Methodology
Portfolio recommendations methodology
Objective, inputs, calculation, interpretation, assumptions, limitations and data sources.
Answer
Vestmind turns a target allocation into an ordered sequence of moves from the portfolio as it stands — contributions first, loss harvesting next, sales last and staged for tax — and re-analyses the resulting portfolio in full before proposing it.
Objective
To express a plan as something the investor can actually execute from where they are, at the lowest tax and transaction cost that reaches the target.
Inputs
- The current look-through portfolio, including holding periods and embedded gains where available.
- The target allocation and its bands.
- Monthly investment capacity and any expected lump sums.
- Applicable capital gains treatment for each holding type.
Calculation
- Gap. The difference between current and target weights, per asset class and then per sleeve.
- Contribution routing. Future contributions are allocated entirely to underweight sleeves until the gap closes, and the months to close it are reported.
- Loss harvesting. Positions at a loss are identified as candidates whose sale realises an offset rather than a liability.
- Sales. Where contributions cannot close the gap, sales are proposed in order of tax cost: long-term before short-term, within the annual exemption before beyond it, and staged across financial years where the band allows.
- Re-analysis. The resulting portfolio is run through the full portfolio analysis and risk methods, so the effect on concentration and overlap is stated before the plan is proposed.
Interpretation
A plan is a scenario with its reasoning attached, not an instruction. Every move states why it is proposed and what it changes.
Where a move is right before tax and wrong after it, the plan says so rather than proposing it.
Vestmind is not a registered investment adviser. Nothing produced by this method is a personalised investment recommendation within the meaning of the SEBI investment adviser regulations.
Assumptions
- Stated contribution capacity continues.
- Holding periods and cost data supplied by the broker or statement are accurate.
- Current tax rates apply at the time of the transaction.
Limitations
- Cost and acquisition-date data are frequently incomplete in Indian statements. Where they are missing, tax ordering is approximate and the plan says so.
- The method does not model exit loads or scheme-specific lock-ins beyond those disclosed to it.
- It does not execute, and it cannot know what price a transaction will actually achieve.
- It optimises the route to a target, not the target itself. A wrong target executed efficiently is still wrong.
Sources
- Income Tax Department, Government of India — capital gains treatment
- Securities and Exchange Board of India (SEBI)
- SEBI — Categorization and Rationalization of Mutual Fund Schemes — defines the scheme categories and what each may hold
How Vestmind does this
VestStudio is Vestmind's portfolio construction product. It turns an investor's goals, horizon and risk capacity into a target portfolio, then lets them simulate a change — a new allocation, a fund switch, a rebalance — and see its effect on risk, concentration and goal funding before any money moves.