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Author: DV-Mint

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Does Many Smallcases = More Profit?

 

That said, over-diversification is overkill. Every asset class and related asset-allocation format (in this case, smallcase) has its own benefits and limitations, especially if you have too many. In this blog, we’ll take a balanced look at both – the pros and cons of investing in multiple smallcases

 

Can you get wealthy by investing in multiple smallcases?

 

For years, portfolio management services have eluded the retail investor. Be it the daunting ticket size (50L since SEBI revised it in 2019) or the complexity of the systems at large, investors looking for a credible asset manager had to make do with mutual funds. The truth is, tailor-made asset management services were always reserved for those with an existing high net worth; as a result, stock-market investing has traditionally been a thing of mystique for the average investor. But smallcases as a concept disrupted this market, and how

 

Smallcases provides retail investors with high-quality capital management services traditionally associated with a typical PMS. You may possibly call smallcases ‘affordable PMS’! With investment portfolios that are tailor-made to multiple investors’ investing goals and bundled risk appetite, smallcases are a viable idea worth exploring for most investors. Additionally, a ticket size as low as Rs 5000 is small enough for most people looking to invest in equities and this consideration truly breaks the entry barrier for a new investor.

 

 

That said, over-diversification is overkill. Every asset class and related asset-allocation format (in this case, smallcase) has its own benefits and limitations, especially if you have too many. In this blog, we’ll take a balanced look at both – the pros and cons of investing in multiple smallcases.

 

Why Investing In Multiple Smallcases Is A Good Thing:

 

1. Counter volatility:
One of the main reasons to have multiple Smallcases is they allow an investor to maintain a portfolio that may tide over volatility smoothly. Smallcases essentially are bundled thematic investments. Should one theme be affected by market movements, there is a possibility that your other smallcase investments buoy your overall portfolio, helping you cross over the short-term fluctuations in the market.

 

2. Fulfilling different goals:
Diversifying across multiple smallcases may allow us to meet diverse life goals. You can explore investing in smallcases across bundles that commit to delivering capital appreciation or beating inflation and/or stable income and wealth protection. By dividing your corpus into different smallcases, you can undertake and achieve different financial objectives. These risk spectrums allow us to better manage our investments for multiple goals, and monitor them according to the benchmarked goal.

 

3. Ease of implementation:
A key advantage of smallcase is their ease of implementation. You don’t necessarily need a broker or sell-side entity to make individual trades of the stocks in your smallcase portfolio – you can do it directly through smallcase too. Buying and selling smallcases is exactly like buying stock, done at the click of a button and the shares are directly credited to your demat. Moreover, smallcases like that of Deeva Ventures are regularly and personally monitored by highly qualified investment advisors who make sure your investments are secure and portfolio is rebalanced on a regular basis.

 

Now that we’ve seen the bright side, it’s also important to be wary of the pitfalls. We’ve made a list of some cracks in the wall that you should consider before accumulating too many smallcases.

 

Why Investing In Multiple Smallcases May Not Be A Good Thing:

 

1. Portfolio Overlap:
Too much of anything is not a good thing. This stands true for diversification of your portfolio through smallcases too. It is very likely that certain well-performing stocks may be repeated across multiple themes and hence a part of multiple smallcases. This could lead to concentration risk should your exposure to particular stocks become high cumulatively across smallcases. Also, with your portfolio filled with Smallcases that have diverse asset allocation patterns, it may result in you not getting the best possible performance out of your money. Your returns get averaged out.

 

 

2. Expensive cost of access:
Many investors are confused by the fact that you have to pay a minimum amount to subscribe to quality smallcases. The fee involved with any Smallcase is not much; it’s just about 2% and this may really not be an issue when you consider the advantages it may give you – professional fund management service at a fraction of the cost. However, overspending in this regard might make it more difficult for you to make an absolute profit, excess of costs.

 

 

3. Hard to monitor:
If you invest in multiple smallcases, for example, 10 smallcases and above, with every Smallcase comprising of at least 10 companies, you will essentially end up with a portfolio that has over 100 stocks. In this scenario, it will be very difficult to monitor performance and manage risk over time! You might never quite understand what’s doing well, what’s underperforming, given that the stock market is a dynamic beast that changes with every trading session. As an investor, you need to know the exact details about what’s going on with your portfolio, which is why investing only in a few selected Smallcases is better for most investors.

 

 

The Bottomline
Smallcases are an interesting investment product- a form of research-led asset allocation program that can give you better returns with managed risks. But it’s important to make the right decisions in the beginning if you want it to work for you in the long run. There are a few advantages and a few disadvantages of investing in multiple smallcases, but they’re still a very good option for investors who don’t have the patience or the time to analyze their portfolios closely. So while investing in multiple smallcases is not really a bad decision, it should be done with caution and a fair bit of understanding of the product to arrive at a number that works for you. We’ll leave you with what Oscar Wilde wrote – Everything in moderation, including moderation!

