--- title: "Position Sizing | RupeeCase Learn" description: "How much to allocate to each stock, equal weight, inverse volatility, Kelly criterion, and conviction weighting." source_url: "https://www.rupeecase.com/learn/path-4/module-4-2-position-sizing" --- [Path 04 2 of 5](/learn/path-4/)Position Sizing[Next 4.3](/learn/path-4/module-4-3-rebalancing-strategies) You have picked your stocks with a systematic signal. Now the quieter question: how much goes into each one? It gets a fraction of the attention stock selection gets, and it decides a large part of how the ride feels. The same 10 stocks, sized two different ways, can give you two very different drawdowns. I learned to respect sizing early. A good signal with careless sizing still hurts you, because one or two names end up carrying the whole portfolio's risk. There are four main ways systematic equity portfolios size positions. Each assumes something different about what you know, and more importantly, about what you do not know. 1. **Execute**Through your own broker, into your own demat. 2. **Execute**Through your own broker, into your own demat. 3. **Execute**Through your own broker, into your own demat. 4. **Execute**Through your own broker, into your own demat. 5. **Execute**Through your own broker, into your own demat. A 10 stock equal weight portfolio with a 10% single stock cap means a 40% fall in any one name costs the portfolio about 4% before anything else moves. Step 3 is the step most discretionary investors skip. ## The four approaches Equal Weight Simple Weight(i) = 1 / N Every stock gets the same allocation. Hold 20 stocks and each gets 5%. No view on which stock is better than another. Maximum simplicity. * Needs no inputs beyond the stock list * Tilts towards smaller companies compared with market cap weighting, which adds a size exposure * Strong academic evidence that it often matches or beats optimised weights out of sample * A very volatile stock gets the same capital as a calm one, so it carries more of the risk The default in every RupeeCase strategy Inverse Volatility Weight Moderate w ∝ 1 / volatility Each weight is inversely proportional to the stock's volatility, usually measured on one year of daily returns. Calm stocks get more capital, jumpy stocks get less, so each contributes a similar share of the portfolio's risk. * Fixes the risk concentration problem of equal weight * Has often improved risk adjusted returns over equal weight in published studies * Needs a volatility estimate per stock at every rebalance, so more turnover * Can pile into defensive, low volatility sectors unless capped Useful when volatility varies widely across the names you hold Market Cap Weight Moderate w = cap / total cap Larger companies get larger weights. This is how the Nifty 50 and Nifty 500 work, on free float market capitalisation, and so how most index funds hold their stocks. * Low turnover: weights move with prices, so little trading is needed * Concentrates money in the largest few names * Underweights smaller companies that may score better on your factor * For a factor strategy it brings back the size bias the factor was meant to avoid Best when you want to replicate an index Kelly Criterion, Signal Scaled Complex f* = (p × b − q) / b Kelly gives the fraction of capital that maximises long run growth, if you know your edge exactly: p is the probability of a win, b the payoff ratio, q = 1 − p. Nobody knows their edge exactly, so practitioners use a fraction of Kelly, typically a quarter to a half. * Optimal for long run growth only if your inputs are right * Needs a win rate and payoff estimate per position, which is very hard in equities * Full Kelly produces large swings and deep drawdowns in practice * Most useful as a ceiling: never bet more than Kelly says Conceptual value; rarely used directly for multi stock portfolios ## Worked example: equal vs inverse volatility Say your signal selects five stocks with these annual volatilities. The volatilities are illustrative, of the size you see across Indian large and mid caps, and I assume every pair has a correlation of 0.4. | Stock | Vol | Equal wt | Risk share | Inv vol wt | Risk share | | --- | --- | --- | --- | --- | --- | | A | 22% | 20% | 13.3% | 24.8% | 20% | | B | 35% | 20% | 23.4% | 15.6% | 20% | | C | 48% | 20% | 35.2% | 11.4% | 20% | | D | 26% | 20% | 16.2% | 21.0% | 20% | | E | 20% | 20% | 11.9% | 27.3% | 20% | | Portfolio volatility | | 22.1% | 19.7% | A is a steady large cap, B a lender, C a cyclical, D an IT services name, E a consumer staple. Computed with the full covariance formula from Module 4.1; illustrative volatilities, correlation 0.4 between every pair. Look at stock C. It holds 20% of the capital and drives 35% of the risk under equal weight. Inverse volatility cuts it to 11.4% of the capital and every stock ends up carrying the same 20% of the risk. Portfolio volatility drops from 22.1% to 19.7% with the same five stocks. Now the rupees. On ₹5 lakh, equal weight puts ₹1 lakh in each name. If stock C falls 40% in a bad quarter, you lose ₹40,000 from it alone. Under inverse volatility you hold ₹57,000 of C and the same fall costs about ₹22,800. **The practical trade off:** inverse volatility gives a smoother ride but adds work