SIP algorithm is based on the the Smallcase logic which goes into loss
making stocks first.
The Smallcase 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
Now, this might sound counter-intuitive in Momentum investing style but
that is how the logic is built.
Let us first understand this with an example.
I have been doing my SIPs regularly. I noticed that my SIP based fund
addition to Smallcase would inevitably go into stocks that are down and
about to exit the portfolio. Why is that so ? What is the solution ?
Let us consider a hypothetical 4 stock portfolio with an approximate 25%
allocation to each stock. We also consider an equal Rs 25 / share for all 4
stocks as the buy price. The portfolio looks like below as on Day 1
After 30 days, before SIP, let us say the portfolio looks something like
below. As you can clearly see, the weights have fluctuated due to change
in current market price.
What is the solution ?
(1) You can consider allocating your funds to the performers / the winning
stocks during every SIP schedule using the “Manage Order” option but
that might become intimidating if you are a new user.
(2) The other option is that you can collect your SIP amounts every few
weeks or every few months and do one shot lumpsum addition using the
“Invest more” option and allocate as one lot whatever is that minimum on
If you have any further doubts or questions, please send an email to firstname.lastname@example.org