Smallcase vs Mutual Funds Key Differences

1. Smallcase vs Mutual Funds: Key Differences Mutual funds and Smallcases are the two asset structures in contention, and we will 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 are 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 will compare them over the course of this article to understand the fundamental difference between Smallcase and mutual funds. What are 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).

2. What is a Smallcase? 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 wealth, 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. A Smallcase is a basket of stocks or ETFs, decisively created by the top qualified Registered Investment Advisors (RIAs) in India, based upon a theme, strategy, or objective. David vs Goliath: A legacy David vs Goliath: A legacy product vs a promising challenger 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 Smallcase vs Mutual Funds: Points of Comparison 1. Exercise Control 2. Risk Mitigation Mechanisms 3. Cost of Leaving 4. Management Fee 5. Access to Returns 6. Volatility Read more about smallcase vs mutual fund smallcase vs mutual fund