Building the portfolio
Portfolio construction is the decision layer between strategy selection and live capital. Even if you have a perfect stock selection rule, a portfolio that sizes positions badly or rebalances on a bad schedule will underperform a portfolio that picks worse names with better construction. The math here is not optional.
What these 5 modules cover
- 4.1 Modern Portfolio Theory: Mean variance optimisation, efficient frontier, Markowitz framework. What still works and what does not.
- 4.2 Position sizing: Equal weight, market cap, inverse volatility, risk parity. Which to pick when.
- 4.3 Rebalancing strategies: Calendar based vs threshold based. Frequency tradeoffs. Tax drag in Indian equity.
- 4.4 Performance measurement: CAGR, IRR, Sharpe, Sortino, max drawdown. What each tells you and what it hides.
- 4.5 Risk management: Volatility targeting, drawdown control, stop-loss rules that do not hurt more than they help.
Executing in live markets
A strategy that looks great in backtest can lose 2 or 3 percent a year to bad execution. Slippage, market impact, timing of orders, broker API quirks. Path 10 is about the gap between clean simulation and messy reality.
What these 6 modules cover
- 10.1 How orders actually work: market microstructure in India: Order books, matching engines, tick size, pre-open, auction periods.
- 10.2 The real cost of trading: slippage and transaction costs: Bid-ask spread, market impact, STT, GST, brokerage, exchange charges.
- 10.3 Systematic execution: APIs, algos, SEBI rules: Broker APIs, algo approval, SEBI co-location rules, order throttling.
- 10.4 Paper trading to live: the hardest transition: Why backtests lie to you and what to do about it before putting real money down.
- 10.5 Portfolio monitoring and rebalancing in practice: Daily routines, alert design, handling corporate actions mid-strategy.
- 10.6 Scaling: when your strategy meets capacity: Why a strategy that works on ₹10L may break at ₹10Cr. Liquidity constraints.
Read one more paragraph, 63 words
Construction and execution meet on rebalance day. How often a portfolio rebalances and how much of it trades decide both the cost and the tax. In RupeeCase's published model records, a two week multicap index typically changes about a fifth of its names at each rebalance, while an equal weight Nifty 50 index barely changes names at all. Same discipline, very different bills.
Common questions about portfolio construction
What is portfolio construction?
Portfolio construction is how you combine stocks into one portfolio: how much capital each position gets, when you rebalance, and how you measure results. Path 4 covers modern portfolio theory, position sizing, rebalancing, performance measurement and risk management.
How often should a portfolio be rebalanced?
It depends on the rule. Module 4.3 compares calendar based and threshold based rebalancing, the frequency tradeoffs and the tax drag in Indian equity. A quantitative index fixes its schedule in advance, so nobody decides by feel.
Why does execution matter if a backtest looks good?
A rule that backtests well can still lose 2 or 3 percent a year to slippage, market impact and order timing. Path 10 covers all three, and Module 10.4 covers the move from paper trading to live.