Smallcase Investment | What is Smallcase Investing?

In this article, we will get to know how to invest through smallcase, and how do you start to make returns? Dear friends, I have often discussed smallcase in the previous articles, and in this article, I'm discussing with you complete detail of smallcase investing; So that you can get an end-to-end absolute clarity on, what it is to invest in smallcase. In this article, we will discuss 5 things. First of all, What is smallcase investing?  Secondly, Why should smallcase investing be considered, especially when there are stocks, there are mutual funds? Number 3, How does smallcase investing work? Number 4, What are the costs attached with smallcase investing?  And number 5, What are the risks that you will have to bear in mind if you consider smallcase investing? All right, let's get started.

Smallcase Investment
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What is Smallcase Investing?

As we know, whenever we invest in the stock market, there are typically three methods... 

1. Trading

I don't focus a lot on it because I'm not an expert, I don't even trade personally, but trading is you betting on short-term movements of a stock price. So, if the stock goes from ₹100 to ₹102, then you will bet on this movement of 2%, and you will buy and sell within a day. This is also F&O (Futures and Options trading), or derivatives trading, where you may not sell within a day but may sell after some time, but you are actually betting on the movement of the price of the stock in a short-term period.

2 & 3. Long-term investing

This is where I'm interested, because here you make a consistent amount of return over a really long period of time, so you can see the impact of compounding on your portfolio. There are 2 methods.

1. Direct stocks

The stocks which are really good, the company is good, the revenue is good, the profit is good, the market share is good, the industry is growing, governance or management team is good, all those things that you want, and then, of course, there are ratios, there's PE ratio, by how much is EPS increasing? What is the actual value? What is the debt-equity ratio? So on and so forth. But like I'm explaining this to you, this is not something that you and I are capable of, I'm assuming on your behalf, but at least, I'm not. I know a few stocks, I bet on them properly, but for me to identify, what would be multi-bagger? Multi-bagger is those stocks that give a lot of returns over a period of time, like 5-10 times the return. That becomes very hard because that requires expertise, it requires deep research, it requires you to go deep into the industry, into the market, into the company.

3. Portfolio stocks

In a way here, you are assigning someone for all the research and expertise on your investments. Because what they are doing is, they are doing the research on your behalf, and they are essentially helping you buy into a portfolio of stocks. When you buy a portfolio of stocks or a group of stocks, as against buying just one company's stocks, then you mitigate your risk as well. For example, if you want to invest in the chemical industry, pharma industry, or auto industry, but now you don't know the best company in chemical, pharma, or auto, but can know who are the top 10 players because that's far easier. And if you were to buy the stocks of top 10 auto companies, pharma companies, or any such industry, then you are going to get just as good returns; Definitely not as good as a particular stock you buy if that stock works. But at the risk-adjusted level, you will get pretty good returns. Because God forbid if one company goes down, the other company will go up. If the revenue projections go wrong in the other company, the fourth company will cover it up, so those 10 companies will in some way give you a decent return. smallcase allows you to buy a portfolio of stocks that are based on ideas.  And I will tell you what that means, it means 'It's a buying or an investing process where you buy into an idea, as against just one stock.'

Why Consider Smallcase Investing?

It sounds very similar to mutual funds, so why should I consider smallcase investing? There are 3 reasons for it…

1. Investing in Ideas

What does that mean? It means whenever you will look at a portfolio of stocks that are run by managers, then typically they are focused on the return of the mutual fund. So one would be high growth, another would be medium growth, another would be small-cap, and another would be large-cap, but you very rarely get a representation of ideas. For example, one idea is, that the rural sector of India will experience very good growth in the next 10-20 years. Their disposable income will increase, and they will get a lot of facilities, tools, and technologies, so while sitting at home they will be able to experience as much growth in their rural sector as urban growth. Now, what if you want to bet on that? What if you want to bet on companies that are catering to the rural economy of this country?  It's very difficult to do this through any other portfolio of stocks but in smallcase, you can actually do that.

So when you look at something like Rising Rural Demand, this is actually a portfolio of stocks, a smallcase that allows you to invest in all the companies that are going to benefit from the rising rural demand. So this smallcase has companies that either derive a significant amount of their revenue from rural India, or are striving to enhance their foothold across rural markets to benefit from increasing rural demand. This is a very powerful idea. Based on this there is another one called, Great Indian Middle Class. India's middle class is constantly expanding, and their disposable income is increasing. They are getting their houses painted more, they are eating out more, they are buying more cars, and they are spending more on travel. So what are the companies that are benefiting from that, and can I invest in those companies? Because I know that the companies which bet on India's middle class in the next 10-20 years are likely to do well. What is a great way of doing that? smallcase. So you look here,

This smallcase includes companies that are expected to benefit from the growth in the Indian middle class. 

