A. Investment Score
- Investment Score is a tool based on the core-satellite approach that analyses all your investments in stocks, ETFs and mutual funds done via the platform or imported on the Platform and gives insights into the overall health of the investment portfolio.
- This is a rule-based tool applicable uniformly to all the users of the tool and does not take into account any individual risk-reward preferences, demography, or financial goals. This should not be construed as investment advice. You should seek professional advice when necessary, as the Company and WCPL do not assume responsibility for any outcomes.
- This tool has been created and managed by Windmill Capital Private Limited (WCPL), a SEBI- registered Research Analyst having registration number - INH200007645. WCPL is also a wholly owned subsidiary of Smallcase Technologies Pvt Ltd (STPL).
- Core-satellite approach – Core and satellite is a common and time-tested investment approach that consists of a core investment and other satellite investments that complement it. The objective of this approach is to build a solid investment foundation using asset allocation to protect your wealth in volatile times and enhance returns with risky satellite investments in the long term.
- Classification of Core and Satellite Investments:
- Satellite investments are subdivided into slow-moving and fast-moving categories.
- The classification of investments into core-satellite categories is based on the volatility ratios and labels as described here. If the volatility label of the investment (smallcase/stock/mutual fund) is low, it is categorised as a core investment. If the volatility label is medium, it is categorised as slow-moving satellite investment and if the volatility label is High, it is categorised as fast-moving satellite investment.
- On the platform, core investments are also referred to as Stable investments, slow-moving satellite investments are also referred to as steady investments and fast-moving satellite investments are also referred to as high-growth investments.
- Calculation of investment score: There are two broad components for arriving at the investment score:
- Deviation of the portfolio from the ideal ranges for core, slow-moving and fast-moving investments:
- Based on the above logic of classification of investments into core, slow-moving and fast-moving categories, the weight of each category in a user’s portfolio is arrived at
- The above is then compared against the ideal composition of each category for any portfolio. e.g., core investments should be between 30-50%
- Based on the above comparison which yields the deviation of a user’s portfolio from the ideal composition of a portfolio, a score is arrived at
- This component carries the highest weight in the investment score
- A detailed breakdown and the ideal score ranges are provided to the users in the investment score report
- Measurement of how consistently the user is following a systematic investment approach and healthy investment habits
- Systematic investments reflect disciplined investing and protect against market volatility
- A score for this component is calculated based on the SIPs setup (as a % of portfolio value) as well as the % of SIPs executed on the more volatile satellite investments
- There are various recurring actions which might be required for a user to have a healthy portfolio. e.g., on smallcases - to stay true to the investment objective of a smallcase and hence, the investment objective that a user might have, it is important that a user performs timely rebalances (once issued by the manager)
- To give effect to the above scenarios, a logic has been defined where such pending actions from the user will carry a penalty and be deducted from the overall score
- Deviation of the portfolio from the ideal ranges for core, slow-moving and fast-moving investments:
- Insights based on the investment score:
- Based on the different calculations performed as part of the tool (and detailed above), insights will be generated
- These insights will help a user understand/identify the gaps in portfolio composition, if any, and/or gaps in systematic/disciplined investing behaviour
- Based on the insights, users can take action to bring their investments into ideal ranges for core-satellite investments or for setting up healthy investment habits in their portfolio. These steps depend on the users’ existing investments and might include some actions on smallcases created and managed by WCPL (a SEBI-registered Research Analyst and a wholly-owned subsidiary of STPL). The insights can broadly be divided into the following categories
S. No User’s portfolio Rationale Insight 1 No investments There are no investments in stocks, mutual funds or smallcases To start the investment journey with core investments 2 Investments are in ideal ranges Allocation to core investments and slow-moving satellite investments are in the ideal ranges --- 3 Core Missing No allocation to core assets/investments To invest in the core assets for improved diversification 4 Core lagging Investment in core assets is less than the ideal range To invest in the core assets for improved diversification 5 Slow-Moving Investments Missing No investment in Slow-Moving assets To invest in the slow-moving steady assets available on the Platform for improved diversification and risk-adjusted returns 6 Slow Moving Investments lagging Investment in slow-moving steady assets is less than the ideal range To invest in the slow-moving steady assets available on the Platform for improved diversification and risk-adjusted returns
- The Investment Score tool has been live on our app version 6.20 onwards. So if you are using the erstwhile Portfolio Health tool in our earlier app versions, please update your app to the latest version.
B. Smart Alerts
- Smart Alerts is a tool that allows you to keep track of the major market movements. There are two types of smart alerts - one based on market movements and the other based on suggestions from SEBI-registered intermediaries for the specific smallcases that they offer on the platform.
- The first type of smart alerts which are based on market movements are created and managed by Windmill Capital Pvt Ltd (WCPL), a SEBI-registered Research Analyst having registration number - INH200007645. WCPL is also a wholly owned subsidiary of Smallcase Technologies Pvt Ltd.
