Raj Khosla, Founder and Managing Director, MyMoneyMantra.com replies, “Small cases are basket of stocks or ETFs, picked by financial experts after thorough research. These stock portfolios are basically thematic investments grouped together to track a sector’s growth. Somewhat akin to mutual funds, it diversifies investors’ risk by picking up a combination of stocks. Investors can choose from readymade small cases or customise their own according to investment strategy. Compared to MFs, buying a small case is cost-effective, as there is no expense ratio, exit load or hidden cost. You only pay a brokerage fee of around 0.3% per transaction. A small case is the new kid on the block. Mutual funds have an established ecosystem wherein thousands of financial planners have been offering investment advice to millions of investors for decades. On the other hand, a small case is constituted in a comparatively smaller capsule size portfolio of a few lakh investors, which is managed by professionals. A new investor should begin with mutual funds only. An existing investor can test waters with a marginal surplus amount. Do not shift your MF corpus to small case. Stick to your allocation and choose 1-2 small cases to diversify.”
I hear mid and small caps are doing well and will continue to do well. What is the best way to start investing in them? Also, which tier should one look at for a 1-year horizon?
Vidya Bala, Co-Founder, PrimeInvestor.in replies, “Mid and small-caps are great wealth builders if chosen right. Else they come with greater risk of capital loss. You should be prepared to take losses not for just one year but even over a 3-year period. Small caps, for instance, fell 60% in 2008. Hence, they cannot be the first option for beginners to invest in. Also, there is no place for 1-year investing in the equity space, leave alone in mid and small caps. If you are new to investing, start with Nifty index funds and add slightly more aggressive indices such as Nifty Next. Use the SIP route.”
