7 steps to invest using smallcase:

1. An investor should have an account with Zerodha, Upstox, 5paisa, Alice Blue, Angel Broking, Axis Direct, HDFC Securities, Kotak Securities, Edelweiss, IIFL Sec, Motilal Oswal, and Trustline. If a person doesn't have an account with any of these brokers, he will not use the smallcase.

2. Visit the small case website, select your broker, and log in using the credentials provided by the broker.

3. Go through with different products offered by smallcase in the "Discover" tab. For example, 'Equity and Gold' is a smallcase product with a CAGR of 17.44%, and the minimum amount required to invest is only Rs.239. This product aims to create wealth using equities but opts for protection with gold. Similarly, an investor picks any smallcase product based on his ideas and requirement.

4. One can use the existing smallcase products or can create their own personalized smallcase.

5. Once the smallcase product is finalized, a payment gateway appears. The current price and weight of the stocks will decide the minimum amount an investor shall pay for the smallcase product.

6. After the payment, buy orders will be placed in your broker platform through API integration. One can verify the orders in their broker terminal.

7. At any point in time, an investor can close his smallcase investments in the same method.

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Popular Smallcase Products

There are different varieties of smallcase products available. However, below are some of the popular products which provided an attractive CAGR.

1 – All Weather Investing

Image 2 – All Weather Investing smallcase

It is one of the popular smallcase products among investors. It is a low volatility product with a CAGR of 12.51%, and the minimum investment amount is only Rs.4,154. Moreover, it allocates funds across equity, gold, and debt, and hence imbalance in one area will be compensated by the other areas.

2 – Equity and Gold

Image 3 – Equity and Gold ETF smallcase

It is another popular product among investors. It is also a low volatility product with a CAGR of 17.44%, and what makes this product attractive is that the minimum investment amount is only Rs.241.

It allocates 30% of the fund in Gold ETF and the remaining 70% in Equity ETF.

3 – Growth at a Fair Price

Image 4 – Growth at fair price smallcase

It is suitable for investors who are ready to take higher risks. It is a high volatility product with a CAGR of 16.01%, and the minimum investment amount is Rs.10,761. Moreover, it allocates funds across different stocks, as shown in the above image.

4 – Dividend Stars

Image 5 – Dividend stars

This product is for any investor who expects some constant dividends every year. It consists of some stocks with a track record of not cutting dividends every year.

It is a medium volatility product with a CAGR of 24.50%, and the minimum investment amount is Rs.22,967.

There is an extensive list of products on the smallcase site. An investor can have a look before investing.

Smallcase App

An investor can perform all the tasks using the smallcase app. It is easy to invest, track all the investments in the app.

Image - Smallcase Mobile App

The above image shows the home page, a list of smallcase products, and the option to create our own smallcase product.

Smallcase Charges and Taxes

There are no monthly charges or subscription charges with smallcase. However, there will be a small one-time fee of Rs.100 will be charged along with the brokerage fees for the first transaction.

If a smallcase product has stocks, then the taxes are the same as equities (long-term capital gain if the holding period exceeds 1 year, otherwise short-term capital gain). However, for ETF smallcase products, it varies as every ETF has its own taxation.

Smallcase vs. Mutual Funds

Both mutual funds and smallcase are two different investment vehicles. However, smallcase takes a slight edge ahead of mutual funds if an investor is ready to spend some time analyzing the stock's performance (only to pick the right one).

• Investing in Mutual funds comes with a cost (expense ratio) that includes fund management fees, exit load, etc. In contrast, an investor will only pay for the brokerage in smallcase.

• An investor will not have any control over allocation in the case of mutual funds. However, in smallcase, an investor can add or change any stock. Besides, one can create their own smallcase product.

• Redemption request with a mutual fund takes 2-3 working days to process. With a smallcase product, one can close the position and get the funds immediately on any business day.

• A Demat account is not needed with mutual funds. However, a Demat account is mandatory to invest in a smallcase product.

• There is no need to pay the taxes in mutual funds in case of rebalancing transactions by the fund managers. In contrast, there will be a small tax component in rebalancing situations in smallcase products.

• A mutual fund comes with a lock-in period for a few years. In contrast, there are no such restrictions with smallcase.

Whether Smallcase is Safe to Invest?

Investing through smallcase carries the same risk as investing with equities.

Because smallcase acts as a facilitator in the frontend to provide the information. All the execution happens with your broker account, and the shares will be stored in your DP account.

Hence, it is much safer to invest through smallcase.

Smallcase Review

Smallcase blends the features of both mutual funds and equity investing. It offers a platform to build a ready-made portfolio without much of a struggle.

Monitoring of stocks within a smallcase product is necessary if you aim for better returns. This rebalancing can take away some of these profits but still can give better results if an investor sticks to the core idea.

The advantage with smallcase is that you own the stocks, and you have complete control over your investment. In addition, any dividends from your investment will come directly into your bank account, and these dividends are tax-free.

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