 

Source: Tejimandi

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Smallcase vs Mutual Fund : Which one is better

 

Mutual funds and Smallcases are the two asset structures in contention, and we’ll compare them over the course of this article to understand the fundamental difference between Smallcase and mutual funds.

 

As investors, most of us spend a considerable amount of time window-shopping for the right investment avenues. “Should I invest in the safety of debt instruments or should I stay equity-focused? Should I pick evergreen stocks or can I benefit more from trading the seasonal ones? What about adding some cryptocurrencies to my portfolio? How long should I stay invested?” Questions, so many questions.

 

The truth is that unless you’re an exceptionally nuanced investor with well-rounded insights about multiple sectors, a diversified portfolio can hold the answer to most ‘what and why questions as far as investments are concerned. Two financial avenues facilitate this diversification optimally; the first is a household name and the second has emerged as a buzzword in the last year or two. Mutual funds and Smallcases are the two asset structures in contention, and we’ll compare them over the course of this article to understand the fundamental difference between Smallcase and mutual funds.

 

What are mutual funds?

 

A mutual fund is a pool of money collected from many investors to invest in securities like stocks, bonds and other assets. Professional fund managers, vetted and hired by mutual fund houses or Asset Management Companies (AMCs) are responsible for picking the constituents of the fund and allocating capital; they can attempt capital gains or income production based on the investment objectives of the fund as per the prospectus set out at the time of the fund launch (called NFO).

 

What is a Smallcase?

 

A Smallcase, on the other hand, represents a capital allocation structure similar to portfolio management services (PMS) that were previously reserved for wealthy individuals (Read: HNIs and UHNIs). As a product, this is an idea that has caught the fancy of many well-heeled millennials as well as on-the-brink wealthy, ever since SEBI hiked the minimum investment amount for portfolio management services (PMS) from ₹25 lakh to ₹50 lakh in November 2019. In some sense, Smallcase may be called affordable PMS – with a starting price as low as Rs199/month. Basically, a Smallcase is a basket of stocks or ETFs, decisively created by the top qualified and registered investment advisors (RIAs) in India, based upon a theme, strategy, or objective.

 

David vs Goliath: A legacy product vs a promising challenger

 

If we have to compare the sheer size of the market with respect to Assets Under Management (AUM), mutual funds represent ₹36.74 trillion as of September 30, 2021. In comparison, Smallcases are a disruptive product that has been around for approximately 6 years now. Quoting the founder and CEO Vasanth Kamath “Our users multiplied three times from 9 lakh in March 2020 to 28 lakh in March 2021.” In FY21, the firm saw Rs 8,000 crore invested through its platform. A drop in the ocean, as far as the larger financial products industry is concerned.

 

 

Smallcase vs Mutual Funds: Points of Comparison

 

1. Exercise Control
Investing in Smallcases potentially offers investors better control over securities as the shares are credited directly in the Demat account. Having the portfolio right at your fingertips allows you to time your exit and know where each investment goes, which isn’t possible with mutual funds; you can cherry-pick which mutual fund you want to invest in, but the customization ends there.

 

 

2. Risk Mitigation Mechanisms
Smallcases are thematic investments; they invest in companies and securities that follow an underlying strategy or idea. For example, there can be a Smallcase that focuses on Clean Energy companies or fast-growing tech companies that focus on enterprise software integrations. Since these ideas are highly specific, diversification is restricted. For those intent on diversification, mutual funds offer a basket of good companies that are related by larger themes such as industry type and revenue benchmarks that may be a better hedge against volatility over several business cycles.

 

 

3. Cost of Leaving
In many mutual funds, there is an in-built penalty for liquidating your assets before the minimum stipulated time (generally just about a year)- this expense is called the exit load which ranges from 1-2% of the total investment. Typically, all mutual fund houses adjust this amount against the net asset value (NAV) of the fund. Smallcases, by design, allow investors to buy individual units of securities that are directly credited in the demat account like common shares. Since there is no exit load on selling shares, there is no exit load on selling smallcases.

 

 

4. Management Fee
Any asset allocation structure is only as good as the people managing it, i.e., the fund manager- who in these cases is typically someone who holds high repute in the financial markets. Understandably, this expertise attracts a certain cost, apart from the cost of monitoring and managing the fund. In the case of mutual funds, this cost, called the expense ratio, is a percentage of the total fund value, capped at 2.5% by SEBI. Smallcases have no fixed range – the cost differs from case to case and RIA to RIA, depending on the nature and theme of the basket of investments.

 

 

5. Access to Returns
Smallcases give investors direct access to their holdings since the shares are directly credited to their demat account. Hence, all corporate actions such as dividend distribution as well as the issue of bonus shares take place directly with the investors. In the case of mutual funds, the returns are collected in real-time but distributed quarterly.

 

 

6. Volatility
Due to the nature of the theme-wide concentration of Smallcases, they are typically more volatile than the stock market in general since the risk is concentrated in a specific strategy or idea. However, as one of the fundamental principles of finance states – the higher the risk, the higher is your potential for gains. Mutual funds, on the other hand, spread the risk across companies working in different areas even if the fund is concentrated in a specific industry. Hence, the latter is more resilient during market ups and downs.

