Introducing All Weather Investing smallcase

August 1, 2018
Featured, smallcase

Dear Investors,

We hope you’re liking the new smallcases Platform we launched last month. We have introduced a cleaner look with seamless order placing, improved smallcase Profile pages and more

Today, we’re excited to present a unique, first-time concept for India with All Weather Investing – a recession proof way to build long term wealth

Objective behind All Weather Investing

Our goal has been to constantly design & develop investment products that are
  • liquid (enabling you to invest & redeem at the click of a button)
  • low-cost (significantly cheaper in terms of fees compared to alternatives) and
  • provide higher value than found anywhere else

While Equity (stock markets) is undoubtedly the best asset class to invest in for the long term, it becomes difficult for most of us to overlook market fluctuations in the short term and stay invested for the long term

The idea for the All Weather smallcase arose from a need to build an investment product that can be used by investors in all environments–whether the markets are up or down. This smallcase would generate Equity (stock market-like) returns over the long term, but would also significantly reduce fluctuations to provide a smooth wealth creation journey

This is precisely what the All Weather smallcase provides – exposure to Equity, Gold & Fixed Income with low-cost ETFs, rebalanced quarterly to ensure your money is in the right asset class at the right time
Fixed Income ensures a positive, stable return; When the markets are up, Equity generates wealth & when they’re down, Gold provides a cushion to ensure stable returns in the long term

Stable Returns at Lower Risks

To build the All Weather smallcase, our Research team studied many mathematical models and optimizers to build the best algorithm for you to intelligently allocate your money into equities, gold and fixed income. To ensure the smallcase is liquid, we used Exchange Traded Funds (ETFs) to provide this exposure vs stocks, physical gold or fixed deposits

After extensive testing (construction methodology here), we are confident that the All Weather smallcase provides the perfect asset allocation mix for long-term wealth creation
In the last 11 years since its inception, it has generated a post-tax CAGR (yearly rate at which your investment would have grown, if you had invested in 2007) of 10.15%. This is much better than the Nifty CAGR of 7.41%

Post-Tax CAGR –
AWI has outperformed all asset classes in last 11 years, from Jun 2007-Mar 2018

At the same time, we have ensured the volatility for this smallcase is minimal. We have tested the algorithm in different market scenarios, including the 2008 crash, to check the performance of the strategy for more than a decade. The table below shows the performance of the strategy in various periods when the markets crashed

Time Period Nifty Performance (Market) All Weather Performance
Feb 2015 – Feb 2016 -42% -8%
Oct 2010 – Dec 2011 -32% 2%
Jan 2008 – Oct 2008 -75% -22%

Every quarter, our research team runs the algorithm to decide the optimal allocation — how much money should go into equities, gold and fixed income, and you can apply the same allocation with just 2 clicks

How does All Weather stack up against alternatives (FDs, Liquid Funds, Balanced Funds)

FDs & liquid funds give you a fixed return only via fixed income exposure. With All Weather, you get the fixed returns along with equity & gold exposure that work well in both up & down markets

Compared to Balanced Mutual Funds (that provides equity & fixed income only), the smallcase provides gold exposure which acts as a cushion in market crashes, and is much cheaper from an expense ratio perspective (the total expense ratio for all ETFs in the smallcase is ~0.65% vs expense ratio for a Balanced Fund at 1.5-2%)

How to Invest in All Weather

The All Weather smallcase should form the core of your portfolio – a low-cost way to obtain stable returns for the long term. You can also look at how you can take a core-satellite approach, but more on that later

With its low volatility, the All Weather smallcase is ideal for you to hold a large part of your portfolio in. You can invest as much as you like in this smallcase without worrying about market fluctuations

Furthermore, setting up an SIP on this smallcase & rebalancing the smallcase quarterly ensures your money works harder for you

It’s free to try All Weather Investing – no charges for buying or exiting this smallcase. You only pay when you commit – a flat fee of Rs. 50 when you place orders to invest more/SIP in or rebalance/manage this smallcase

Build your core with All Weather Investing today, get started here

Taxes & Zerodha charges apply as usual
Vasanth Kamath

Founder/CEO at smallcase | Changing how India invests

45 comments

  1. NARESH N GADOYA says:

    ELABORATE AND EXPLAIN

    • Hi Naresh, you can check more details here.We’ll be having a video/webinar about this soon. Will ping you the link then

    • Jaswinder Singh says:

      Hi,
      Need to know more about this. Like if Im investing for five years or more then what will be the probable return? Suppose investment is of 1 lack Rs.
      Thanks n regards
      JASWINDER SINGH

      • There’s no fixed returns here Jaswinder, given there’s equity & gold exposure. As explained – the fixed income ETF will give you positive returns through (similar to bank deposits/FD rates). The equity ETFs will generate wealth in up markets, and gold will provide a cushion in down markets. You can expect stable returns over the long term, at much lower risks 🙂 If you check the graph on the smallcase Page for the last 11 years – you can see how less volatile the smallcase performance has been compared to Nifty

    • Mag says:

      I don’t know how to use smallcase, have you introduced any plugins for the existing kite? Please help to use it

      • Hi Mag – you can get started with your Zerodha/Kite credentials here smallcase.zerodha.com – check it out. We have a chat section inside the platform where you can chat with us

  2. Prakash says:

    Sounds good. How to start with it.

  3. Pradeep says:

    Hi Nitin,

    Can this investment used for margin requirement collateral for trading FnO?
    What other option zerodha provides to get some income from dead money sometime to be kept in DP account? like collateral options…

    Regards
    Pradeep

  4. Dhiraj Kumar Singh says:

    Would like to understand more about this.

