How does an SIP work in Equity Baskets?
Understanding the SIP Algorithm with an example:
The below table shows the composition on the day of investment and on the 1st SIP instalment. The change in weights is due to the change in stock prices over time.
Please note: To simplify, we have assumed an equal-weighted basket. The logic would work the same way for custom weights too
Initial Investment amount: 1,00,000
Monthly
SIP instalment amount: 20,000
1.
Calculate the number of shares based on the Total
amount (Current value + SIP amount)
- On the day SIP is due the current value of your
investment is 1,12,000. We calculate the total amount as (Current Value
+ SIP amount) = 1,32,000
- As per the above amount and the weights on
T0, the number of shares to be bought will be calculated
2.
Calculate additional shares to be bought
- We then calculate the difference from existing holdings to form your SIP instalment
3.
Determine the SIP amount
- The stocks that have deviated below from the ideal
composition are preferred
- The actual instalment amount is calculated as New no.
of shares * Market price of each stock
4. In the next SIP instalment, the same steps are repeated
- Every Equity Basket has an ideal weighting scheme
- With time, as prices change, the constituents will deviate from the ideal composition. The algorithm compares your current constituents with the ideal composition to find the constituents that deviate the most
- The SIP amount is first invested in stocks where the weightage might have reduced. With every instalment, the algorithm ensures your constituents try to match the ideal composition in the long run.
Related Articles
How do Equity Baskets work?
There are 3 parts to understand this: 1. Investing Your clients invest in Equity Baskets by using funds in their Broker account. They can either start an SIP or do a lump-sum investment. All invested Equity Basket constituents will be added to ...How does an Equity Basket subscription work?
Equity Basket subscriptions are required by users to view the constituent stocks/ETFs as created by SEBI registered professionals as well as to invest in the same. The subscribed clients will also receive periodic rebalance updates based on the ...Can I start an SIP in Equity Baskets for my clients?
Yes. There are 2 ways to start an SIP in an Equity Basket. 1. Your client can setup an SIP along with the First Time Buy transaction in an Equity Basket. 2. After first time Buy transaction, you can initiate an SIP registration request for ...Who manages Equity Baskets?
Equity Baskets are created and managed by Registered Investment Advisors (RIAs) who are SEBI-registered professionals.How to initiate an order in Equity Baskets?
Order in Equity Baskets can be initiated for clients following below steps: Go to Equity Basket details screen Click on PLACE ORDER Select Client Select Order Type (Buy/Sell/Start SIP) SUBMIT Upon successful initiation, Client will get the link on ...