 

Where should you invest?
While choosing between mutual funds and Smallcases, you must consider the following questions:

 

• Do you have adequate knowledge of the market?
Investing in a Smallcase requires some degree of market research and ample time to sort through to find the best Smallcase to invest in. It is an excellent investment for those who have a good idea of how markets operate. However, you can invest in a mutual fund without any market knowledge.

 

 

• How much control do you want over your investment?
Smallcases allow you greater flexibility, transparency, and control over your portfolio. You can choose a Smallcase that aligns closely to your financial goals and ideas, giving you greater discretion. On the other hand, investing in mutual funds comes with comparatively low transparency, and you have minimal influence over your portfolio.

 

 

• For how long do you want to park your funds?
Smallcases come with no lock-in periods, while mutual funds require you to lock-in your money for a considerable amount of time. Moreover, the charges associated with mutual funds are higher.

 

 

• How much time are you willing to spend on tracking your investment?
Investing in Smallcases requires you to keep a tab on your investment. You will have to decide when to enter the market and when to exit it to get the most returns. You may also have to keep a check on the returns to make sure they are on track. As for mutual funds, you can simply invest and let the experts take care of your investment. You may review it once a year.

 

 

Based on how you answer these questions, you may choose between these two investment avenues.

 

Closing Thoughts
As far as investments as concerned, asset allocation structures are as effective as the investor’s understanding of their goals. Both Smallcase and mutual funds are excellent avenues for growing wealth and intelligent investors should use these tools judiciously to their benefit. Where mutual funds provide the diversification a portfolio might need, Smallcases are conveniently packaged customizable investments in simple ideas that could return well over time.

 

Source: Tejimandi

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Impact Investing: An underrated investment opportunity for family offices and high-net-worth individuals

 

Family office and HNIs can be significant investors for social enterprises with their patient and flexible capital. Here’s a lowdown of reasons behind their hesitancy and what impact investing can bring to their portfolios

 

If Covid-19 has taught us anything, it is that the world can no longer afford to ignore social and environmental issues. Climate change, poverty, human rights, gender inequality are just some of the issues that are fast becoming central to mainstream business decisions. This paradigm shift towards people, planet and profit is a direct result of the growing understanding by global leaders that socio-environmental issues are agnostic in their impact on people’s lives, cutting across socio-economic levels and geographies. One of the solutions to solving these global issues is impact investing.

 

The impact investing ecosystem in India has rapidly grown over the last decade. According to the data from the Impact Investors Council (IIC), more than 600 impact enterprises in India now affect more than 500 million lives, attracting over $9 billion in capital. However, most impact capital comes from foreign donors and investors, be they development finance institutions, institutional investors, high-net-worth individuals or global foundations. While this inflow of impact-focused capital has helped build a robust ecosystem for impact investing, it continues to serve as a stark reminder that domestic private capital is still focused on conventional approaches to investment.

 

Indian family offices and high net worth individuals (HNIs) are important stakeholders in India’s investment landscape. However, investor participation in impact investing is still at a very nascent stage. According to ‘Unlocking Impact Capital: The Indian Family Office Edition’, a study brought out by Waterfield and the Indian Impact Investors Council, domestic family offices and HNIs make up only 7.5 percent of participants in impact investments in India between 2016 and 2020. The same study also shows that Indian family offices and HNIs have polarising views on impact investing. Nearly 52 percent of Indian family offices and HNIs believe that doing good can also generate market-linked financial returns and a near equal proportion believe the two must remain separate and distinct. Family Office and HNIs, with their extensive networks, can be significant investors for social enterprises with their patient and flexible capital. Coupled with the intent to align their wealth with their personal values (a trend which is developing amongst the NextGen), it makes family offices and HNIs perfectly placed to become an attractive source of capital for this ecosystem.

 

For family offices, impact investment opportunities address issues related to the masses—social enterprises that find solutions for India’s largely underserved but incredibly aspirational ‘next billion’. Some optimistic Family Office investors view impact investing through the same investment lens as they do for any other asset class. This is a definite win for the impact investing ecosystem as these investors function as evangelists, strongly advocating the ability for impact investing to provide commercial returns and impact. Equally, many family offices and HNIs continue to have reservations regarding the ecosystem. They repeatedly point out the industry’s inability to demonstrate measurable results. Moreover, a lack of common frameworks and a common language to measure the impact make greenwashing a real concern. To add to this, many families feel that impact funds and enterprises often lack skilled professionals with adequate on-the-ground experience to understand the nuanced challenges of these businesses.

 

Additionally, potential investors face product related barriers because of a lack of good quality investment opportunities across the risk-return spectrum. Domestic investors have not been sufficiently exposed to the wide variety of impact investing opportunities available in the country. They range from equity investments into funds and social enterprises to less conventional social finance models such as development impact bonds (DIBs), loan guarantees and pay for success models.

