Thread by @typename_nish

#smallcase overview and product reviews

Overview-
It's a company(@smallcaseHQ) offering a product(smallcase) to invest in a basket of stocks with a single click. The basket can be managed by self or a professional. In short an alternative to mutual funds (MF)

1/20

Similarity with MFs - Investing in a basket of stocks managed by a professional
Differences with MFs - In a MF, all transactions are done by professional and hence taxation on end-user is based on how long they invest.

2/20

However with smallcase, transactions are initiated by end-user, though following professional advice. Thus taxation is not just dependent on how long the user invest but also depends on how frequent the professional updates the basket.


3/20

In MFs, if one invests 100 Rs for 10 years and it grows to 405 Rs (15% CAGR), user pays a long term tax of 30.5 Rs (10%) once on withdrawal . So net final amount after tax would be 375 Rs

4/20

On the other hand, 100 Rs invested in a smallcase with updates within a year, and a growth of 15% return every year, user pays an approx of 2.25, 2.58, 3, 3.4, 4, 4.5, 5.2, 6, 6.8, and 8 Rs as tax (15%) each year for the 10 years, totalling 45.7 Rs.

5/20

Thus the net final amount after tax would be approx 325 Rs (Yearly compounding after deduction of tax) . On top of this, the professional might or might not charge a fee. Mostly I have seen a fixed fee. Thus for a large corpus it can easily be brought below 1% every year.

6/20

MFs too charge a fee, mostly in the range of 1.5% to 2.5%, but the published CAGR generally includes that cost.

So a smallcases generating slightly higher return than MFs are comparable to MFs in terms of net return to end user.

7/20

Having said that, I do see enough smallcases generating more return than the best MFs. There are exceptions on both sides though

8/20

Feedback to
@smallcaseHQ - There is no way to compare performance metrics of all products by all professionals, like how moneycontrol or valueresearch does for MFs. There is no sorting by CAGR either. There is no display of drawdown metrics. Please consider adding them.

9/20

Review of smallcases -

I have picked 1 best smallcase per professional

Criteria
✅ Atleast 4 yrs of live or backtest data
✅ Annual fee < 30k
✅ CAGR > approx 30%
✅ Approx < 25% drawdown (intermediate max drop in value)
✅ Smaller drawdown prioritized over higher CAGR

10/20

Return should always be talked in terms of risk adjusted returns. A portfolio giving 5x return over 5 years with a 80% drawdown is very volatile compared to another portfolio which gives 2x return over 5 years with 20% drawdown.

11/20

Its important because past performance might or might not repeat. Hence if a portfolio with 80% drawdown never recovers, users will be at a larger loss than one with just 20% drawdown.
Capital preservation should be the primary goal and returns should a secondary goal.

12/20

Below are few best smallcases with the above mentioned criteria

Speciality Chemicals by Windmill capital (subsidiary of @smallcaseHQ )
Drawdown : aprpx 14%
CAGR(6+ yrs) : approx 34%
Fee : Free

Link: smallcase.com/smallcase/spec…

13/20

NT_Retirement_25 by NiftyTeam
Drawdown : approx 13%
CAGR(4 yrs) : approx 37%
Fee : 6.9k Annually

Link: niftyteam.smallcase.com/smallcase/NITE…

14/20

MI_MT_AllCap by @WeekendInvestng
Drawdown : approx 18%
CAGR (4+ yrs) : approx 37%

Fee : 10k Annually

Link: weekendinvesting.smallcase.com/smallcase/WKIM…

15/20

High Quality Companies by @PrescientCapit1
Drawdown : approx 19%
CAGR(5+ yrs) : approx 37%
Fee : 12k Annually

Link: prescientcap.smallcase.com/smallcase/PCRN…

16/20

CapitalMind Momentum by @capitalmind_in
Drawdown : approx 19%
CAGR(4 yrs) : approx 33%
Fee : 12k Annually

Link: capitalmind.smallcase.com/smallcase/CMMO…

17/20

Estee Long Alpha Lite (Gear 3) by Estee
Drawdown : approx 12%
CAGR(4 yrs) : approx 30%
Fee : Free

Link: estee.smallcase.com/smallcase/ESTM…

18/20

Emerging Dominators plus by @PiperSerica
Drawdown : approx 21%
CAGR(4 yrs) : approx 30%
Fee : 2.5% of total asset Annually

Link: piperserica.smallcase.com/smallcase/PSRN…

19/20

Aggressive by Qovar Advissors
Drawdown : aprpox 24%
CAGR(6+ yrs ) : approx 32%
Fee : 16k Annually

Link: qovar.smallcase.com/smallcase/QOVM…

20/20

Wright Momentum by @ResearchWright
Drawdown : approx 18%
CAGR(6+ yrs) : approx 33%
Fee : 2k annually

Link: wrightresearch.smallcase.com/smallcase/WRTN…

Note that some have considerable back-test data. But since this platform is just picking up, can't help but wait. Please look at the respective links for details on what % is backtested data.