Is Smallcase Rebalance burning a hole in your pocket?


#21

Yes i agree that rebalancing in 3 months intervals is too much frequent and it will incur losses as some stocks need atleast 4 to 8 quarters to show its performance. I also was very critic to the inclusion of some stocks(e.g. Graphite India in magic formula) which I found not suitable for the said smallcase, still I didn’t get a proper response from the team/management. Anyway my unique usage of smallcases really benefited me.


#22

Hi @sabyasachi_sadhu
Could you please elaborate on this if this is something not personal to you.Are you saying not to rebalance every quarter to see best results.From my experience in 1.5 years with small case Started in Feb 2017 till Nov 2018 for one of the small case I saw 20 per loss with all rebalances done.


#23

Also not to forget, in your case when you rebalanced, not only it was a realized loss of your invested amount, you were also asked to put in more money as well.

Realized loss (during rebalance) + Putting in more money = Much more loss.

Inviting @nithin @Anugrah @vasanth_kamath @smallcase team to join the party.


#24

@rupeshmandal

I m afraid you are not going to get what you want.

The real reason why smallcases don’t work is they have no clue how to manage a portfolio. It takes more than just returns to manage a portfolio of stocks.

Small case is a very very stupid idea to begin with. Stick with traditional investing.

you are better off investing in index funds or any of the Good MF.


#25

How do you say this?

I have 80% of my investments in mid and small caps. While index benchmarks are down a good 15-20% , my funds are down 7-8% and i have bought a good chunk when the markets where at an all time high.

EVERY Indian portfolio be it retail or institution is down by atleast 5% or more. We are in a correction. It affects everyone, some more than other due to various factors.

It doesn’t matter if its a smallcase or MF portfolio.


#26

DP charges kills in smallcase re-balance… if 10 stocks are sold, u pay Rs. 159.3 upfront there itself…


#27

I wonder why you guys are so much worried. In markets you need patience else you should not invest in equity. Before getting into any product - smallcase or anything else you must research well before getting into it. Now that you guys have taken a dip into a waterless pond learn how to come out as you cannot swim !! (just a joke)…Note that your own backtested strategy can only get you success…


#28

This is not a crib against market loss whether you are able to digest market loss or no.
I sincerely, request you to patiently read all the comments above before arriving at a conclusion.

We are asking some genuine questions regarding how the smallcase product has been designed as a financial instrument. The flaws in the product - Rebalance causing intraday (without knowledge and intent of the investor), Accountability of who is managing the smallcase (compared to a find manager of Mutual Funds). What are the research backing for rebalance. And many others issues.

I hope you would look at this thread from a different perspective once you have read all the comments.


#29

I’ve written only after having read all comments. As i’ve stated you must not invest in any product before asking these basic questions upfront. Now that you’ve jumped into this investment you have to see how to manage it. In my opinion, the best thing would be to just call the expert/support team.


#30

Rebalance causing intraday was discovered by me when I was scanning through my ledger. A customer doesn’t know about such technical flaws while signing up. Am I wrong?

They have accepted that it is a flaw in the system and they promised to get it resolved which has not happened yet even after 6 months.


#31

you are absolutely right mate !


#32

Below I have tried to address different concerns raised in this thread

  1. Why benchmark for all smallcases is Nifty?
    It is not. Every smallcase has its own benchmark. Example of a smallcase with NIFTY Smallcap as benchmark. Example of a smallcase with Nifty Midcap as benchmark. You can check the benchmark information in the Past Performance section of a smallcase. It is available for every single smallcase

  2. Why No information provided for parameters like Volatility?
    This is also not true. With every smallcase, we show a risk label. You can check the same for the smallcases that I have shared in the above point. You can also see the same in the image below

    Also, happy to share the algorithm used to calculate these risk labels, if someone wants to have a look.

  3. Who are maintaining these smallcases?
    There is a dedicated team of SEBI licensed research analysts who are maintaining smallcases created by smallcase Research. On every smallcase page, we show the organization who has created that particular smallcase. This information is available just below the methodology. The research team at smallcase directly reports to me. So it is I who’s neck is on the line. The research analysts comes from reputed institutions like IIT and IIMs after working in various multinational organizations and Investment Banks.
    Someone also mentioned about smallcases available on HDFC, Axis and Edelweiss. On these platform, their research teams are also creating smallcases. And by looking at the creator info, anyone can easily identify who has created a particular smallcase. On Zerodha, all the smallcases are created by my research team

  4. Product is built with a trader mentality
    The whole product is created with an objective to promote long term equity investing. Majority of the themes available on the platform are long term in nature. Also, someone pointed that all the products offered by Zerodha are trader focused. It is really difficult for me to understand how a product like coin or smallcase is trader focused

  5. Quarterly rebalancing
    A smallcase needs to be looked like an Index. For example NIFTY 50 is a portfolio of top 50 market cap stocks. The index is rebalanced every 6 months - some stocks come in, some stocks go out. A smallcase like Dividend Aristocrat is a portfolio of stocks who have been increasing dividends consistently for last 10 years. The smallcase is rebalanced every year, where some stocks come in some go out.
    Different smallcases have different rebalancing schedule. There are many smallcases on the platform which have an yearly rebalancing schedule. Few examples - Dividend - Smart Beta, Quality - Smart Beta, Zero Debt
    Also, the biggest index manufacturers in the world like MSCI follow quarterly rebalancing. We follow quarterly rebalancing for smallcases where model parameters depend on the quarterly numbers announced by the company. And as someone pointed out, at every rebalance the user is in full control to apply or skip.

