Zerodha Smallcase Review

Before jumping into the review of Zerodha Smallcase, we need to understand what exactly is smallcase? How does it help in investments? Why do we need it and so on! Basically, Smallcase is an equity investment platform, designed specifically for retail investors taking into account two prominent investment strategies – themantic and portfolio based investing.

Wait, what is themantic investing?

Themantic investing is basically investing in the changes we see around us. These changes could be anything such as changes in the mindset of people towards branded products, new infrastructure developments around specific cities or types of cities of the country, change of government policies towards any particular domain such as smart cities, metros, powertrains, the introduction of GST etc.

Basically, these investments are not targeted primarily onto stocks, but themes, ideas, observations that can create potential opportunities in a segment or more.

The best part of themantic investments is it is future driven and not on historical trends, thus, creating future profitable investment scenarios. There can be such initiatives in the tourism industry, luxury industry and so on.

Alright, that makes sense! What about Portfolio investing?

Portfolio investing focusses on a set or sub-set of stocks instead of a specific stock or two. For instance, due to the growth of e-commerce in India and inclusion of demonetization recently, the market has seen recent improvements in the stocks of banking space, simply because major retail purchases are being done online. And thus, a lot of banks have gained traction in terms of value to go along with high cash assets.

So, if you a person A saw all that, with media through newspapers and television channels echoing the same point, he/she would pick a particular bank based stock and invest in it. What if that particular bank goes down the barrel due to other factors while other banks enjoy a huge rise in the stock market valuation.

Thus, to cater to such situations, portfolio investing comes into play where it diversifies your investment into multiple stocks within the same industry and helps you NOT to put all the eggs in the same basket.

Coming back to Smallcase, it basically takes both themantic and portfolio investing strategies into consideration and creates separate themes across multiple industries, domains, external situations etc.

Let’s take the example of Smart Cities concept where our government is putting up multiple efforts in creating smart cities out of the 3rd tier cities of India.

This is how a theme introduction looks like:

This concept directly impacts infrastructure, education, retail, telecommunications, transportation and few other sectors. Now, there will be companies coming from these sectors that can potentially see growth opportunities due to this very concept. What smallcase does is, picks out specific company stocks coming from these sectors through their research and create a theme out of it. The theme is called – Smart Cities. This theme is made of multiple stocks coming from multiple business sectors and is seeing an overall growth together.

For instance, this is how the theme growth graph looks like:

Zerodha Smallcase Review

The graph above is basically telling that the stocks within this theme, once invested together through this theme via Smallcase, would have given 40%+ returns in 2 years time. Users can view the returns percentage for durations of 1 month, 3 months, 6 months, 1 year along with 2 years.

Similarly, there are around 40 such themes that contain a mix of stocks that can get impacted by external situations and opportunities. Each of such themes contains 15-20 stocks based on the research done.

Zerodha Smallcase Review

This shot gives an idea on the kind of return you can expect in as less as 1 month to as high as 1 year to go along with the minimum investment amount you need to invest to see that percentage growth.

This is fine but, How is a smallcase theme built?

As per the team from smallcase, they would go through the following process while they build a smallcase:

  • Start at a very broad level and wonder across all stocks listed on the stock market
  • Detailed research on the numbers, indices, external situations that can potentially impact industries, geographies to boil down to a theme topic.
    List down specific sectors, companies that can get impacted by the industries of the theme selected above. This requires the research team to figure out which particular companies are inclined towards what kind of models and whether the selected theme topic will impact them or not. It’s not mandatory that every company in a particular industry will get impacted and thus specific companies get picked out.
  • Stock screening is down via algorithms and models developed by smallcase.
  • Set up corresponding investment weights against the selected stocks.
  • The same process is re-run after a particular period to see any potential inclusions or exclusions of selected stocks.

Thus, small cases present potential investment opportunities based on a decent amount of research done on the subject. It also tells what you can potentially expect in terms of percentage returns along with the investment period and minimum investment needed.

Pricing of Zerodha Smallcase

Zerodha Smallcase charges INR 100 per smallcase you buy irrespective of the investment value you put in. So, if you are interested to invest 50,000 in 3 different small cases – then you will be charged INR 300 in total.

Later, if you want to increase your investment in the small cases you have bought already, there is no extra fee.

How Zerodha Smallcase works?

Since smallcase works in partnership with Zerodha, thus, first of all, you need to have a trading account with Zerodha. You can open the trading account with Zerodha by providing your details here.

Once you have selected smallcase(s) for your investment, you need to go to the smallcase page. Once you are there, you need to click on ‘Buy Smallcase’ button as shown below:

Zerodha Smallcase Review

Once you click the button, you will be required to confirm the amount you are looking to invest in this particular smallcase. There is always a minimum investment set for a smallcase, although you can choose to invest more than the minimum amount set for the small case. Once you enter the investment amount, you need to click on the ‘Confirm Amount’ button, as shown:

Zerodha Smallcase Review

Once done, you will get to see different stocks, corresponding quantities and amount invested through smallcase in those selected stocks. Your total investment will be divided among different stocks as per the weight set by the research team.

Once you confirm the order, you will be directed to the order confirmation as shown below:

Zerodha Smallcase Review

Further, you can also track your investments by click on the ‘Track Investment’ button.

Yea, but everything cannot be good with it, right!


Disadvantages of Zerodha Smallcase

There are few concerns with the platform, such as:

  • Available only in Equity segment
  • Incomplete integration with Zerodha Kite Platform

Advantages of Zerodha Smallcase

Further, it certainly provides the following positives for investors or beginners:

  • Users can customize a smallcase, add new stocks or remove some of the existing ones as per users’ preferences.
  • You don’t need to go through any fundamental research on your own. That part is already taken care.
  • Diversifies your investment across industries, company stocks and keeps minimal risk on your initial capital.