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.

4.1Modern Portfolio TheoryMean variance optimisation, efficient frontier, Markowitz framework. What still works and what does not.11 min 4.2Position sizingEqual weight, market cap, inverse volatility, risk parity. Which to pick when.8 min 4.3Rebalancing strategiesCalendar based vs threshold based. Frequency tradeoffs. Tax drag in Indian equity.9 min 4.4Performance measurementCAGR, IRR, Sharpe, Sortino, max drawdown. What each tells you and what it hides.9 min 4.5Risk managementVolatility targeting, drawdown control, stop-loss rules that do not hurt more than they help.9 min

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.

₹246
Statutory cost of a ₹1 lakh delivery round trip, before brokerage and slippage
Oct 2026 rates, Module 10.2
0.05%
STT on futures sales from 1 April 2026, up from 0.02%
Finance Act 2026
10
Orders per second per exchange above which an algo needs registration
SEBI framework, live 1 Apr 2026

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.

10.1How orders actually work: market microstructure in IndiaOrder books, matching engines, tick size, pre-open, auction periods.12 min 10.2The real cost of trading: slippage and transaction costsBid-ask spread, market impact, STT, GST, brokerage, exchange charges.11 min 10.3Systematic execution: APIs, algos, SEBI rulesBroker APIs, algo approval, SEBI co-location rules, order throttling.10 min 10.4Paper trading to live: the hardest transitionWhy backtests lie to you and what to do about it before putting real money down.9 min 10.5Portfolio monitoring and rebalancing in practiceDaily routines, alert design, handling corporate actions mid-strategy.9 min 10.6Scaling: when your strategy meets capacityWhy a strategy that works on ₹10L may break at ₹10Cr. Liquidity constraints.9 min

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.