Where it is

ScreenHoldings tab, Position sizesAdvanced

The Holdings tab, Position sizes card. Top 5 share, Largest position and Holdings show in Basic; Effective holdings and Herfindahl in Advanced; Cash share on a portfolio.

Indices in this video: Allcap (strategy page) and Large Cap Multi Asset (the sample portfolio).

What it means

The card measures how much of the money sits in a few names. Top 5 share adds the five largest positions; Largest position names the biggest. Herfindahl adds up every position's share squared: 1 means one position holds everything, and an equal split over N names gives 1 / N. Effective holdings turns it back into a count: the number of equal positions that would be just as concentrated. On a portfolio, Cash share is the cash beside the holdings.

The formula

Square each position's share and add the squares: that is the Herfindahl index. One over it is the effective number of holdings.

As computed in the RupeeCase app
Share = position weight / total weight (portfolio: live value / holdings value, cash left out)
Herfindahl = sum of share squared (0 to 1)
Effective holdings = 1 / Herfindahl
Top 5 share = sum of the five largest shares
Cash share = cash / (holdings value + cash), portfolio only

Worked example

Example only

  • 4 positions at 25% each: 4 x 0.25 x 0.25 = 0.25, effective 4
  • One at 70%, three at 10%: 0.49 + 3 x 0.01 = 0.52
  • Effective holdings 1 / 0.52 = 1.9

How to read it

  • At equal weights Effective holdings matches Holdings, as on Allcap's 60.
  • Effective holdings well under Holdings: a few positions carry most of the money.
  • A higher Herfindahl means more concentration.

Watch out

  • It counts positions, not how they move together: two similar stocks still count as two.
  • On a portfolio the shares leave cash out; Cash share shows it on its own.
  • On a multi asset portfolio an ETF can be the largest position.

Transcript

Tap Sound on for voice and music. These are the captions of the video, chapter by chapter.

  1. 0:00Where it is. Position sizes, on the Holdings tab, shows how spread the money is.
  2. 0:10What it means. Top 5 share adds up the five largest positions.
  3. 0:36Worked example. Worked example, example only: 4 positions at 25% each: 4 x 0.25 x 0.25 = 0.25, effective 4. One at 70%, three at 10%: 0.49 + 3 x 0.01 = 0.52. Effective holdings 1 / 0.52 = 1.9.
  4. 0:42How to read it. Here 22 holdings count like about 17 equal ones.
  5. 1:02Watch out. Watch out: It counts positions, not how they move together: two similar stocks still count as two. On a portfolio the shares leave cash out; Cash share shows it on its own. On a multi asset portfolio an ETF can be the largest position.

Terms in this tutorial

  • HerfindahlA concentration score: each position's share squared, all added up.
  • Cash shareThe part of a portfolio sitting in cash rather than in stocks.
  • Position sizesHow the money is spread across the stocks held.
  • diversificationSpreading capital across assets that do not move together.

Learn it in depth