and turnover at every rebalance. When you hold 20 or more stocks of similar volatility, the difference narrows and equal weight is usually good enough. For concentrated portfolios of 10 to 15 names, or ones that mix jumpy growth stocks with steady compounders, inverse volatility changes the ride noticeably. ## Kelly in rupees, and why I stop at half Suppose a setup wins 55% of the time and the average win is 1.2 times the average loss. Kelly says f* = (0.55 × 1.2 − 0.45) / 1.2 = 17.5% of capital per bet. On ₹10 lakh that is ₹1.75 lakh on a single idea. Now suppose your real win rate is 50%, not 55%, a tiny estimation error. True Kelly drops to 8.3%. Betting 17.5% when the right answer is 8.3% is betting more than double Kelly, and at double Kelly your expected long run growth falls to about zero while the swings get much larger. Half Kelly, 8.75% here, keeps you near the right answer across a range of errors. That is why every practitioner I respect uses a fraction of Kelly or none at all. ## Position sizing constraints Whatever the weighting rule, a few hard limits stop extreme concentration: * **Maximum single stock weight.** Typically 10 to 15% in a 20 stock portfolio, 5 to 8% in a 30 stock one. No single stock should decide your year. * **Maximum sector weight.** Typically 25 to 35%. A momentum signal can otherwise put half the money into one sector in a strong run. * **Minimum position size.** Typically 1 to 2% of the portfolio. Smaller positions cost more in friction than they add in information. * **Liquidity.** Keep any order to a small fraction of the stock's average daily traded value, often 5 to 10% at most, so your own trade does not move the price. How much one stock weighs on a rebalance day, by strategy 1. Allcap, 50 names**2%** 2. Allcap, 50 names**2%** 3. Allcap, 50 names**2%** 4. Allcap, 50 names**2%** 5. Allcap, 50 names**2%** Equal weight per stock = 100% / holdings, from the RupeeCase strategy lineup, as of 27 Apr 2026. Weights drift with prices between rebalances. ## Whole shares and minimum capital Indian cash equity trades in whole shares. That makes small portfolios lumpy. With ₹2 lakh across 20 stocks, each target is ₹10,000. A stock at ₹7,800 gives you one share, ₹7,800, or 3.9% instead of 5%. A stock at ₹13,000 cannot be bought at all without overshooting to 6.5%. This is why systematic products state a minimum capital. On RupeeCase the minimum shown on each strategy is roughly one share of every holding at recent prices, and the strategies cap the share price of stocks they admit, for example under ₹5,000 for Allcap. More capital buys more shares of each name and tracks the equal weights more closely. ## Common mistake: sizing by conviction The common mistake is letting conviction set the size. The stock you have read the most about gets 25%, the ones you are unsure of get 3%. Conviction feels like information. Most of the time it is familiarity. And the size of a position usually grows after a stock has run, which means you are largest exactly when the risk is highest. The second mistake is averaging down without a rule. Buying more of a falling stock turns a 5% position into 12% without any decision about whether 12% is acceptable. A systematic rule makes both decisions for you, in advance, when you are calm. **Myth**Equal weight means each stock carries equal risk. **Fact**Equal capital is not equal risk. In the example above a stock with 20% of the money drove 35% of the risk because it moved more than twice as much as the calmest name. ## How this shows up in RupeeCase Position sizing on RupeeCase Every RupeeCase strategy holds its names **equal weighted** at each rebalance: Allcap holds 50 names at about 2% each, [Focused Largecap 20](/strategies/focused-largecap-20) holds 20 at about 5%. The weights then drift with prices until the next rebalance resets them. The factsheet on each strategy page lists the current holdings with their weights on the rebalance day, and the minimum capital shown is roughly one share of every holding. Compare concentration across strategies on the [compare page](/compare), and find a risk band that fits you with the [risk profile](/risk-profile). A portfolio in the app: composition first, then every holding with its weight.RupeeCase app, sample data ## Questions readers ask Is equal weight better than market cap weight?Neither is better in every period. Equal weight gives smaller companies more room and rebalances more often, which has helped when smaller companies did well and hurt when the largest names led. Market cap weight is cheaper to hold. The NSE publishes both a [Nifty 50](/learn/glossary#nifty-50) and a Nifty 50 Equal Weight index, so you can compare them over any window. How much of my portfolio should one stock be?There is no single right number, but most systematic investors keep single names between 2% and 10%. The question to ask is what a 50% fall in that stock would do to your total portfolio, and whether you could hold through it. Why do my actual weights differ from the target weights?Two reasons. Whole share rounding means small portfolios cannot hit exact targets, and prices move every day after the rebalance. Both are normal; the next rebalance brings the weights back towards target. What