 

India is not lacking in socio-environmental issues and there is enough and more room for philanthropic, impact, and commercial capital to co-exist and complement each other in alleviating socio-economic issues. Wealth advisors to family offices and HNIs can help their clients contribute to real social change by earmarking ‘sustainable development capital’ in a client’s portfolio for the broader spectrum of grants, direct investments in social enterprises and blended finance. Exposing families to opportunities across this spectrum will help broaden the perspective and give clients multiple options to deploy capital towards social development. Equally important is to be able to create metrics for clients that enable them to measure, monitor and evaluate the “impact quotient” of their investments.

 

As India inches closer towards achieving the UN Sustainable Development Goals and climate commitments made at COP26, unlocking Family Office and HNI capital for sustainable development can be a game-changer. It will require a concerted effort amongst wealth managers to channelise domestic capital to the social sector. It will mean educating and training our relationship managers, working with partners to source investment opportunities, and being able to diligence social enterprises through both the commercial and impact lens. As investors, we applaud the unicorns that get created, but can we also applaud those social enterprises and impact funds that aspire to touch a billion lives.

 

Source: Forbes India

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Is Health Insurance Premium a waste of Money?

 

A lot of people think that paying health insurance premiums is a waste of money.

 

After all, why pay the premiums for years and years, and what if nothing happens? After all, our grandparents never had any health insurance and they are in perfect health. Why pay for something which is an imaginary risk? These health insurance companies are here to just make money, fool customers with their fancy presentations and brochures, and reject claims finally.

 

Why not just save that money or enjoy life!.. Some people also give a nice example of how they can save up the premiums each year and if after 10 yrs, there is some hospitalization, they can use the money to pay the bills.

 

This is exactly how millions of investors feel and that’s one reason why insurance penetration is so low in our country. I am sure you must have met someone in your office or in your family who just reject the idea of taking the health insurance, because “Company ka cover to hai na” types of remarks

 

I see two big reasons why many people think this way!

 

Reason #1 – Transactional Benefit Mentality

 

A lot of people have a transactional benefit mentality, where they want to get some tangible benefit the moment they pay.

 

• Like you pay for a movie, and you watch it.
• You pay for apples, and you get it.
• You buy a TV on Amazon, and it gets delivered!

 

What do you get when you pay your health insurance premium? What do you get?

 

A PROMISE!!

 

That’s all, a promise that your medical bills will be taken care of in the future, only if it arises?

 

It’s very hard for these people to see benefits in terms of probabilities and future possibilities. It’s all about a short-term mindset and no ability to visualize the future.

 

This is even true for many investors who buy health insurance premiums, but eventually, they let expire the policy because they feel frustrated looking at their premiums go waste!

 

Reason #2 – Fake confidence of “Nothing will happen to me”

 

I don’t know how some people have this super confidence in themselves that “nothing will happen to me”

 

People don’t say it, but many people truly believe that there are fewer chances of anything bad happening to THEM.. It all happens to others.

 

I have lost one of my close friends and one more known person to COVID in the last 12 months, both below 40 yrs!. I was also admitted to the hospital in Nov 2020 as I was having cough and breathing issues. Both the people who died in Covid got admitted the same way with minor issues at first, and then it got worse and finally, they died.

 

I survived.

 

Remember that a person who dies in an accident or gets cancer has the same “Nothing will happen to me” kind of confidence 5 min before the event happens. We are all like that.

 

I feel it’s nothing but a lack of maturity and a bit idiotic to think that nothing will happen to me or my family because “we are careful”.

 

If you are careful, it’s just that the chances of something bad happening to you reduces a bit. That’s all, it does not get eliminated. Don’t live in the imaginary world.

 

Premiums are wasted if nothing happens?

 

It’s foolish to think that premiums get wasted if nothing happens to you.

 

• When you wear a mask, is it a waste if you didn’t catch COVID?

• Was the helmet a waste if you didn’t meet the accident?

 

What about the protection it provided you and you had that peace of mind?

 

In fact, the best thing is that your health insurance goes WASTE!.. I have tweeted the same some time back

 

3 levels of risks

 

In any area of life, you have various levels of risk.

 

You either accept the risk, reduce the risk or transfer the risk!

 

Health insurance is all about transferring the risk of very big hospital bills to insurers by choosing to pay a premium each year. If someone does not want to pay the premium, it means that they are accepting the risk that someday they may have to shell out a big sum of money for medical reasons.

 

And sometimes it can run into such a big amount that it can wipe out your years of effort. Sometimes you may get a disease that may require multiple or regular hospitalizations and it can really be crippling to your financial life.

 

So it’s up to you to decide if you want to accept these big risks or transfer them to the insurer (The cost part)

 

 

Is company cover enough?

 

I have already said this multiple times.

 

A company cover many times is not a full replacement for full-fledged health insurance which you buy yourself. At best you shall see the employer cover as a complimentary benefit because it can go away anytime. You also don’t know if it’s sufficient for you or not? And the worst, you cant depend on it after retirement, when you will need it the most!