House of Tata. You really love Tata Group, you really like all the companies of Tata Group, whether it is Titan, or TCS or Elxsi, so what do you want to do is you want to invest in these companies. So that's number 1, which is investing in ideas.

2. Researched by Experts

All the research is done by experts, you are not doing it. You don't have to find out which stocks should you buy, which company's portfolio you should make, what should be its weightage, all of that is done by experts. They will not just tell you which stock to buy in what quantity, but they will also tell you that every week, or every month, or every quarter, or every year, if there is any change, then how to execute that change. You just have to click on the smallcase app or the desktop version and complete the process, I will tell you how the whole process is done, but it is as simple as that.

3. 100% Control and ownership

You get 100% control and ownership at all points in time because smallcase is connected through your Demat account, so wherever you open your Demat account, it could be Zerodha, it could be Upstox, it could be 5paisa, it could be Angel Broking, so wherever is your Demat account, you connect your smallcase to it, that is when you will be able to buy and sell smallcases. So whenever you will buy something then those stocks will not be in smallcase, they will be in your Demat account. Whenever you sell something, you will not sell it through smallcase, it will be sold through your Demat account. So you at all points in time have 100% ownership over your stocks  that you buy through smallcase.

How does Smallcase work?

It has 3 steps. 


you will have to connect your Demat account to your smallcase account. If you do not have a Demat account, then you can open up an account online, all that privilege and control is yours. I have a personal account on Upstox, so I will log in, So once I do that, I am inside the world of smallcase. Once you have logged in, you can see the components of all the smallcases, assuming that they are free. For example, as I showed you Rising Rural Demand smallcase. If we go to stocks and weights, I will be able to see all the stocks that this smallcase would be buying. It will buy the stocks of building products like Ambuja, Heidelberg Cement, Prince Pipes, and Supreme Industries. You may not have heard their names, but these are the companies that are focused on the rural sector. Similarly, if you go to the Indian Middle Class, then in paints, there are Asian Paints which is a very good company, in automobiles, there is Bajaj Auto for two-wheelers, Hero for two-wheelers, Maruti for four-wheelers, Home Electronics, Crompton Greaves, Whirlpool India, so on and so forth.

If you go to House of Tata, then there is Tata Chemicals, Consumer, Elxsi, Power Company, Tata Steel, all the usual suspects of Tata Group, but they are in a certain ratio. Why is this ratio there? That is completely developed by research, and that is what you are riding on when you go through this proper process. So this is how you connect smallcase and your Demat account. 


The second step is buying into a smallcase. Buying into a smallcase is very very simple provided your Demat account is already connected. All-Weather Investing is my favorite smallcase if you have never bought any smallcase, or even if you have not started your stock investing journey. You get a balanced portfolio in All Weather Investing. What does All Weather Investing have? It has Gold which is around 38%. It has equity which is around 36% again, This equity is also divided into parts, one is the Junior Beens which are small caps, and another is NIFTY50 which is the top 50 stocks of the Indian Stock Exchange. And then Debt, which is again fixed income, so you will get a guaranteed return like Fixed Deposit, but of course, better performing, which is around 27%. So you can understand, it's a good combination of gold, equity, and fixed income. God forbid, if the equity market is not doing well, then gold and fixed deposits can maintain it. If the equity market would be doing well, and gold and fixed income might be less, then the equity market will give a good performance. 

When you do this, overall you will be able to get a good rate of return. So in the last four years, this All-Weather Investing has given 10.90% which is not bad at all, because the risk in it is absolutely minimum, since there is gold in it, and there is fixed income in it. You can start with ₹3,965 only, which is as low as it gets, and the access is absolutely free. This means you will not be charged anything to do this. What are the charges for smallcase? That will come in the next section, but at least for now, you can assume that it is free. You will have to log in to invest. Once you log in, you will have to enter whatever is the amount. If you want you can invest more than ₹3,965. It's not necessary that you have to create a SIP, or you have to invest every month, you can invest one time in a lump sum, everything is in your control. I, of course, would recommend that you do a monthly SIP, but if you do not have that predictable income, you are a student, you have some money to invest, or you are a freelancer and you do not know when your money comes, then you can invest whatever lump-sum you have, and whenever you have more money, you can reinvest in it. This will always be free, so that is a good thing. As you start, it will be free forever and ever for you. 

