Let’s talk about smallcases!

We all have been hearing all the time “Mutual Funds sahi hai !”, well they are but now times have changed and people have been more creative in how to increase liquidity of their surplus money they have with them in hand.

We know the usual instruments that have an age old history of what are their risks, how they function.

Now look, today when someone thinks about investing in stock market he/she is completely left puzzled as they are overwhelmed with the amount of companies that are available in the market (BSE has 5,000+ and NSE has 1,600+ companies listed).

This situation can be visualized like a customer who arrives at a large supermarket for the first time. Every catergory of item have so many options to choose from leaving the customers either perplexed on what to buy or they end up spending way more that was not even required. Similary stock market has a plethora of options to choose from in every sector – food, oil, govt, banks, industries, etc.

So the traditional set of people go for the most easiest path, i.e Mutual Funds. Since an average retail investor does not have the time and adequate knowledge about how market performs, which stocks to buy, when to sell, we end up giving our money to Mutual Funds who are a team of people that do market research, plan and make strategies to buy and sell stocks on our behalf. In return, they take a small percentage as a commision of the gains they make with our money and this is how mutual funds function.

Coming on to smallcase, things are quite different. What happens in Mutual Funds is we don’t have a clear idea on how and where are our money invested as all we see is a graph on how the NAV (Net Asses Value) of the particular mutual fund is performing. But say that I know that food and beverage industry is growing at a tremondous rate in India or with the last Budget, there will be millions of families in our country who will be joining the middle class. All I don’t know is which all companies to invest in such situations and in what volumes. Here comes the concept of smallcases.

A smallcase is nothing but an idea, a theme – moreover a basket of stocks that reflects an idea. For example – I know that there will be an exponential growth in renewable energy and a higher adoption of electric cars but I don’t know which companies to invest. This shows I have a theme, strategy that I have faith in, I believe is going to grow in future. Zerodha smallcase has a team of SEBI qualified people who curate and do the research on theme and make basket of stocks which they call “smallcase”. This way I can easily invest in my idea, theme.

Additionally instead of getting units of a mutual fund, I will be getting the stocks of those companies directly to my demat account thus giving me a complete transparency on where my money is invested. There is also no such commision on exit load, only a one-time fees is charged on first transaction and that’s it.

So would you be looking on to invest in an idea which you believe will grow in future? Check out smallcase by logging on to https://smallcase.zerodha.com/