 

Source: Jagoinvestor

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New-age wealth management: Personalised, tech-enabled and agile

 

“The only constant in life is change” – Heraclitus.

 

If there is anything that the current environment has taught us, it is that change is inevitable and often, unexpected. At the same time, it has underscored the importance of being agile and future ready. For the wealth management industry, winds of change had already started blowing, taking the industry towards a more technology-enabled future. In the last few years, technology has driven many changes across various sectors. Digitally-powered solutions and digital interactions are changing the way companies work and provide services.

 

Besides the technological changes, wealth management firms are doing well to keep up with the changing needs and attitudes of investors. The attitudes of investors across different age groups and their expectations from wealth managers is currently undergoing a transformation. Add to that, the complexity of the economic environment and the need to stay tethered to the traditional values of trust and transparency.

 

Let’s dwell into some of the paradigm shifts taking place in the wealth management industry:

 

New generation of investors

 

A huge amount of global wealth is currently changing hands from the previous generation to the new generation. Shaped by dissimilar experiences and brought up in a different environment, the new generation of investors has markedly different expectations from their wealth managers when compared to the previous generations. They want to be respected and treated as unique individuals. They seek personalised recommendations based on their financial goals and liking. This new breed of investors doesn’t shy away from doing their research before investing in any investment option. They also discuss investment options with their friends and colleagues and are open to their suggestions. While in the past, advisors and wealth managers interacted with their clients through face-to-face meeting and telephonic conversations, the new generation of investors expects their money managers to be available across different channels at any point in time, in demand.

 

Goal-based planning

 

The industry has been witnessing a slow migration from product-based to solution-based offerings. Clients today demand holistic and end-to-end solutions that meet their various wealth related needs. These could range from fund raising for an entrepreneurial venture to creating a sufficient corpus for the child’s foreign education. Instead of providing products or solutions in silos which only meet the one-time needs of the client, wealth managers are undertaking the customer journey along with the clients. This requires assessing the client’s risk profile, understanding her multiple life goals, determining the return requirements, creating an asset allocation strategy that meets these requirements, and continuous monitoring to adjust for changes in the client’s circumstances or the external environment.

 

Embracing digital

 

Digitally-powered solutions are slowly becoming the norm, rather than a competitive advantage. Covid-19 has accelerated the adoption across industries. As individuals increase their digital engagements, the wealth management industry, which was traditionally more of a human touch business has now turned phygital. Technology has the power to transform businesses, elevate interactions and user experience, and create customised solutions that generate high value and client satisfaction. Wealth management companies are now looking at artificial intelligence (AI) and machine learning (ML) powered tools to collect and harness data. This helps wealth managers create personalised solutions for their clients. Digital tools are now being extensively used to enhance reporting, analysis, and client interactions. Technology, if harnessed well, will go a long way in further enhancing the human interactions.

 

Retirement & Legacy Planning

 

Wealth managers serve clients across the wealth spectrum and cater to their multiple needs. One of the biggest concerns that the wealthiest clients have is whether they will outlive their assets. This is now becoming increasingly complex due to longer life expectancies. the increasing cost of medical care, and concerns over the value of their assets. At the same time, many wealthy individuals wish to have a proper plan in place to pass on their wealth to the next generation. To effectively meet these requirements, wealth managers are engaging with clients early on, to balance their short and long-term financial goals.

 

The wealth management industry is witnessing several changes. These changes will inevitably make it easier for investors across different age groups to invest and fulfil their financial goals. Yet, some things remain the same—like staying agile, adapting to new imperatives and ensuring trust, transparency and client-centricity are not compromised.

 

Source: Forbes India

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How do SIP’s work in a Smallcase?

Risk appetite and risk tolerance are one of the most important criteria in selecting investments. Let’s look at how to match them in Smallcases.

 

How do SIPs work in a Smallcase?

 

Well, the answer would depend on who you ask. If you ask an expert stock investor who understands the technicalities of the stock market, can do extensive research, and then pick the right stocks, the answer would be the former. However, ask other investors who don’t have such hands-on knowledge of the stock market and the latter would be the most preferred choice.

 

Most investors fall in the second category, and so, for them, Smallcases prove to be ideal investment avenues. A Smallcase is a readymade portfolio of stocks and ETFs that follows a specific theme or investment idea. Most are handcrafted carefully by astute fund managers and Sebi-registered investment advisors. For example, the Deeva Ventures Flagship is a Smallcase that consists of 15-20 handpicked stocks from the Nifty 500 index. Similarly, Deeva Ventures’s Multiplier Smallcase consists of small and mid-cap stocks that have the potential to deliver exponential returns.

 

Smallcases, thus, help you invest in a well-researched portfolio of stocks to earn better risk-adjusted returns. They are also constantly monitored by experienced analysts so that the portfolio can be recalibrated with changing market dynamics. This ensures that your investment stays relevant in all market conditions.

