The first thing that the research team evaluates is whether an investment objective has a large-enough investable universe to choose from, i.e. enough stocks to invest in.
- After the preliminary check, the research team sets out different rules based on the strategy or theme
- Since each smallcase tracks a different theme/strategy, the exact methodology used to create every smallcase varies
- You check the methodology on the smallcase profile page, by clicking on “Methodology”
- When you invest in a smallcase, you are investing in a portfolio that follows a systematic and rules-based approach using measurable data such as price, volatility, earnings, etc. and ignores any subjective opinions
- Using data eliminates use of any biases, which impacts all investors including fund managers
- In addition, a rules-driven strategy has no room to react to short-term news and events, keeping in mind just the long-term objective.