Indian women form 48.05% of the total population in India i.e. 1.3 billion with 21% of them participating in the work force. Though the participation of women in the workforce is low, more women have opened demat accounts and are actively taking interest in both investments and trading. The number of women participating in the stock market is under 20-25% but they still have a long way to go and can possibly explore small cases which is an emerging investment avenue providing both features of mutual funds and portfolio management services (PMS) affordably. SEBI registered advisors such as Capital Mind (Deepak Shenoy), Emkay, Aurum Capital, KR Choksey etc. provide more than 250+ portfolio offerings that invest in a mix of asset classes such as stocks/ETFs/Gold/Debt based on a theme, idea or strategy. It helps investors build long-term diversified portfolios and these portfolio offerings apply various investment strategies based on momentum, factors, and quantitative methods.

The table below presents a few examples based on different risk categories, asset composition and minimum investment criteria below ₹5000 except (All weather investing).

For example, If Ms. A has no or very little investing experience she can opt for an ‘All weather investing’ portfolio for investors with a low risk appetite and investment that spans across three asset classes such as equity, debt and gold and is suitable for all market conditions. The small case has resulted in a return of 10.65% p.a. on CAGR basis over a 5 year period. This means if you invested ₹100 five years ago in 2017 the small case would have become ₹165.87.

One would ask, what are the benefits under a small case compared to mutual funds (MF)?

In comparison to mutual funds, small cases allow an investor to become an owner of the shares or debt instrument purchased unlike a unit holder status. It also ensures more transparency compared to the monthly portfolio disclosure of mutual funds as an investor knows what shares are held in the portfolio throughout.

Systematic Investment Plan (SIP) and Portfolio rebalancing

Both small case and mutual funds offer SIP mode to investors who want to stay invested, enjoy the magic of compounding and a rupee cost averaging.

How does this small case SIP work?

SIP splits the purchase of shares across a period of time based on the SIP date. On every SIP date, the portfolio manager attempts to purchase shares of companies that have diverged from the ideal portfolio composition. Consider an equal-weighted portfolio with an initial investment of ₹100,000 and monthly SIP of ₹30,000. The number of shares are calculated based on the total amount (Current value of small case portfolio + SIP amount). If the current value of the investment is ₹120,000, the total amount = 120,000+ 30,000 (SIP) =150,000. Based on the portfolio weight and the difference.

In this portfolio, the SIP will result in a purchase of Stock C which has dropped to 15% of the portfolio weight. Subsequently, the same process is followed every month.

Small case portfolio rebalancing requires investor approval and is tricky under small cases as it attracts capital gains tax and brokerage charges when buying or selling shares. Small cases attract brokerage charges and Depository Participant (DP) charges irrespective of the quantity of shares sold or purchased. E.g.: If you purchase or sell eight different company shares, an investor will have to incur (INR.13.5+GST i.e. 18%)*8= ₹127 on both the sale and purchase. Mutual funds present a Total expense ratio (TER) disclosure78 and attract capital gains when an investor sells MF units in the short-term or long-term, where portfolio rebalancing happens at the behest of the fund manager.

Small cases are indeed an affordable investment avenue, where women retail investors can avail portfolio management services from reputed investment advisors, participate in their portfolio rebalancing decisions and own shares and other financial securities.

-Prof. Jaslene Bawa, Assistant Professor - Finance & Accounting.

(Source: https://mintgenie.livemint.com/news/personal-finance/ladies-make-the-most-of-small-case-investments-here-s-how-151646641980314)