3. REBALANCING (which is a very important and necessary step)

The third step is rebalancing. Now rebalancing is very important because rebalancing is basically saying when we bought a smallcase, it's not necessary that whatever stocks we bought, or in whatever ratio we bought those stocks, it's still the right. Because the market changes, conditions change, and industries change, it is possible that a company is not performing well, then some other company can take its place, or a company is performing really well so we put weightage on it. That is the process of rebalancing. So the experts of smallcase, they spend that time on this every day, this is their job 24/7 that they do for you. And when they feel that this requires an update, they will send you an email, which will be, that it's time for you to rebalance. Whenever you would have to rebalance, you will come back to the smallcase site or app, and through 2 clicks, go through the entire rebalancing process. Let's understand how this works. As you can see on the screen, we will try to rebalance the smallcase Capitalmind momentum.

You will click on rebalance, and it will clearly show you, what rebalance they are suggesting. So when you click on 'review update', you will see all the stocks that are being bought, and what are their quantities.  And the second thing, we see that which are the stocks that we are selling? And third, there are stocks that are unchanged, so they remain as it is, and there is nothing there that you have to do.

So when you review all of it, and you can at any point in time, change that, you will click 'confirm update'. That is when it will tell you if there is some amount that you will have to invest, this amount is usually a small amount. I would tell you something very important, how much are you selling any day, how much are you buying, and there is a market rule that says, for whatever amount you are selling today, you can spend only 80% of it today itself, you can spend the remaining 20% on the next trading day. So in case, your buying and selling don't balance out from a value perspective, then smallcase gives you an alert that this is not balanced, and we will understand how that works. But for now, suppose that my sell value is ₹56,000, buy value is ₹57,000, but today I can use only 80% of the sell value which is 56,000. So when I click on 'rebalance smallcase',. So I  can use only 80% of ₹56,000 which is ₹44,000 today, but the buy value is ₹57000, so you will have to pay for the gap, which is ₹12,400. Right now, there is only ₹1,000 in your Demat account, then you have two options. Either you add funds, which is perfectly fine, I would say, don't add, move on. The second option is, that you continue anyway. So when you continue anyway, then all the transactions which can happen today, will be completed, and then tomorrow you can complete the remaining transactions with the 20% amount that you will get. 

If you would have added the funds today itself, then you would have been able to go through it completely today itself, nothing else would be required to do. As you place these orders, you can go to your Demat account, and you can see that all those orders would have been placed, which is what I was telling you is one of the benefits of smallcase, that the total ownership is directly in your Demat account, nobody else has it, smallcase doesn't have it. It is in your Demat account in your control.

What are the charges for Smallcase Investing?

The charges for smallcase are of 3 types.

1. Charges by smallcase

What are the charges for smallcase? So you will see for all smallcases you will have to give a one-time fee which is ₹100 plus GST, meaning ₹118. You will have to pay this irrespective of any smallcase, whether it is paid or free, whether you have spent ₹1,00,000 or ₹1,000 on it. No, actually I stand corrected. If your investing amount is less than ₹4000, then you will have to pay 2.5%, and not ₹100. So 2.5% would usually be less for ₹4000, so let's say, if you are spending only ₹1,000, then you will have to pay ₹25 only for that smallcase. That is the only charge that smallcase has for all its smallcases irrespective of whether it is free or paid.

2. Charges by Demat

These are brokerage charges. These charges are related to your Demat account. So what are these charges? First of all, if you take the delivery of the stock, which means you are not selling the day you are buying it, then that's called a delivery. So Zerodha, for example, doesn't charge anything as brokerage.

There is ETF, or Exchange Turnover Fee, which is 0.00325% of the traded value. So the value of the stock that you have bought, you will have to pay 0.00325% of it, and GST will be charged on it. GST will be levied on brokerage also, but brokerage is zero. Then there is STT, which is Securities Transaction Tax, which is 0.1% of the traded value. There is stamp duty, which is 0.01% of the traded value, but it varies according to the state. There are SEBI charges, which are 0.0002% of the traded value again. And then there are Demat charges per stock. This is important to know, it doesn't depend on the value, it depends on the unique stocks and it only applies when you are selling stocks. So if you would be selling 5 stocks, then you will have to pay for 5 stocks which will be, 13.5 would be on CDSL, or 12.5 if you would be on NSDL, and GST 18% will be charged on it. What are CDSL and NSDL? These are depositories where your stocks actually rest.