 

Investing in Smallcase

When it comes to investing in a Smallcase, there may be a minimum investment amount that depends on the Smallcase that you pick. This further changes with the market as the cost of one share of each stock or ETF that comprise the Smallcase changes. For instance, Deeva Ventures’s Multiplier Smallcase required a minimum investment of Rs.46,987, while the Flagship Smallcase required Rs.24,676 when we compiled this article. Check out their prices now.

 

There is no maximum limit to investment or the number of smallcases you may hold. You can invest in a Smallcase in a lump sum or in regular installments through SIPs (Systematic Investment Plans).

 

However, entry into SIP-based investments in Smallcases is slightly differently structured from SIP investment in mutual funds. Both, nonetheless, allow you to invest affordably and create a disciplined investing habit that may serve you well in the long term.

 

How SIP investing works in Smallcase?

 

Before we get into how SIPs function in Smallcases, note that Smallcases are a basket of stocks and ETFs with dynamic price movements. And unlike mutual funds that permit one to buy partial shares, investors need to purchase full units of the stocks. That is, if a Smallcase portfolio has stocks of 10 companies with 10 units of shares each (equal-weighted), the investor will need to purchase all the 10 stocks at the price of the day, even though he need not purchase them in the same weightage (no compulsion to buy 100 shares). The minimum investment amount is thus dynamic in nature and updated in real-time, in line with the daily price movement of the underlying assets.

 

So, the first investment in a Smallcase needs to compulsorily be a lump sum investment that adheres to the minimum investment requirement for most Smallcases. You may thereafter activate a SIP in it for no additional charges. This means that a SIP in Smallcase is possible only in Smallcases that you have purchased and subscribed to.

 

The first investment amount, called the Minimum First Investment Amount, is the least amount required to invest in all the stocks of the selected smallcase as per the weights.

 

Once added to your portfolio, you can then proceed to establish a SIP in it. Note here that your SIP amount will be different from your Minimum First Investment Amount.

 

According to Smallcase, you can start a SIP for an amount less than the minimum investment amount for the smallcase, if the minimum investment amount is more than Rs 10,000.

 

Of course, the SIP amount is less than or equal to the minimum investment amount in Smallcases where the minimum investment amount is less than Rs 10,000.

 

The SIP frequency, on the other hand, depends on the Smallcase that you choose. Almost all Smallcases allow monthly SIPs, while some schemes, like Deeva Ventures’s Smallcases also allow weekly, quarterly and annual SIPs for easy investments.

 

Another point of difference with mutual fund SIPs is that when you set up a SIP in Smallcases, you essentially set up only an investment reminder. Your investment is not really automated. You simply get a reminder to invest in the SIP instalment. That said, Smallcase facilitates a 2-click process to invest in further SIPs.

 

Why are SIPs beneficial?

 

SIPs are a beneficial way of investing in Smallcases. Here are the reasons why –

 

• They are affordable

The primary reason that makes SIPs favourable is their affordability. With SIPs you can invest in the desired Smallcase without feeling a pocket pinch or disturbing your budget. It allows you to invest in small and affordable amounts, regularly, and still create a sizable portfolio of stocks.

 

• You don’t have to wait for the right time to invest

Investing in the stock market is all about picking the right time to enter so that you can buy low and sell high. Picking the right time is, in effect, a challenging task. You need to monitor the markets closely and speculate on the time when the prices fall so that you can enter.

 

• Do you have the time and know-how for the same?

 

With SIPs, you don’t have to time the market. You can invest at predefined intervals without hassling over the right time.

 

• If you invest with a long-term horizon, compounding grows your corpus

Long-term horizons can do wonders for your investment. You can cash in on the benefit of compounding, which helps multiply the returns that you can earn. With SIPs, as you invest affordably if you give your investment time, you can accumulate a considerable corpus for your financial goals through the power of compounding.

 

• Get the benefit of rupee-cost averaging

SIPs give you the benefit of rupee cost averaging. In rupee cost averaging, the effective value of periodic investments is neutralised, positively impacting your overall cost of investment. When you invest in SIPs, you invest at different times and at different rates. The aggregate rate, then, gets averaged out. In falling markets, you end up buying more, and in rallying markets, you tend to buy less. These two purchases balance each other out, and the investment becomes more cost-efficient.

 

• Invest in a disciplined manner

SIPs inculcate a disciplined investment approach. Imagine getting reminded at periodic intervals to invest!

 

With SIPs, you can regularly invest, without fail, so that your modest investments accumulate to a sizable corpus that helps you fulfill your financial goals.

 

SIPs, thus, are quite beneficial and help you invest in the desired Smallcase without worrying about its affordability. You can also continue to opt for multiple SIPs in multiple Smallcase portfolios so that you can diversify your investments.

 

Some things to keep in mind about SIPs

 Deeva Ventures

• While SIPs allow ease of investing in Smallcases, here are a few points that you should keep in mind-

 

 

• Starting a SIP in a preferred Smallcase portfolio is quite easy. You can invest online and click on the option of SIP when investing.

