April 24, 2024

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What to Know Before You Invest in Smallcase?

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The activity of investing in the stock market has seen an upward trajectory. It is primarily due to three main reasons. Firstly, the perception of investing in the stock market is turning positive as more people learn about the benefits of investing. Secondly, with the advancements in technology, it has become very easy to invest in the markets.

To invest in the stock market, you need to open a Demat account. The process regarding the opening of a Demat account is also very simple. And lastly, there are a lot of different ways to invest, thanks to the different options and investment apps. You can invest in individual stocks, mutual funds, ETFs, and Smallcases.

What is a Smallcase?

Of the different investment options mentioned above, a Smallcase is a relatively new investment option. So let us understand what a Smallcase is. Simply put, a Smallcase is a basket of stocks and ETFs. This Smallcase basket could comprise upto 50 different stocks or ETFs.

A SEBI registered fund house, manager, analyst, or broker designs these Smallcase portfolios. So when you invest in a Smallcase, you are investing in a pre-designed portfolio created by a professional who has expertise in investing. Therefore, investing in a Smallcase will help you build a diversified long-term investment portfolio.

A Smallcase is similar to a mutual fund regarding the fact that a professional designs the portfolio. However, a Smallcase operates differently. It also gives you much control over your investment portfolio compared to a mutual fund.

Construction of a Smallcase Portfolio

The fund manager or professional designs the smallcase portfolio based on a specific theme, idea, sector, or parameters. For instance, there might be a Smallcase based on the theme of green energy that will include the stocks of the top companies that will be beneficiaries of renewable energy. In the same way, a Smallcase based on the theme or idea of China+1 will include the stocks of those companies from various industries that will be beneficiaries of the China+1 movement taking place around the globe. By investing in a Smallcase, you can obtain a diversified portfolio while remaining focused on a particular idea.

Investing in a Smallcase

the obvious question is how you go about investing in one. To invest in a Smallcase, you need to have a Demat account and a trading account. You can choose Kotak Securities as your stockbroker and visit the official website to proceed with the opening of a Demat account and trading account. After you complete the Demat account opening, you download the Kotak Stock Trading App. Investment apps let you make all your investments with a few clicks on your phone. The Kotak Stock Trading App is one of the few investment apps with the Smallcase feature integrated.

You can choose from several different Smallcase Portfolios and invest in Small multiple cases. In addition, you can make a one-time investment in a Smallcase or start a monthly SIP (systematic investment plan).

Costs and Fees

However, before investing in a smallcase, you need to be aware of the following things. A Smallcase, like a mutual fund, may have a subscription or management fee that goes to the Smallcase fund manager. This fee is nominal in most cases; however, it can vary from Smallcase to Smallcase. Similarly, the minimum amount required to invest in a Smallcase also varies from Smallcase to Smallcase. In some Smallcases, you would only need a few 100 rupees to start your investments. At the same time, some Smallcases require an initial capital of more than 20 thousand rupees. You are also required to pay the brokerage fee and other transaction fees.

Features of a Smallcase

Unlike a mutual fund, when you invest in a smallcase, you receive the shares of the companies that make up the Smallcase Portfolio. Since the shares will get credited to you, opening the Demat account is necessary to store the shares. Since shares are credited to you, you have complete control over the smallcase portfolio. It is upto you to decide when you want to sell any specific share. There are no exit loads or lock-in periods imposed in the case of a Smallcase.

Hence, you need to know about investing in the stock market before investing in a smallcase. So, if you have the knowledge but do not have the time to find stocks, investing in a Smallcase is a good option. Investment apps like the Kotak Stock Trading app give you easy, quick, and easy access to many Smallcases.

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