Portfolios

Understanding our offerings
Why do you have different portfolio families?

Our mission is to make investing easy and transparent, and provide investment options for all levels of knowledge and experience with investing. Towards this goal, we offer different portfolio families for different levels of involvement.

How involved do I need to be to make a choice?

We offer options for all - you can opt to let us choose an optimal portfolio for you, or pick from the range of Diversified and Active portfolios or a combination of these. Portfolios are rebalanced for you and the allocations are managed by the Portfolio Managers.

Understanding Asset Allocation
What are Asset Allocation portfolios?

Interactive Advisors offers several diversified multi-asset portfolios that are dialled up or down for risk, offer good diversifcation across different asset classes, and attain this diversification by investing in low-cost, liquid ETFs. More information can be found under the 'Resources' drop-down menu in the white paper on Asset Allocation.

How do you select the right Asset Allocation portfolio for me?

To ensure that you invest only in portfolios that are suitable for your investment objectives, risk tolerance and financial capacity, Interactive Advisors assigns all clients a personal client risk score on a scale of one to five, based on their responses to a risk questionnaire. The client risk score and account type (IRA vs. non-retirement) helps Interactive Advisors in determining which Asset Allocation portfolio is right for you. More information about risk scoring can be found under the 'Resources' drop-down menu on the Risk scores page.

Who manages the portfolios?

The Interactive Advisors Investment Management team, under the leadership of Chief Investment Officer Sanjoy Ghosh, manages the Interactive Advisors Asset Allocation portfolios.

Understanding Diversified Portfolios
What are Diversified portfolios?

Interactive Advisors offers low-cost access to several well-diversified portfolios using data from industry-leading providers like FTSE Russell, WisdomTree, SSGA, Legg Mason as well as our own investment team.

Strategies include Smart Beta, Index tracking and multi-asset portfolios. All Diversified portfolios are offerred using fractional shares and basket commissions, reducing the costs and minimums associated with investing in these strategies. You can view all the Diversified portfolios and estimate your cost to invest in them here with details.

What is Smart Beta?

Smart Beta is a broad term used to describe systematic, rules-based investment strategies that do not use conventional market capitalization weights to construct a diverse portfolio. In an attempt to deliver a better risk and return trade-off than conventional market cap-weighted indices, these portfolios use alternative weighting strategies based on measures such as value, volatility or dividends.

Smart Beta products do not usually involve as many active investment decisions as pure active management, but are slightly more complex than market-weighted passive products. This is reflected in the typical cost for these strategies, which tends to be somewhere between that of active and passive strategies.

More information can be found under the 'Resources' drop-down menu in the white paper on Smart Beta.

Who manages the portfolios?

Diversified portfolios are constructed and managed by Interactive Advisors using data from industry-leading providers and our own Investment Management team.

How are portfolios rebalanced?

The Interactive Advisors Investment Management team, which is responsible for constructing the portfolios, continually monitors for any relevant events and periodically rebalances the porfolios.

Understanding Active portfolios
What are Active portfolios?

Interactive Advisors provides low-cost access to a curated selection of talented investment managers who have a mandate to pursue enhanced returns. Active management is an approach to investing which maintains that Portfolio Managers can produce greater returns for a given strategy than can be achieved by passively holding a given index. You can view all Active portfolios and estimate your cost to invest in them here.

Who manages the portfolios?

Active portfolios on the Interactive Advisors platform are managed by third-party investment advisors or hedge-fund managers. These Portfolio Managers fund and trade a proprietary manager-owned brokerage account, which is automatically replicated in clients' brokerage accounts based on which portfolios the clients have selected to invest in.

What is the difference between the Diversified and Active portfolios?

Diversified and Active portfolios differ in the strategies they employ to pursue returns as well as the management of the portfolios.

Working with fractional shares
What is a 'fractional share'?
A fractional share is a unit of stock that amounts to less than one full share. More information here
Why are fractional shares useful?
Fractional shares allow you to invest in diverse portfolios with many holdings even with a low investment amount. In essence, fractional shares allow investors to invest lower amounts in a larger selection of stocks and ETFs, some of which may be too expensive for the investor to purchase in whole shares. Interactive Advisors is able to diversify the Asset Allocation Portfolios, Smart Beta Portfolios and the other Diversified Portfolios and offer them to Interactive Advisors clients investing a relatively small amount due to its ability to trade fractional shares.
Can fractional shares be traded on public exchanges?
Stocks cannot be traded in fractions on public exchanges, which means that you need a counterparty willing to transact with you in fractional shares.
How can I trade fractional shares in my Interactive Advisors account?
Interactive Brokers LLC, Interactive Advisors' affiliated broker-dealer, facilitates trading in the Asset Allocation Portfolios, Smart Beta Portfolios and the other Diversified Portfolios by executing all fractional share orders on behalf of Interactive Advisors clients against one or more liquidity providers. These liquidity providers will sell or buy fractional shares that Interactive Advisors clients would not otherwise be able to trade in the open market.
Is there anything else I should know about the fractional share trades in my Interactive Advisors account?
Note that there is a potential conflict of interest in connection with fractional share transactions in your Interactive Advisors account as Interactive Brokers LLC will act as broker for both Interactive Advisors clients and the liquidity provider counterparty to these transactions. You have consented to these transactions in the Investment Management Agreement. You may revoke your consent to such transactions at any time by written notice to Interactive Advisors or Interactive Brokers, but you will no longer be able to invest in the Asset Allocation Portfolios, Smart Beta Portfolios and the other Diversified Portfolios as they rely on fractional shares.
How do corporate actions work for fractional shares?
You will receive payments or value commensurate to your fractional ownership in the case of stock dividends, stock splits, mergers or other mandatory corporate actions (including cash dividends). You will not, however, have any voting rights or a mechanism to make voluntary elections on your fractional share holdings, and will not receive any shareholder documentation for holdings of less than one share.
How do I liquidate my holdings when I own fractional shares?
You can redeem from a Portfolio and close out your positions at any time. If you do this, Interactive Brokers LLC will sell your whole shares to the market and your fractional shares to the liquidity provider. You will incur commissions in connection with these trades.
What will happen to the fractional shares if I want to transfer my investment to another broker?
You will not be able to transfer fractional share holdings to another brokerage firm and will need to sell them to the liquidity provider. You will incur commissions on these trades.