 

• You only get an investment reminder on the SIP due date, and you have to invest manually. Some brokers, however, are automating the SIP investment wherein the amount gets debited from the registered bank account and is invested in the portfolio.

 

• The minimum SIP amount depends on the Smallcase that you choose. It is not uniform.

 

• You can stop the SIP at your discretion. There is no lock-in period

 

The bottom line

 

Understand what SIP investment is all about in the context of Smallcases. Know how it works and how you can start your very own SIP. Choose a profitable and consistently performing Smallcase and start a SIP to get the maximum benefits that SIP investments can provide. You can check out Deeva Ventures’s Smallcases that have a good portfolio and can help you create a corpus worthy of your financial goals.

 

Source: Tejimandi

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Why Direct Stock Investors Should Invest in smallcases

If there is one thing that can be said about direct stock investors, it is that they are certainly not averse to risks. Someone who invests directly in stocks does so with the understanding that the stock markets are going to be volatile. There will be bad days along with the good days, but as long as the good ones outnumber the bad ones, the investor would consider himself or herself to be successful.

 

Direct stock investors embrace market volatility and take investment decisions based on these ups and downs. But there are a number of reasons why direct stock investors would also benefit by investing in smallcases.

 

Portfolio-based investing

 

Investing in a portfolio of stocks has proven to be more beneficial than investing in 1 or 2 stocks. A portfolio allows you to diversify across market segments and capitalizations. Not only do you benefit from the upside in different stocks, but a portfolio also allows you to stay protected from the downside in a particular stock.

 

Investing in readymade themes & strategies

 

Direct stock investors follow the news and purchase stocks of companies that they believe will do well. This can easily be done when investing in individual stocks, but not when an investor is following a theme or an investing strategy. After all, tracking news & updates for more than 10-15 stocks is time-consuming. A smallcase will allow you to invest in ready-made themes & investing strategies that have been created by SEBI licensed professionals. For example, if you want to invest in companies that own brands which India loves, we have the Brand Value smallcase.

 

Research and analysis by experts

 

One of the biggest hurdles for stock investors is taking the time and effort out to research stocks. Fundamental analysis of companies is an important step before buying its stocks. This, of course, is not easy to do and can take away a lot of the investor’s resources. But not if you invest in a smallcase. The hard work is done for you by the smallcase team of researchers and analysts. The stocks in every smallcase pass our stringent proprietary filters so that investors don’t have to worry about making the individual choices.

 

Investing in smallcases comes with many other benefits. They are transparent, customisable and straight-forward.

 

smallcases come in different types–thematic/sectoral, strategy-based, asset-allocation based, and those based on smart beta. Check them out and begin investing in the ideas you believe in. And if you still haven’t found a smallcase that’s right for you, remember that you can always create one yourself very easily! Add the stocks that you have in mind, see a simple-backtest before investing, and then conveniently buy/sell all stocks in 1-click – learn more about the create a smallcase feature here.

 
Source: SmallCase

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Dos and Don’ts of investing in smallcases?

Tips to stay on track with your smallcase investments

 

👍 Do’s

 

Start SIP: SIPs are great for long-term goals. You can start a SIP while investing in a smallcase, or anytime later after investing

 

Track News & Dividends: Every smallcase comes with a performance summary of Index Value, Dividends, News and more

 

Watchlist: If you want to track and monitor the smallcase before investing, you can add it to your Watchlist

 

Rebalance Regularly: Rebalance updates keep your portfolio aligned with the original idea

 

Check Portfolio Health: Portfolio Health Helps you achieve maximum efficiency in your wealth creation journey

 

 

👎 Don’ts

 

Don’t skip SIP or Rebalance updates: Make sure that you always complete your SIP and apply the rebalance updates so that your financial goals remain on track

 

Don’t exit too soon: smallcases are built for long term investing, hence it is ideal to give your portfolios time to perform and grow your wealth

 

Don’t sell stocks directly on your broker platform: For all transactions relating to smallcases transact directly on smallcase platform

 

Don’t invest and forget: Even though smallcases are long-term investments, they should be evaluated periodically to make sure they are on track

 

 

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Is it a good time to invest in Indian equity

The risk-reward of the Indian market has improved and the market is looking more reasonably valued today, than six-nine months back, according to Prashant Jain, executive director and chief investment officer, HDFC AMC. He believes that the near-term outlook for the Indian economy looks steady, and over time, the country’s economic growth has the potential to accelerate meaningfully. The stock market veteran made these observations at a webinar on Mid-Year Review of Indian Economy & Markets.

 

 

According to him, while one may see some moderation in consumption growth, exports and capex recovery should help ensure good growth in the near term. He expects India to be the fastest growing economy in this decade and to emerge as the fifth largest economy before the end of the decade.

 

On interest rates, he feels that what we are experiencing is normalization of abnormally low interest rates prevalent over the last few years. The sharp pace at which the US yields have moved up has surprised everyone. But, he feels, in India, because interest rates did not fall as much as in the West, the normalisation too, will not be that sharp. So, this should have less impact.

