Good Morning [%first_name |Dear Reader%],

I’m one of the many investors who entered the stock market during the peak of Covid, when it was soaring to new heights. Stock trading—and the sumptuous rewards it apparently offered—kept popping up on my feed everywhere. I got added to Whatsapp and Telegram groups that shared trading tips every other day. 

Most of us got burned trading, though. So eventually, I moved on to “safer” investments. I scoured the internet for stock recommendations, for multibaggers hiding in plain sight. But to be honest, I didn’t really know what I was looking for, or why one stock being recommended was better than the other. My bets remained assorted and erratic, my strategy non-existent. Which is why I remember so clearly the first time I had a coherent thesis for an investment. 

One of my friends had recommended I buy some sugar company stocks. The government, he said, has been pushing for ethanol-blending for a while, and these companies seemed poised to cash in. I doubt he did anything more than follow the news to make the recommendation, but it was still better than the reasoning for any of my other investments until then. 

I came across fintech firm Smallcase not long after, and what it offered was something very similar to what my friend had done, though Smallcase did it quite a bit better. It offered thematic portfolios—curated stocks bundled with a narrative (or, more accurately, a theme) and a rationale for why it would work as an investment. It also told you when to adjust your strategy, how to reposition your holdings, and allowed you to tweak your portfolio. That made investing through it seem far more appealing than investing in a mutual fund. 

But with all the market volatility and uncertainty lately, and an increasing number of mutual funds trying to take a leaf out of Smallcase’s book and creating similar bundles, can Smallcase really maintain its relevance and uniqueness in the market? 

That’s one of the questions Two by Two hosts Praveen Gopal Krishnan and Rohin Dharmakumar began the latest episode with, before heading into the larger DIY investing space and its many challenges and opportunities. Joining them for the discussion were Bhavesh Sanghvi, CEO of Growthfiniti Wealth, and Nirav Karkera, head of research at Fisdom.

Two By Two • EPISODE 44

Can Smallcase maintain its relevance in a changing market?

The do-it-yourself platform has faced the heat from an old challenger

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And as in almost every online marketplace, merit alone won’t get you to the top—you have to pay your way to climb up. This is important to Smallcase because it makes much of its revenue from money managers who list their thematic baskets and subscriptions for investors, as my colleague Archishma reported in her recent story.

As I mentioned earlier, subscriptions are the norm on Smallcase. I have had an account for a while, but never actually invested through it. While there were some low-risk thematic baskets available for free, the majority came with both a subscription fee and a minimum investment amount that I simply couldn’t afford up front. I was also unsure about how much the fees would eat into my potential returns, and was leery of paying capital gains tax every time stocks within the basket were sold.  

That’s a significant amount for most investors. And when you factor in the uncertainties and higher expenses, Smallcase can start looking less attractive than it first did, especially when you consider there are mutual funds that offer similar flexibility now. 

For a deeper dive into the opportunities and pitfalls in front of Smallcase, tune into the full discussion here. Also, do write to [email protected] with your thoughts and suggestions, or leave a comment on our website edition.

Regards,
Hari Krishna

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