To give you a sense of how it works, Suppose that, if we have bought and sold stocks worth ₹5,000, and we sold five stocks, irrespective of how much we bought, then the brokerage is already 0%, ETF would be 0.00325%, so you will pay ₹0.163. GST is 18%, so you will pay ₹0.3. Securities Transaction Tax is 0.1%, so you will pay ₹5. Stamp duty is 0.015%, so you will pay ₹0.75. SEBI charges are 0.0002%, so you will pay ₹0.01. And you will give 15.93 on CDSL and 14.75 on NSDL, which is basically 13.5 or 12.5 + GST since we considered 5 stocks, so we will either pay ₹80 or ₹73. So total-total, you will pay ₹86 on CDSL and ₹80 on NSDL, which comes out to be 1.7% or 1.6% on the value of ₹5,000. What you will note is, that it is a pure function of the number of stocks that you are selling, because that is the most expensive thing. If this becomes less, then automatically your percentage of value goes down, and if this becomes an increase, then automatically your percentage of value goes up because everything else is a function of your traded value.

3. Subscription of Smallcase 

What is a subscription? Some smallcases are research-heavy and expertise-heavy, they are not free but they are paid. And there are many subscription options. The bigger one is what is called the Windmill subscription option. So for example, if I go here, this is CANSLIM-esque. This is a technique of investment, this is called the CANSLIM methodology, I have taken the subscription. If I click on the details, then you can see that you can buy the subscription for ₹800 a month, ₹2,000 for a quarter, or ₹6,000 for a year. My recommendation would be ₹6,000 for a year, but, there is a very important but to what I'm about to say. When you buy this subscription worth ₹800 or ₹2,000 or ₹6,000, then you are not taking it only for this small case, you are taking the subscription of Windmill Capital. What is Windmill Capital? It is a smallcase manager, basically the ones who do all the research for you. So, there are 52 smallcases in Windmill, and it is a SEBI registered research analyst creating all these ideas, blah blah blah. So you will see it has All Weather Investing, 100 Stocks, Dividend Aristocrats, Equity And Gold, all of them are very good smallcases, all of them are free, free access. But then there are some like Canslim, Speciality Chemicals, Value and Momentum which is a very good smallcase, Dividend Stars, Brand Value, Quality - Smart Beta, all of them are paid. So through this subscription, you take the subscription of all these paid smallcases, not just one. But the important thing to notice is that if your annual investment is not more than ₹5 lakhs, then it may not make sense for you to buy this ₹6,000 subscription.


Because the cost of investing would increase. Your cost of investing should be between 1-2%. So if it takes ₹6,000 to be 1% that means ₹6 lakhs, if you take it as 2% then ₹3 lakhs, I mean if you are ready to invest between ₹3-6 lakhs in a year, then that is a good reason for you to buy this smallcase subscription. But if your investment would be less than ₹5-6 lakhs annually, then you are unnecessarily increasing your cost of investing which is something I would not recommend.


There are a lot of free very high-quality smallcases. As I said, All-Weather Investing, Equity, and Gold are really good quality smallcases, which are brilliant for someone starting up, and that is what you should tap into.


Finally, 3 things that I would summarise to bear in mind for smallcase investing.

1. long-term investment

You would not be able to make money overnight. This is made and built on ideas that have a long duration return attached to that, so please don't get greedy and don't treat it as trading, that you invest today and if it goes down tomorrow, then you get frazzled, nothing doing. You have to be patient and invest for at least a 5-10 year period, which is number one.

2. 100% control over the stocks

whenever you buy any portfolio of stocks from smallcase, then they are residing in your Demat account and your depository, not with smallcase. Like when we buy a mutual fund, whether it is from INDmoney, Groww, Coin, or so on and so forth, then it is not with that platform, it is the mutual fund company. In the same way, smallcases that are bought are resting in your Demat account. You have 100% ownership at all points of time.

3. Cost of investing should be 1-2%

Before taking this smallcase's subscription or any other smallcase's subscription, please check that your cost of investing should not be more than 1-2%. So the more quantum you invest, the subscription amount should be 1-2%, not more than that. If it is more than that, then my suggestion, start with the free smallcases, enjoy the power and benefit of it, that is the best use of it. 

It is an amazing product. If I spend ₹100 in the Indian stock market, then ₹30 goes to direct stocks that are my selected stocks in which I regularly invest, the remaining 70% is all on smallcases. Every month with absolute dedication, I blindly invest my money in the momentum strategy smallcases that I have bought. Super happy with the returns! Even on today's date, I am sitting on 50% plus returns. This return is for around 2.5 years. I am more than happy with that because frankly, I have many more riskier assets that will give me high growth, but this is where I want to park the bulk of my money because I know it is consistent and has good quality returns. 

If you want to know more about investing, you can read this:

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