  5. Vishvesh says:

    Why only reliance etfs are available in that?
    You should provide option of Etfs managed by other AMCs also

  6. Anurag soni says:

    Good

  7. Deepanvita says:

    How about Taxation on the Gains? Is it as per Equity or Debt?

    • Individual ETFs in the AWI smallcase have their own tax implications:

      Equity ETFs (NIFTYBEES, JUNIORBEES) will be taxed like other equity instruments – 15% tax on short-term gains & 10% tax on long-term gains over Rs 1 lakh
      Fixed Income ETF (LIQUIDBEES) does not attract any tax liability, as it only issues dividends
      Gold ETF (GOLDBEES) is also taxed like debt funds or bond ETFs – short-term gains added to income (3 year holding period) taxed at 20% after indexation

  8. ATISH KUMAR GHOSH says:

    Tell me—-min amt/lock-in period/entry and exit charges and its difference in comparison with liquid Fund investment,all incidental charges as well as return pattern

    • Hi Atish, the minimum amount is Rs. 5753, keeps changing when markets are open though

      No lock-in periods, the concept is however most effective for the long term. No additional fees on entry/exit, usual Zerodha charges apply. When you invest more/SIP/rebalance this smallcase, you’re charged a flat fee of Rs. 50 + tax

  9. Pavan says:

    Hi,

    Really it is not clear.. Waiting for webinar and detail link…

  10. Kuldip Pawar says:

    Certainly looks a good product at first look. More details and demo would help.

  11. Avinash says:

    Hi, I have recently opened a account with Zerodha. I am new to small case and I don’t have any. Is this smallcase good to start. How much can I invest. If there any auto re balance in portfolio of this smallcase will it reflect in my account and How Will I, be charged then ?

    • Hi Avinash – yup, smallcases are a great way to get started investing in equities. The All Weather Investing smallcase gives you exposure to fixed income & gold along with equity (making it the best first step to investing in smallcases)

      There’s no auto-rebalance/auto-trades placed – you’ll be able to see all stocks/ETFs bought in smallcases on Kite, however do take care to not sell these stocks via Kite as this is not reflected on the smallcase interface leading to incorrect P&L/returns

  12. Shubhankar Barman says:

    Hi sir, my question is ,in smallcase there are 20 stock . Then what is dp charge ? It flat 13.5 or it 20*13.5=270. Plz explain

    • Hi Shubhankar, DP charges would apply on each stock (not shares/quantities) – so for 20 stocks sold on a day, it would be Rs. 270 + tax

      • Shubhankar Barman says:

        Hi vasanth, how it is better than mutual fund ?

        • Some advantages of investing in smallcases over mutual funds
          Simple to Understand
          smallcases reflect understandable ideas & themes like rising rural demand, increasing internet penetration, zero-debt companies, affordable housing, GST implementation etc – making it easier for you to understand what they’re taking exposure to

          Cost-Efficient
          With smallcases, you only pay when they transact (flat fee approach on Zerodha with zero brokerage), vs an expense ratio that investors pay on a daily basis

          Transparent & Flexible
          While investing in a smallcase, you have a clear idea of what stocks they hold, as there is direct ownership of stocks in their demat account. This also means you have an option to customize the constituents of a smallcase and change their weights whenever they want to

          Use-Cases
          Number of mutual fund types are limited, whereas any actionable idea can be a smallcase (be it theme-based like Smart Cities, Speciality Chemicals or strategy based like Magic Formula, Dividends or even sectors like Insurance that aren’t available in mutual funds yet)

          Liquidity
          A smallcase is as liquid as the stocks/ETFs in them, so can be transacted (bought or sold) anytime the markets are open

  13. Shantanu Ramesh Athavale says:

    If I will sip should I pay rs50+ tax on each sip ? Or each rebalance ?

  14. Vinay says:

    1. Will the fund manager keep changing the proportion of Equity / Gold / Debt composition (actively manage) based on market conditions and market expectation or does the mix between these remain fixed ?
    2. Also, in equity will it be an ETF or is it select promising stocks that will be bought?
    3. Fixed Income (Debt investments) are in low duration or high duration investments?

    • Hi Vinay, addressing each
      1) The proportion will keep changing based on our algorithm, but will not be actively done, will be done on quarterly basis. There’s no concept of fund manager/human intervention, we’re rooted in passive investing
      2) Two ETFs for equity – Nifty 50, and Nifty Next 50. If you are interested in having more equity exposure, we would request you to checkout core-satellite approach here – https://blog.smallcase.com/core-satellite-investing/. It will inform you how you can use Smart Beta smallcases along with All Weather to get best core-satellite allocation
      3) Fixed Income exposure is via Liquid ETF. The value of your investment only goes up everyday (daily dividends). No risk here

  15. Nupur Gupta says:

    Heard, Zerodha is now 2nd largest company in India. is that true ? ( source : https://www.investallign.in/top-10-stock-brokers-india/ )

    And also came to know that you are leading direct mutual fund broker (AUM wise)

    All the best for future.

  16. Vosu says:

    For each SIP installment 50/- will be charged

  17. Varun says:

    The charges seems high. Rs. 50 per SIP will make this 10% charges for 5000 rs sip per month in a year

  18. narendra says:

    Where to study about small case. Is it related to market sensex, nifty. How to start. minimum investment. Duration of investment. Risk factors. I am regular invester in mutual funds SIP, stocks. Is it profitable. I have not heart about it. Why it is not popular as mutual fund,stock.
    Thanks

Post a comment