 

On the topic on how rising inflation will impact the profits of companies, he highlighted how higher inflation may be good for some of the key segments of the Nifty. Roughly one-third of the profits pool of the Nifty comes from banks. Today, two-thirds of bank loan books comprise floating rate loans that will get re-priced once rates start rising. In fact, today, the share of floating rate loans is the highest in Indian banks’ balance sheet than ever before and therefore, the loans will reprice faster than deposits. So, higher inflation, which in turn is leading to higher interest rates will aid the margins profitability of banks, according to Jain. Also, higher inflation is leading to faster credit growth. Added to this, bank NPAs are also extremely low.

 

Further deconstructing the Nifty, Jain pointed that another one-third to one-fourth of the Nifty profits come from commodity-linked companies such as oil and gas, refining, coal and metals. Such companies are benefiting from high commodity prices and also high refining margins. High commodity prices and high inflation go hand in hand and so this segment too is not going to be adversely impacted by inflation, according to him. Apart from that, 15% of the Nifty is in software services and another 5% in pharmaceuticals. This 20% of the market will benefit from rupee depreciation which is likely because of the pressure on the balance of payments given the elevated oil prices and also the strong FII outflows. So, the outlook on this segment too looks quite reasonable.

 

Valuation-wise, Jain highlighted that bank stock multiples are now below long-term averages as this sector bore the biggest brunt of selling by FIIs. He also finds some value in IT stocks after correction in their P/E multiples. On capital goods companies, he feels that while the stock valuations look expensive, their outlook is quite robust. So, the sector may sustain the high multiples because when the cycle of capital spending turns, profit growth could be quite high.

 

He suggests that over the nest 3-6 months, one must invest in phases in equities and take advantage of sharp dips, if any. He, however, adds that one must invest only that money in the market which can be held for a longer period. Today, long-term investors have a good opportunity to buy Indian equity at reasonable valuation as most uncertainties seem to be priced in.

 

Source: Livemint

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FD interest rates on the rise: What should be your investment strategy now?

Fixed deposit (FD) interest rates have significantly dropped during the last three years. Currently, the repo rate is at a historic low of 4%, which has not changed since May 2020. This trend has led investors to search for alternative ways to generate income.

 

Thankfully, there have been small hikes recently in the FD rates of some financial institutions, including the national banks. This hints at the bottoming out of rates and investors need to prepare their strategy to make the most out of this.

 

So, what are the different techniques you may use to invest for higher returns via bank FDs? Let’s look at some options.

 

Short or Medium Terms FDs

 

When the interest rate cycle turns back after bottoming out, it has been noted that short- and medium-term FD interest rates respond quicker to rate change than long-term FDs. Investing in FDs with short or medium-term maturity helps you switch to a higher FD rate. When the rates are expected to go up, you should avoid committing to long-term FDs because you may miss out on the benefit of the rising interest rate. The interest rate may not increase immediately, but it may gradually inch upward. So short-term FDs can keep your FD investments closer to the prevailing interest rate offered by banks, according to Bankbazaar.

 

Floating Rate FDs

 

A few banks are offering floating rate FDs to their customers. The interest rate on floating rate FDs may not look attractive compared to the current fixed rate FDs; however, if the rate increases, the floating rate FDs can easily be a winner. Floating rate FDs can be beneficial if you don’t want to get into the hassle of continuously switching old short-term FDs to higher rate FDs.

 

Diversify New FD Investments Into Bank and Company FDs

 

When interest rates go up, it’s not only banks that increase their FD rates, but the rates of company FDs are also increased. Diversifying your investment into banks and company FDs can be a good option for better average rates. By diversifying FD investment into banks and company FDs, you can ensure higher returns on your investment. Company FDs offer a higher interest rate, but you need to do your diligence before investing your money.

 

Use the FD laddering option

 

FD laddering is an excellent option to ensure a high return on FDs amid the chances of a rise in the interest rate. You can make your own FD laddering strategy by spreading your lumpsum fund into different FDs with multiple maturities.

 

For example, if you want to invest Rs 5 lakh, you can break it into 5 FDs with a maturity period of 1 year, 2 years, and so on up to 5 years. On maturity, you can use the amount if you have a requirement, or you can continue with the existing laddering by reinvesting the matured corpus into a new FD for 5 years. You may choose different banks, companies and the FD amount while creating an FD laddering strategy.

 

When the interest rate is expected to increase gradually, you can shift your corpus to an FD that offers a higher interest rate on each maturity. So, you can ensure a higher return on investment in the long term. If you create an FD laddering by investing money in different banks’ deposit schemes, it can also help you get the insurance benefit of up to Rs 5 lakh in each bank.

 

You must not wait for a rate hike to invest in FDs because it’s not definite when the rate will go up, and there is a chance that it may happen multiple times. So, after each hike, you will get enticed for another rate hike. Until you invest, you’ll lose the return on your corpus. Use these techniques to get the maximum benefit out of your FD investment.

 

Source: financialexpress

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