One of the main reasons we see a growth in the number of investors in the stock market is because investing has evolved over the years. Today, it has become simpler and more convenient to invest in the stock market. All you need is your Demat & trading app on your smartphone to invest in the markets. Modern investors also have new investment options available to them. One such modern investment option is a Smallcase.
What is a Smallcase?
In simple words, a Smallcase is like a basket of stocks or ETFs (exchange-traded funds). SEBI registered fund managers, analysts or brokers manage this basket or portfolio of stocks. On the surface, a Smallcase may seem just like a mutual fund. However, there are some key differences that we will get into later in the article. For now, you need to know that the fund manager constructs a Smallcase based on a specific theme, sector, or strategy. For example, a Smallcase based on green energy companies would consist of the stocks of the top companies venturing into green energy. Likewise, a Smallcase tracking IT stock would have some top IT stocks.
The goal of investing in a Smallcase is to help you attain a diversified portfolio. It also helps to make the activity of investing a lot less tedious. You do not have to research and find different companies since the Smallcase manager does that for you. However, you may still need to track those companies from time to time. A Smallcase portfolio can have a minimum of two securities and a maximum of 50 different stocks. And you have the option to invest in a smallcase through systematic investments as well as the lump sum mode.
Differences Between Smallcase and Mutual Funds
First and foremost, to invest in a Smallcase, you need a Demat account. Next, you can open a Demat account online with Kotak Securities. After that, you can invest in a mutual fund using your Demat & trading app. However, you can also invest directly by approaching the mutual fund house. Now let us look at the other key differences between a Smallcase and a mutual fund.
Ownership of Shares
When you invest in a Smallcase, the shares that make the Smallcase portfolio gets credited to your Demat account. You, as the investor, have complete ownership of the shares in the Smallcase. Whereas in the case of mutual funds, you do not own a stake in any of the companies in the portfolio. Instead, you hold units of the portfolio. A benefit of having shares in your Demat account is that you are the direct beneficiary of corporate actions like dividends and bonus shares.
Fees and Charges
In the case of Smallcase investments, the fee imposed by the fund manager is generally nominal. Some Smallcase portfolios are open to the public, while to invest in others, you may have to pay a one-time subscription fee. On the other hand, mutual funds charge 1.5-2% annual fees on the amount invested.
Lock-in Period and Exit Load
When you invest in a Smallcase, there is neither a lock-in period nor an exit load. It simply means that you are not forced to stay invested for a specific period. You can sell your holdings at any time. However, some schemes do have a lock-in period and exit load with mutual funds. So, if you want to sell your holding before the lock-in period ends, there might be an exit load fee imposed.
Control Over The Portfolio
Control over the portfolio is one of the biggest benefits of having shares credited to your Demat account. You can access these shares anytime using your Demat & trading app. If you lack confidence in any other companies in your smallcase portfolio, you can sell those companies. Mutual funds disclose the stocks in the portfolio after fixed intervals, and you cannot make any modifications to the portfolio.
Diversification
Both a Smallcase and a Mutual Fund help investors diversify their portfolios. But when compared, a Smallcase is more focused and sticks to the theme or idea. For example, an EV Smalcase will contain automobile, EV technology, and auto ancillary companies. You do not find such mutual fund schemes. Instead, a mutual fund scheme will have different assets like stocks and bonds. So if you have an investment theme in mind, you are better off investing in a Smallcase.
How to Open Demat Account Online?
If you plan on investing in a Smallcase, you now know that you require a Demat account. The process to open a Demat account online is very simple. To open a Demat account online with Kotak Securities, you can visit the Kotak Securities official website. You then click on the account opening prompt. Next, you have to fill out an online form and submit digital copies of documents like your PAN and Aadhaar card. Then, once you get done, and the verification is complete, you can start investing.