Minimum investment: why does each strategy have one?

Where it is

ScreenMarketplace, Strategy, invest sheetBasic

On each Marketplace card ("Min"), in the strategy key figures and the phone action bar, and on the invest sheet. Basic and Advanced.

What it means

The minimum is the smallest first investment that lets the strategy buy at least one share of each stock at its weight. It depends on the highest share price among the stocks it holds, so it moves when prices or holdings change. The invest sheet refuses a first amount below it; top ups later can be any amount.

The formula

Take the number of stocks times the highest price among them, divide by the sleeve's share of the money, add 2 percent, and round up to the next Rs 1,000.

Minimum = largest over sleeves of (number of stocks x highest price among them at the last rebalance) / sleeve's share of the money x 1.02
rounded up to the next Rs 1,000

Worked example

How to read it

• "Add Rs X" on a card is the gap between your broker cash and the minimum.
• Fewer stocks or lower prices mean a lower minimum.
• "Use minimum" on the invest sheet puts the minimum back in the amount.

Watch out

• The minimum changes with prices; it is worked out on the latest rebalance.
• At the minimum, weights can drift from target because shares come whole.
• Charges are separate from the minimum.

Transcript

The video has no sound. These are its on screen captions, chapter by chapter.

1. 0:00Where it is. Each card shows the minimum first investment.
2. 0:13What it means. The invest sheet opens with the minimum as the amount.
3. 0:29Worked example. Worked example, example only: 50 stocks, highest price Rs 4,000, one sleeve with all the money. 50 x 4,000 = Rs 2,00,000; x 1.02 = Rs 2,04,000. Minimum shown: Rs 2,04,000.
4. 0:35How to read it. How to read it: "Add Rs X" on a card is the gap between your broker cash and the minimum. Fewer stocks or lower prices mean a lower minimum. "Use minimum" on the invest sheet puts the minimum back in the amount.
5. 0:41Watch out. Watch out: The minimum changes with prices; it is worked out on the latest rebalance. At the minimum, weights can drift from target because shares come whole. Charges are separate from the minimum.

Terms in this tutorial

• rebalancingPeriodic reset of portfolio holdings back to target weights or a new selection.
• diversificationSpreading capital across assets that do not move together.

Learn it in depth

• Module 4.2: Position Sizing8 min read, free