Smallcase provides curated stock and ETF portfolios managed by research analysts and investment advisors. This allows individual investors to take a simple, diversified portfolio-based approach with the help of professionals.
Vasanth Kamath, Founder and CEO of Smallcase, talks to Navneet Dubey of BT Money Today about smallcases and how it leverages its growth along with the presence of online brokerage firms, and much more.
Kamath said, “We work with leading brokerages like Groww, Zerodha, Angel One and 14 other partners so their clients can allocate to smallcases in their portfolios. We also provide infrastructure to wealth apps like ETMoney to enable transactions for their stock and ETF portfolio advisory offerings. Orchestrating an ecosystem of 250+ capital market players offering smallcases in different capacities (across research analysts, RIAs, brokerages and wealth platforms) has been core to our model from day 1.” Edited excerpts:
BT: We’ve seen a surge in younger investors (under 35) using smallcases. Can you elaborate on the investment strategies they prefer (thematic, ESG, etc.) compared to older investors (over 35)?
VK: In the last four years, there has been a sharp rise in the number of new demat accounts opened and this has been fuelled largely by a younger demographic (sub-35) investing into the equity markets for the first time. For this segment, smallcases make for a simple and diversified way to start building their stocks and ETFs portfolio. Their top choices to begin with are ETF-based asset allocation portfolios and dividend strategies. Over time, they diversify with focused smallcases like thematics (green energy, electric mobility, rising rural demand smallcases etc.) and sectoral trackers (banking, realty, infrastructure trackers etc.) compared to investors over 35 opting for more traditional strategies like fundamental, growth, quality, etc.
BT: Both young and old investors are using smallcases for long-term investing. Are there any differences in their holding periods?
VK: Since smallcases are long-term exposures, most investors look at them as buy, hold and SIP instruments. Irrespective of age classifications, over 90% of investors continue holding their smallcases for 2+ years.
BT: Younger investors seem to favour ETFs and multi-cap strategies, while older investors prefer large caps. Is there any reason for this difference?
VK: The investment choices of both younger and older investors are influenced by several factors, including their:
- Risk tolerance
- Investment objectives
- Investment duration
- and familiarity with various investment opportunities
Generally, younger investors tend to lean towards ETFs and multi-cap strategies because of their potential for growth and diversification advantages. On the other hand, older investors may be more inclined towards large-cap stocks due to their stability and potential for generating income.
BT: With younger investors favouring SIPs (systematic investment plans) over lumpsums, is there a specific type of smallcase preferred for SIP investments (e.g., asset allocation)?
VK: According to our data, asset allocation smallcases are the most preferred for SIPs in the under 35 category with 60% opting for them.
The following are the most popular smallcases SIPs:
- All Weather Investing
- Equity and Gold
- Green Energy
- Value and Momentum
- Top 100 Stocks
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BT: Future Focus: What are your key areas of focus for the next financial year?
VK: Our focus in 2024 will be on continuing to expand the offering set to make smallcase a multi-asset platform. We will soon launch mutual funds, which can enable more use cases like debt and tax savings with smallcases. We have also received a lot of interest from our users in introducing fixed-income assets in the smallcase format.
More broadly, we also want users to look at their portfolio in terms of their overall net worth, so they can make more informed decisions about their allocations and choices within their assets and liabilities. We will be launching more tools towards this in the later part of the year.
BT: Platform Growth: Can you share any insights on the volume of transactions on your platform (monthly, quarterly, or YoY basis)?
VK: Investors have continued increasing their allocations to smallcases, transacting over Rs 30,000 crore this year (a growth of 50% YoY)