Using Smallcases to Invest Passively in Themes & Ideas
Passive investing doesn’t have to be limited to index funds and ETFs
When we think or talk about passive investing, we usually take our attention to index funds and ETFs. These are mutual funds that track a specific index, like the Nifty, or an asset, like gold. When you invest in such an instrument, you participate in the growth of the underlying index or asset. For example, Reliance ETF Nifty BeES tracks the Nifty index while Reliance ETF Gold BeES tracks the price of gold. Index funds and ETFs are as simple as that, which is why they come with lower costs and make for excellent passive investment tools.
However, passive investors shouldn’t limit themselves to just index funds and ETFs. What passive investing essentially means is that you choose a specific investment strategy and invest in it for the long-term. Whatever the strategy might be, when you begin investing in it with the intention of not wavering for a long period of time, what you’re doing is investing passively.
For example, let’s say you invest in a Nifty ETF for the long-term. Here, the strategy you’re adopting is to invest in the 50 largest companies in India. The companies might change, but your strategy doesn’t change. This is how passive investing works.
Passive investing means that you choose a specific investment strategy and invest in it for the long-term.
Hence, passive investing strategies can be of various types. Investing in a gold ETF that tracks the price of gold is also a passive investing strategy. So is investing in different themes like electric mobility, affordable housing, rural demand, etc.
Understand this further with the example of electric mobility.
Passive investing can also be diversified across asset classes like equities, gold and fixed income through an All Weather Investing portfolio.
Investing passively in different strategies and themes can seem like a daunting task. Especially when compared to investing passively in the Nifty, where all you have to do is pick an index fund or ETF. However, passive investing in themes is also just as simple with smallcases.
A smallcase is a portfolio of stocks and/or ETFs that is built around a specific idea, theme or strategy. All you have to do is pick a smallcase that follows the theme or idea you believe in.
Smallcases are low-cost instruments that help you passively invest in a portfolio of stocks and ETFs that is aligned to a theme or idea.
Similarly, there are a number of other smallcases that you can choose from. And just as passive investments should be, all of them are low-cost investments as well. Most smallcases have just a flat transaction fee.
This is how investors can have a broader take on passive investing and use smallcases to build wealth over the long-term.