- The market movement based alerts and indicators used in this tool along with their logic are reproduced below:
- Nifty Rolling Returns: It is used to generate an alert during a market downtrend. It is calculated by taking rolling monthly returns of Nifty 50. Whenever the rolling returns value drops below the defined threshold for a consistent time period, the alert gets triggered. Post which, it remains valid until the value of the rolling monthly return crosses 0%.
- Market Mood Index (MMI): It is used to generate an alert during a market downtrend. MMI takes into account various factors like Institutional investors’ data, volatility, gold price trend, etc. to gauge the current market sentiment and signal an investment opportunity when the market unexpectedly enters a state of heightened fear or bearish sentiment. MMI related disclosures can be found here. An alert is generated when the MMI value drops below the defined threshold for a consistent time period and remains valid till the value increases beyond a defined threshold.
- Ratio of Nifty 20-day SMA:50-day SMA: It is used to generate an alert during a market uptrend. It is calculated by taking the 20-day and 50-day simple moving average (SMA) of Nifty prices and then calculating the ratio ( Nifty 20D SMA/Nifty 50D SMA). The alert gets generated when the ratio is above the defined threshold for a consistent time period and remains valid till the ratio breaches a defined threshold on the downside.
- Further details about the indicators and their logic are available here.
C. Find my smallcase
- The Discover Page of the smallcase platform helps users to discover investment ideas. On this page, the Find your smallcase tool is present along with collections of smallcases categorised basis their strategy, objectives and or fundamentals.
- In the All smallcases section, smallcases are present in a list format where the users can apply various filters such as minimum investment amount, volatility level and type of smallcases (based on constituents, strategy / objectives).
- Find your smallcase is a tool to assist users to find an appropriate smallcase. It works on the core-satellite approach. This tool also works in conjunction with the Investment Score Tool to indicate smallcases to the investor based on the Investment Score Card and relevant action (if any).
- Find your smallcase will first help an investor build a core foundation for their portfolio by indicating the core smallcase(s). To understand what are core smallcases, please read point 5 in the Investment Score disclosure.
- After building the core, "Find your smallcase" helps the investor to add other appropriate investments (satellite smallcases) to their portfolio that are required to achieve the right balance of risk & returns. The user can directly come to this step by skipping the 4th step, if he/she wants to explore riskier/more volatile smallcases than the core smallcase. Further the tool, lets the user explore more risky/volatile smallcases in different categories, as selected by the user
- The tool is created and managed by Windmill Capital Private Limited (WCPL), a SEBI-registered Research Analyst having registration number - INH200007645.
D. Similar Stocks on Create Page
Similar stocks are shown to a user when he/she decides to create a smallcase and starts adding stocks to it. The platform follows the following algorithm to show similar stocks to add to the portfolio:
- User adds stocks to the smallcase by directly typing company name in the search box.
- Platform identifies the sectors of the stocks added by the user in the smallcase.
- It then shows 4 stocks in a decreasing order of Market Capitalization for various sectors present in the user’s smallcase.
If a user adds HDFC Bank Ltd. in the smallcase, the platform picks the sector as “Private banks” and shows 4 stocks from the Private Banks sector in the decreasing order of market capitalization, under the similar stocks section.
- The collection of smallcases under various groups has been made as and by way of available sources of information with Smallcase Technologies Private Limited (STPL). The rationale of the collection of smallcases under each particular group is mentioned in that section and is self- explanatory.
- All the collections are either made based on objective information, public knowledge or broad sectoral trends. For example - ETF smallcases collection will list few of the smallcases from platform which only consists of ETFs as constituents, Popular Investment Ideas collection lists few smallcases which are popular (most bought) on the platform, Ideal for New investors collection lists smallcases which are focused on asset allocation and have low volatility as such portfolios are generally considered ideal for first time investors, etc.
- The objective of the Investment Score tool and the Find your smallcase tool is to identify and evaluate the risks in your smallcases portfolio due to inadequate diversification.
- Suggestions for investing in additional smallcases (if any), are only for the purposes of ensuring proper diversification, on a best effort basis. These suggestions are derived from a fixed model without any reference to the investor’s risk profile, financial needs and goals.
- All the tools or activities mentioned in the above points A, B, C, D & E should not be construed as investment advice or as a solicitation to invest in the smallcases and the investor is advised to consult his / her advisor prior to arriving at any investment decision.
- While every effort has been made to take due care in building and calculating the above tools & activities to avoid errors or omissions, all the tools and activities are publisher with a condition and understanding that STPL shall not be responsible for any damages, compensation or loss or action taken or abstained to be taken on the basis this information.
- There is no assurance or guarantee that the investment objectives of the respective smallcase(s) will be attained.
- Investing in Stocks & ETFs (Exchange Traded Funds) are subject to market risk. Please read all the related documents carefully before investing.. Past performance and representations are not indicative of future results and does not guarantee any future performance.