How to Invest in Smallcase & Best Smallcase in 2023

In today’s day and age, the Indian economy is no longer functioning in a silo pattern.

In fact, it has evolved to create correlations with the ever-evolving global trends.

Keeping in sync and its modes of investing, newer demographics have joined in.

Smallcase is the latest addition to this market.

What is Smallcase?

A bull market will often create the perfect environment for retail investors. In such cases, investors will increase investments in stocks. But each investment product’s performance would differ each time. This is where ‘smallcases’ make the best choice.

‘Smallcase’ was first introduced by a Bengaluru-based fintech start-up in 2015. It allows investors to buy a ready-made portfolio, rather than purchasing multiple different stocks. This investment platform first flagged off with its own portfolio. Today, several brokers and money managers have adopted this idea. They, in turn, have tied up with the fintech firm. These now offer their own ‘smallcases’ that comprises of a variety of themes and needs.

Today’s smallcase comprises of a basket of stocks, that reflects a particular idea, focus or specific sector. For example, a dividend yield smallcase would comprise of high dividend paying stocks. Added to this, would be an IT smallcase of leading software firms. 

Smallcase today hosts several dozen ready made portfolios and investing strategies. They are being created by SEBI-licensed professionals such as brokers and research analysts. These individuals also use quantitative models and algorithms to screen and weight constituents. They have also partnered with leading brokerages such as Zerodha, HDFC Securities, Kotak Securities and more. By doing so, they have provided infrastructure to the creators of these portfolios. A few brokerage houses also curate their own in-house smallcases. 

What to look for in Smallcase investing?

If you are considering the best smallcase to invest in 2023, here are 4 pointers you should consider:

  • Pricing versus gains:

What you would pay versus the amount you would invest would be different. The biggest cost component here would be subscription costs, payables on a monthly, quarterly, semi-annually, or annual basis. Eventually your portfolio would need to appreciate for you to recover the subscription costs before you can even see any gains.

  • Setting realistic expectations:

With every investment you make, you would need to set realistic expectations. Periods of negative returns can affect your portfolio performance. An unexpected 10% in your portfolio performance can cause you reconsider investing. In this case most smallcases options would not be an option for you.

  • Be prepared when things don’t always work when expected:

Your buy and sell orders may not always go as planned. When that does occur, you would need to know why it happens, and then take the appropriate action. This can also affect your rebalancing decisions.

  • The more information may not be the merrier:

Evidence has proven that the more frequently you monitor and perceive how your stocks are performing, the more likely you will take actions that will deviate you away from your financial goal. Smallcase does make investing as easier alternative. You will need to understand enough to know that you are not overpaying because of unrealistic expectations and being aware of costs involved

How to Invest in Smallcase?

Investing in smallcases is like investing in any other stock options. As a first-time user, you would first need to have a demat account. Once you have opened a demat account, you can follow these steps.

Step 1: Go to the smallcase website and click on the login. Input the credentials provided by your broker to login. 

Step 2: Once you have logging in, chose from the different array of themes available. This would include, all weather, smart beta, bargain buys, amongst several others.

Step 3: You can now view the stock options, that comprise the portfolio. It would also include their proportion and rationale behind the inclusion. You can customise the small case by adding or removing stock options. 

Smallcase Charges

A onetime fee of Rs. 100 will be charged along with GST is chargeable on the day of purchase for created or customers free smallcases.

If you are investing less that a certain on the day of purchase, the smallcase charges include up to 2.5% based on the amount invested. There will be no additional fees for further orders in the same smallcase, excluding costs for executing the trades.

The fees will be deducted from your ledger, at the end of the day. 

Paid smallcases would also come with subscription charges.

That is because they come with researched portfolios, that require experience and expertise to build, created by well experienced smallcase managers.

How to Rebalance a Smallcase?

Rebalancing smallcase is the process of periodically reviewing your smallcase investments. This ensures that your smallcase investment continues to reflect your original investment goal. If you receive a new update, you should review and apply the same. In the event you skip the update, your smallcase would no longer follow the original goal. This in turn would affect your returns. 

