Portfolio risk — methodology v1

The score is a deterministic calculation over your own holdings — never a model, never an AI-generated figure. The same portfolio always produces the same number, and every run is stored with the model version that produced it, so a score you were shown last month can be reproduced exactly.

Higher means more concentrated and more exposed. It does not mean worse. Concentration is how positions are taken; an NRI deliberately overweight in Indian equity is expressing a view, not making an error. This page describes the arithmetic so you can decide what the number means for you.

The four measurements

  1. Concentration by holding (30%) — a Herfindahl index over every holding, normalised so that a single holding reads 100% and an even spread reads 0%, whatever the number of positions. Normalising matters: a raw index would score an evenly split two-holding portfolio at 50%, when that is the least concentrated two holdings can be.
  2. Concentration by asset class (25%) — the same index over classes rather than holdings. Ten funds tracking one index are diversified on paper only, and this is the measurement that says so.
  3. Currency mix against spending (30%) — half the sum of absolute differences between the share of the portfolio in each currency and the share of your spending in that currency, over the last 90 days. It reads directly as "this much of the portfolio is in a different currency from the outgoings". Ninety days rather than one month, so a quarterly obligation lands inside the window exactly once.
  4. Held in illiquid assets (15%) — the share in property and retirement, which cannot be realised quickly without taking a haircut.

How they combine

Each measurement lands between 0 and 1, is multiplied by the weight above, and the total is expressed out of 100. The weights are a judgement — concentration carries more than liquidity because a single-holding portfolio is the case this score exists to surface — and they are stated here rather than hidden so you can read the four measurements instead of the total if you disagree with them.

A measurement that cannot be taken is left out and the remainder rescaled, not scored as zero. With no transaction history there is no spending mix to compare against, so the currency measurement is omitted entirely — no history is not evidence that your currencies match.

What this is not

It is not advice, and nothing here recommends buying, selling or rebalancing anything. Wise4NRI is not a broker, an adviser or a distributor (PRD §3.2), and a descriptive figure that shipped with a suggested action attached would be a recommendation wearing a measurement's clothes.

It also says nothing about the quality of what you hold. Two portfolios with identical concentration score identically whether the holdings are index funds or a single speculative stock.