does Position Sizing cover?The most underappreciated decision in portfolio construction, how much to allocate to each stock. Equal weight, inverse volatility, Kelly criterion, and why simplicity usually wins. It works through The four approaches, Worked example: equal vs inverse volatility, Kelly in rupees, and why I stop at half, Position sizing constraints and more. It is module 4.2 of Path 4, Portfolio Construction, about 8 minutes of reading, free. TTry it ## Position Sizing, in numbers. Percentage-risk position sizing on Indian equity Your numbers, the module's formula, nothing stored. Calculator ### Position Size Calculator Decide how many shares to buy based on portfolio size, risk per trade and stop distance. Portfolio (INR)Risk per trade (%)Entry price (INR)Stop loss price (INR) [Full calculator: Position size calculator](/learn/tools/position-size-calculator) AApply it on RupeeCase ## Allcap Multi Asset 50 stocks, 10% debt, 10% gold. The broad-market engine with a cushion. An index built on the rules this path teaches, multi asset construction, equity, debt, gold, held stock by stock in your own demat. Risk band: Moderate. [See the strategy](/strategies/allcap-multi-asset)[Sign up for RupeeCase](https://invest.rupeecase.com/signup?strategy=allcap-multi-asset) [CAGR40.5%Sharpe1.81Max DD−21.3%Minimum281000Model, back tested, as of 27 Apr 2026. Not client returns, not a promise.](/strategies/allcap-multi-asset) QQuick check ## 10 questions, 7 to pass. Pick an answer and the explanation appears. Your result stays on this device and counts towards the Path 04 certificate. CCheck yourself ## Path 04 so far. Your quick check results on this device, stop by stop. 1. [TPath test, 30 questionsNot yet](/learn/path-4/module-4-5-risk-management#pathTestSection) 2. [TPath test, 30 questionsNot yet](/learn/path-4/module-4-5-risk-management#pathTestSection) 3. [TPath test, 30 questionsNot yet](/learn/path-4/module-4-5-risk-management#pathTestSection) 4. [TPath test, 30 questionsNot yet](/learn/path-4/module-4-5-risk-management#pathTestSection) 5. [TPath test, 30 questionsNot yet](/learn/path-4/module-4-5-risk-management#pathTestSection) 6. [TPath test, 30 questionsNot yet](/learn/path-4/module-4-5-risk-management#pathTestSection) Explore next ## Put the module to work. * [Blog noteSize decides more than selectionPortfolio construction, a short note](/blog/2026-09-01-evening-size-decides-more-than-selection/) * [Blog noteYour biggest asset is not in your portfolioPortfolio construction, a short note](/blog/2026-07-13-morning-human-capital/) * [StrategyEnergy Basket strategyCNX Energy, 10 stocks, every week](/strategies/energy-basket) * [StrategyHealthcare Basket strategyNifty MidSmall Healthcare, 10 stocks, every week](/strategies/healthcare-basket) Community ## Join my WhatsApp group. Scan the code, fillFill one short form, and join my WhatsApp group. Slides, sources, factsheets and the rebalance logs live there, and members join a daily Google Meet with me. [Sign up for RupeeCase](https://invest.rupeecase.com/signup) [Join the WhatsApp group](https://forms.gle/C6HMtM1Z2GfeocQV7) [One form, one group](https://forms.gle/C6HMtM1Z2GfeocQV7)Scan with your phone camera SSources ## Where the figures come from. 1. [NSE, Nifty 50 and Nifty 50 Equal Weight index methodology](https://www.niftyindices.com/) 2. [NSE, Nifty 50 and Nifty 50 Equal Weight index methodology](https://www.niftyindices.com/) 3. [NSE, Nifty 50 and Nifty 50 Equal Weight index methodology](https://www.niftyindices.com/) 4. [NSE, Nifty 50 and Nifty 50 Equal Weight index methodology](https://www.niftyindices.com/) GTerms ## 5 terms from this module. Equal weightAllocating 1/N of capital to each stock in the portfolio. Simplest and most robust weighting scheme, each position has equal capital allocation. Inverse vol weightAllocating in inverse proportion to each stock's volatility. Less volatile stocks get higher weights, ensuring more equal contribution to portfolio risk. Kelly criterionA formula for optimal bet sizing based on edge and odds. Theoretically optimal for long-run growth but requires accurate edge estimates and typically produces extreme concentration. Risk contributionThe share of total portfolio variance contributed by each position. In equal weight, high-volatility stocks contribute disproportionately more risk than their capital weight suggests. Sector capA maximum weight constraint limiting how much of the portfolio can be in any single sector, typically 25 to 35%. Prevents sector-driven signals from creating extreme concentration. [All 91 terms in the glossary](/learn/glossary) [From the podcast archiveEP103: The Fireworks Came One Minute Too Late, A Frozen Auction Moves 284 Points In The Uncross, Both Indices Pin On Max Pain, And Vol Hits The Cycle FloorThe Tanmay Edge, 14 Aug 2026, graded 4/5](/podcast/episodes/2026-08-14)[Pillar guidePortfolio Construction11 modules across paths 4, 10](/learn/portfolio-construction) Education only, not investment advice. RupeeCase is a technology platform operated by QC Alpha Technologies Pvt Ltd; it is not a fund, a PMS or a SEBI registered investment adviser. Model returns are back tested and not a promise of future returns. Figures carry the date they were checked.