To rebalance smallcase you would need to follow these steps:

Step 1: From your investments page, click ‘rebalance’ where available

Step 2: Review the update and make your choice of changed by clicking ‘customise’

Step 3: If there is no change, confirm the update to place the order

Smallcase Vs Mutual Funds – Pros and Cons

While smallcase and mutual funds are considerably similar, there are several differences between the two options. Here are the important differences and some of the pros and cons to them:

  • Control over investment portfolio: As compared to mutual funds, smallcase investing offers a better control on investments. This is because, you would be able to control when and where to invest your funds, based on your preferential choices. It also offers the opportunity to control the exit. Mutual funds on the other hand, doesn’t provide investors with control over the investment portfolio. Mutual fund investments will focus on equity, debt, and other sectors. In other words, in each mutual fund investment, investors would not have control over where the money is invested. 
  • Portfolio diversification: Smallcase investing involves investing in stocks that follow a specific strategy, focus or idea. This would result in restriction of diversification. However, mutual funds does offer a good diversification for small capital investments, based on investment objectives. This can can act as a hedge against market crashes or high volatile scenarios.
  • Expense ratio: Expense ratios is basically a certain fee charge based on management services. Smallcase charges will have different expense ratios. It would also be deducted from the trading ledger. Charges for mutual funds will be deducted from the investment itself. Or, it would be adjusted in the Net Asset Value expense. 

How to build a custom smallcase?

You can easily create your very own smallcase. If you are looking to invest in the best Zerodha smallcases to invest in 2023, here is what you need to do.

Step 1: Select your stock and segregate them

  • The smallcase would comprise of a list of up to 20 stocks
  • While adding stocks, look for additional stocks within the same sector
  • Once you’ve added your choice of stocks, organize and classify them as per your requirements. 

Step 2: Assign a weighting scheme for these stocks

  • Choose between weighted schemes available to balance your smallcase.
  • You can also assign individual weights or chose the number of shared to your stocks.
  • Check the final weight or shares for the selected stocks along with the minimum investment amount.

Step 3: Review the past performance of your created smallcase and purchase it instantly

  • When adding your stock options, review the performance of the smallcase stocks in the year before, against the general market.
  • Once you have finalized your choice of the best smallcase to invest in 2023, purchase it immediately
  • Alternatively, you can save your smallcase for a later time, track it in a draft format and purchase it when the time is right. 

Top 10 Best Smallcases to Invest in 2023 

Since its inception, there will be several options that make it to the list of the best smallcase to invest in 2023. 

However, if you are looking for the best Zerodha smallcases to invest in 2023 here are the top 10 options you should consider:

  1. Craving Alpha Index Advantage

This smallcase covers the top 500 stock. It also comprises of a high-volatility multi-cap strategy and utilizes a multi factor-based model with a lower churn. This means, high performance, low fee charges.

  1. Q10

This smallcase is a trend following momentum-based quant system. It comprises of up to 10 stocks in the portfolio at any time. The focus is on higher liquidity stocks while allowing a greater churn and a monthly reset.

  1. Mi_MT_Allcap

Mi_MT_Allcap is a non-discretionary momentum portfolio with up to 20 stocks. It follows a medium-term momentum trend with above-market capitalization of Rs 1,000 cr. It incorporates a low-volatility multi-cap strategy, with an opportunity to rebalance smallcase every week.

  1. Future Growth Stocks

This smallcase comprises of strong stocks from different sectors having strong fundamentals. It is a high-volatility multi-cap strategy, with a focus on a long term view.

  1. Estee Long Alpha Lite (Gear 4)

This smallcase incorporates a directional strategy that aims to outperform the market. At the same time, it also maintaining low volatility systematic rule-based investing with a high-volatility multi-cap strategy.

  1. Calm Investor Momentum

This smallcase selects up to 20 stocks from the top 200 stocks by market cap, based on quality of momentum and trailing return. It also incorporates a low-volatility large & mid-cap strategy. This smallcase reviews its portfolio monthly, and the occasion to rebalance smallcase at least quarterly

  1. Capitalmind Momentum:

This smallcase aims to capture the momentum factor. It does so by selecting options based on sharpe ratios, liquidity, and fundamental sanity-checks. It incorporates a low-volatility mid-cap strategy. This smallcase reviews its portfolio on a weekly basis, with changes incorporated on Monday, or on the first trading day of the week.

  1. Indian Healthcare Momentum:

The strategy consists of a concentrated portfolio of top 10 performing stocks, in the field of Indian pharmaceutical, diagnostic, and hospital companies. It incorporates a high-volatility multi-cap strategy.

  1. Robocapital smaller companies

This smallcase invests in high quality and growth small cap companies. It also focuses on options that provide high return opportunities. It also incorporates a medium-volatility small-cap strategy and medium-volatility multi-cap strategy, that have potential to turn into mid-cap or large-cap stocks in the future.

  1. Estee Long Alpha LITE (Gear 3)

Long Alpha is a directional strategy which aims to consistently outperform the benchmark equity index while maintaining low volatility. It incorporates a medium-volatility multi-cap strategy and directional strategy following rule-based investing with efficient risk management.

Smallcase is a good investment option for those looking for expert Stock suggestions without the high costs of Portfolio Management Service.

If you are looking for something safer then I would recommend Index Funds Investing.

Unlike smallcase, you don’t even have to rebalance the portfolio, it is done by the mutual fund manager.


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