Three years with Low Risk – Smart Beta smallcase

A couple of years ago I listened to Anupam Gupta’s Paisa Vaisa podcast explaining something called as smallcase. Intrigued, I continued to learn more on it. And around 3 years back I decided to dip my toes in the water by subscribing to Low Risk – Smart Beta. Here is what I learned.

I should not have dipped my toe in this water. I should have dipped my entire foot. Let me explain. A smallcase needs regular rebalancing i.e. every now and then you are going to sell some of your stocks and buy new ones. As I was just dipping my toe in water, I had invested minimum amount required. And rebalancing of smallcase every 3 months meant that most of the time I was selling 1 stock and buying 1 stock. Yes, just 1 stock. That also meant paying brokerage and taxes on every transaction. That in turn meant I was negating whatever minuscule gains I had made before rebalancing.

After 3 rebalances, I decided to ignore the rebalance notification. As the stocks in the smallcase were reputed companies, I was okay to hold them for long term. Here’s how it has performed for me.

Psst! If you want to subscribe to a smallcase, go for discount brokers (like Zerodha). You will save big while rebalancing.

Returns

For the first year, I diligently rebalanced my smallcase (by selling 1 stock and buying 1 stock). It was towards the end of 2019 I realised my stupidity and stopped rebalancing. Since then, post COVID-19 market crash the worth on my investment has steadily risen.

If you notice Amount Invested (red line), every now and then it goes down ever so slightly. That is the dividend amount that I am reducing from my Amount Invested.

Profit

As you can see, profit has been made only after COVID-19 pandemic market crash. As far XIRR goes, the smallcase has given 16%. And I am happy with that—considering I was dipping my toe in water.