Which is better for investing: Smallcase vs Mutual fund

smallcase vs mutual fund

There is a salient order that most successful personalities follow while investing their money. That rule is diversification. This simply means not putting all your eggs in one basket. They believe in infusing money into different assets or securities so as to reduce the level of risk. 

Based on the same objective mutual funds and small cases are introduced by varied financial firms. These instruments are build-up by involving a combination of different sets of securities to minimize the risk. And today, we will be discussing some of their features and evaluating which is better for investing: Smallcase vs Mutual fund.

A comparison would be helpful in deriving some of their key features, holding patterns, and understanding which one is more useful from an investment perspective. 

All about: Smallcase investment

The idea behind Smallcase investment was brought in by Banglore based fintech firm named Smallcase technologies in the year 2015. The company was formed by three IIT graduates: Vasanth Kamath, Anugrah Shrivastava, and Rohan Gupta with the aim of providing better investment options to the investors. 

Smallcase provides investors a platform to meet their long-term investment goals. It brings in a pack of smallcases with different categories based on sectors, quality, top-performing assets, etc. Also, it allows the users to make a collective or a theme-based investment. 

For starting with smallcase investment, we don't need to create any separate account as it now collaborated with most of the top brokerage firms. Some of these firms include Zerodha, HDFC securities, Groww, Angelone, Upstocks, etc. Now, let us hold out to our main content of the comparison of Smallcase vs Mutual fund.

Smallcase vs Mutual fund

Given below are the top five factors that will simplify the comparison between Smallcase and Mutual fund: 

1. Capital requirement

People generally look for flexible capital investment and Mutual funds give them the feature of infusing a lumpsum amount or selecting SIP (systematic investment plan). Investors who are willing to invest a small amount on a monthly basis always prefer mutual funds as the best investing platform

While investing in Smallcase lacks capital flexibility as you have to pay the minimum investment amount directly for initiating the investment. Most of the Smallcase quote Rs. 4000-5000 or more as their minimum investment amount except for ETFs. 

2. Ownership 

Talking about the Mutal funds then they don't give us the number of shares or financial assets in units. That simply curtains our ownership and hides the number of shares in units we own. Investors in mutual funds are just familiar with the NAV and can relate their average NAV with the prevailing. 

In Smallcase the user can identify the number of shares he is holding in his smallcase. That ensures an investor to have complete knowledge about the number of units he is owning. And on the basis of which he can derive the true value of his portfolio. 

3. Investment charges 

This is the expense that an investor needs to pay to fund houses. The charges may vary with different companies but the minimal charges on mutual funds are around 1-1.5% of the investment value. And this amount is deducted on an annual basis. Additionally, the investor need not pay the amount directly but it is deducted from the NAV.

While in Smallcase a flat charge of Rs. 100 or 2.5% of the transaction amount is levied (whichever is less) only on the first order. After that a minimum charge of 0.5% (approx)  per transaction. That makes the smallcases investment charges more attractive for the investors.

4. Customized Investing 

Mutual funds are managed by the fund manager and as an investor, we don't have access to modify any of the security. Investors can only see the holding pattern and changes can only be made by the fund manager.

Whereas, Smallcase gives us access to create a customizable asset where we can add our own stock picks. Example: If you are not able to find any favorable smallcase picks from their showcased list then you can create your own smallcase.

5. Additional benefits 

Both the investing schemes provide additional benefits but the gain provided by the smallcases has better visibility compared to mutual funds. In mutual funds, the additional benefits are in the form of NAV appreciation that makes the investors sometimes unaware about which asset in the portfolio is contributing to the gain.

In smallcases, the investors can enjoy additional benefits in the form of a dividend that is credited into their bank ac. If the company announces a stock split and bonus shares then the increase in the number of shares quantity is reflected in the smallcase. 


Take away

The article was to bring to light which is better for investing: Smallcase vs Mutual fund. The comparison was done based on the following factors: Capital requirement, Ownership, Investment charges, Customized investing, and Additional benefits. 

Both Smallcase and mutual funds carry their own advantages and disadvantages. Such as people can start their investment in mutual funds with a very small investment while smallcases require the minimum investment amount to be paid. 

Also, smallcase gives us flexibility in terms of stock customization, and in mutual funds, the fund manager is the sole controller of the diversified portfolio. But, this character of mutual fund brings ease to the beginner who does not have much knowledge about investments.