  6. Rebalance all feature
    This is something which I have already told in this thread that we intend to implement. Yes, we haven’t implemented it yet as promised, because of two reasons - the technical complexity involved is much more than initially anticipated and the problem is faced by very limited set of users. Also, the decision to not implement this feature has got nothing to do with prioritizing revenue generating features first. If that was the case, we would have picked this up first, as users have pointed out in this thread itself that they are willing to pay extra money for this.

  7. Executing your own startegy
    smallcases is all about investing in ideas and tracking these ideas individually. We offer some ready made ideas on the platform, but users are free to create their own and invest in them on the platform. We have a dedicated create section for this. We even have a tool screener tool - which can help you achieve this. You can build your own screens and invest directly into them as smallcases.
    We are also partnering with different research creators like brokers, AMCs, IAs to enable people invest in their ideas as smallcases. Soon all of this would also be available on the platform.


#33

Thanks for replying. Read the benefits of MF over smallcase at the cost of 1% TER.
TER of smallcase is UNKNOWN.


#34

What is you response to this @Anugrah?

What is your responsibility if i may or may not apply a rebalance? I mean what kind of action it is. So you would go to a doctor, you pay for his OPD charges, and he prescribes medicine. Now doctor says you may or may not take it. Is it so?

In mutual fund, you invest 5k and I invest 50k on the same day, for a particular period, we would have same return. In smallcase if things are so upto the user rebalances are not compulsory, and when on what basis you are writing on the website that this smallcase has given so much return (have you mentioned on the website which rebalance it skipped while calculating, or was it that all rebalances were done).

If you read the comments above, we are all talking about religiously applying rebalances as prescribed by you and still facing erosion of capital.

After watching smallcase for a year I am saying now that I am not confident about the product and strongly advise people to invest in index fund or ETF instead of smallcase.

Prove me wrong if you disagree.


#35

In this screenshot, the CAGR snd 1 year returns are mentioned for this smallcase.

Can you answer my simple questions -

  1. So which rebalance was applied and which one skipped? Or all rebalances were applied?

If your answer is yes all rebalances were applied then please for god sake stop saying this:-

Because you can’t say flexibility to rebalance and 1 year return is this much in a single breath. These are two separate things. When people see this much return, they would blindly follow the rebalances you recommend every quarter. Because they would think if they don’t apply the rebalance, the returns might be different. Again, I would give the example of doctor giving you medicine. You will eat because doctor has said so. He won’t experiment saying i would skip medicine and do better. Hope you undetstand the communication.

  1. What was the fund amount invested (initial capital) a year back basis which you derived 1 year return is this much.

  2. What is the TER for this 1 year? Was any fresh investment was fused in during the rebalances? Were they accounted for while calculating loss/ gain?

Look forward to hear from you.


#36

Parag parikh fund is also good


#37

@rupeshmandal

you have made your point.

Small cases are worthless.

Lets all move on…


#38

After reading most of the comments I am feeling that smallcase may be not for everyone, in mutual fund we all are giving our money to a third person to handle(he may be churning as a same way as a smallcase or may be relied upon long term investment, who knows?), here is the problem with smallcase is that beside relying upon the smallcase team you too have to use your brain to get benefit from the smallcases. If you read the books by William O’Neil (CANSLIMESQUE) or Joel Greenblatt (MAGIC FORMULA) you will understand how to use those smallcases for best results.


#39

Yes, agree ! always use your intelligence in the market & don’t just rely on what is provided out of the box.


#40

Answering the additional queries raised in the thread

  1. smallcase pricing being not transparent or known
    Again not true. We are very upfront on pricing. You can check the complete pricing here Let me give few examples -
    Investing in Dividend Aristocrat which is rebalanced annually - you will pay Rs 100 over and above normal trading charges paid by you to buy stocks on the Zerodha platform. No more smallcase charges for life. At the end of the year when you rebalance, again only usual trading charges will be applicable.
    If you would have invested Rs 1 lac in a similar direct mutual fund with 1-1.5% expense ration. You would be paying Rs 1000-1500 on an yearly basis. Thus, the pricing is much cheaper and more transparent.

  2. Short term profit and tax
    If you don’t want to get in a scenario where short term profit or loss is generated with smallcase. You can go for smallcases which are rebalanced on a yearly basis. I gave few examples in my last post also. You can reach out to our support to get the full list. We have all sorts of users - people who want no rebalancing, who want annual, who want quarterly or some even want monthly. We have all sorts of smallcases. You need to pick what suits your requirement.

  3. Loss harvesting opportunities
    Given the full control is with the users in smallcase. Saying that their are better loss harvesting opportunities with MFs than smallcases is lack of product knowledge. Users have full control at every point and thus can plan it however they want.

  4. Doctor example quoted
    It is completely out of context. Every smallcase is a different product. Just the way every Mutual Fund is not suitable for everyone, every smallcase might not be suitable for everyone. In the example user says that the doctor prescribes the medicine - where do on the platform we suggest that out of our collection of 70 smallcases this is the best smallcase for you. We have present a list of different investment ideas and strategies. User picks the one that suits his or her requirement - by self assessment or talking to investment advisor or through some other means, and execute it in a manner suitable for him.

  5. Amount used to calculate returns
    Returns remain the same irrespective of the amount and is calculated using all rebalances for that particular smallcase.

  6. Fresh investment required during rebalacing
    Every smallcase has a minimum investment amount - this is a function of stock prices and their weights and is necessary because one can not buy fractional units of stocks. If minimum investment amount of a smallcase is Rs 3000 and user invests the same amount. At the time of rebalancing, if the minimums investment amount increases to 4000 - because the list of stocks and weights got changed, user would be asked to invest Rs 1000 more. But in the same scenarios if user would have invested Rs 10000 in the smllcase, no fresh investment would have been required at the time of rebalance

For more details about any specific question or queries please feel free to reach out to our support