WealthBasket: Why is a buffer kept on each stock?
A 2% buffer is placed to optimize your investments due to market fluctuations. This buffer is specifically used when placing a “Buy Order.” Please be assured that the buffer is placed for recalculating individual stock and won’t raise your total WealthBasket investment. The buffer can vary according to the individual stock price movement but it won’t exceed 2%.
How is Your Buy Order Scheduled?
Check out this step-by-step guide to understand how we schedule your buy order:
Step 1: As the user schedules the buy order, the stock allocation calculation will be based on the buy value.
In this example, the maximum allowed value of all individual stock is calculated using a 2% buffer.
In this case, the buy value is ₹20290.
| Symbol | Price | Computed Quantity | Allocated Value | Max Allowed (Value with 2% buffer) |
| Stock A | ₹ 660 | 10 | ₹ 6,600 | ₹ 6,732 |
| Stock B | ₹ 540 | 7 | ₹ 3,780 | ₹ 3,856 |
| Stock C | ₹ 210 | 21 | ₹ 4,410 | ₹ 4,498 |
| Stock D | ₹ 550 | 10 | ₹ 5,500 | ₹ 5,610 |
| ₹ 20,290 |
Step 2: Recomputing the stock quantity due to changing market price.
| Symbol | New Price | Allocated Value | New Quantity |
| Stock A | ₹ 665 | ₹ 6,600 | 9.92 |
| Stock B | ₹ 530 | ₹ 3,780 | 7.13 |
| Stock C | ₹ 211 | ₹ 4,410 | 20.90 |
| Stock D | ₹ 544 | ₹ 5,500 | 10.11 |
| ₹ 20,290 |
Step 3: Round down the quantity and calculate the updated buy value based on the latest prices.
| Symbol | New Price | Allocated Value | New Quantity | Round Down | New Value |
| Stock A | ₹ 665 | ₹ 6,600 | 9.92 | 9 | ₹ 5,985 |
| Stock B | ₹ 530 | ₹ 3,780 | 7.13 | 7 | ₹ 3,710 |
| Stock C | ₹ 211 | ₹ 4,410 | 20.90 | 20 | ₹ 4,220 |
| Stock D | ₹ 544 | ₹ 5,500 | 10.11 | 10 | ₹ 5,440 |
| ₹ 20,290 | ₹ 19,355 |
Step 4: Due to price movement the estimated buy value at the time of approval has significantly changed. Now let’s calculate the difference between the allocated value and the new value (₹20,290 – ₹19,355=₹935), then start optimizing the buy orders to utilize this ₹935 on the initial trading day.
Let’s add one unit to each stock, starting with the one closest to a whole number, until we reach ₹935, staying within the maximum allowed value (the approved value plus a 2% buffer).
| Symbol | New Price | New Quantity | New Value | Max Allowed |
| Stock A | ₹ 665 | 9 | ₹ 5,985 | ₹ 6,732 |
| Stock B | ₹ 530 | 7 | ₹ 3,710 | ₹ 3,856 |
| Stock C | ₹ 211 | 20 | ₹ 4,220 | ₹ 4,498 |
| Stock D | ₹ 544 | 10 | ₹ 5,440 | ₹ 5,610 |
| ₹ 19,355 |
Step 5: For optimal allocation of the remaining amount, one quantity is designated to Stock A, the closest to a whole number, followed by one quantity to Stock C.
NOTE: If the new value exceeds the maximum allocated value, then the new quantity is allocated to the next closest whole number.
| Symbol | New Price | New Quantity | New Value | Max Allowed |
| Stock A | ₹ 665 | 10 | ₹ 6,650 | ₹ 6,732 |
| Stock B | ₹ 530 | 7 | ₹ 3,710 | ₹ 3,856 |
| Stock C | ₹ 211 | 21 | ₹ 4,431 | ₹ 4,498 |
| Stock D | ₹ 544 | 10 | ₹ 5,440 | ₹ 5,610 |
| ₹ 20,231 |
In this scenario, additional optimizations won’t be feasible since the value of stocks exceeds the unallocated value. As a result, the remaining ₹59 (₹20,290-₹20,231) will remain unallocated and will remain in your ledger.
NOTE: Maximum allowed value with 2% Buffer is calculated on the individual stocks.
In some cases the maximum allowed value of individual stocks can be less than 2% but, remember that it won’t exceed 2%.
FAQs
2% Buffer is applied exclusively when scheduling a “Buy Order”.
No, 2% Buffer is just for recalculation of quantities and should not increase your WealthBasket investment.
A 2% buffer is utilized while scheduling a buy order during the initial investment, additional investment and rebalancing your WealthBasket investment.
No, 2% buffer will not be utilized if you edit your WealthBasket investment.
Yes, you can. However, if you place any buy order after the market closes, it will be executed only on the next trading day. The quantity for each stock in your WealthBasket will be determined by the percentage allocation recommended by the curator, the value you’ve approved, and the market prices on the next trading day.
Note:
You will not be able to place these orders from 8:55 am to 9:15 am, and from 3:30 pm to 4:00 pm
If you modify the quantity, the orders will be placed based on the quantity you’ve modified, irrespective of the market price on the next trading day. In this case, your invested value may be different from the originally selected investment value, subject to minimum investment amount as fixed by the curator.
We usually take your approval on the total value of each stock plus a 2% buffer. This makes sure that the allocation percentages don’t get affected by the change in market prices on the next trading day. However, the system also takes into effect that your WealthBasket investment should not exceed your approved amount.
Currently, you can only place investment or withdrawal orders after the market closes for a given trading day, however, rebalance orders can only be placed within the market hours.
If you’ve placed orders after market hours, you can modify or cancel them only between 4:00 pm (on T day) and till 8:55 am on the next trading day.
