Portfolios

We offer options for all - you can opt to have us recommend a portfolio for you or you can pick from our full selection or do both. Portfolios are rebalanced for you and the allocations are managed by the Portfolio Managers.

Interactive Advisors provides low-cost access to a wide-range of portfolios that differ in the strategies they employ to pursue returns.

Some examples include growth and income portfolios, portfolios that invest in specific sectors such as healthcare and technology, portfolios that track an index, portfolios that invest in socially responsible companies, asset allocation portfolios, and Smart Beta portfolios. You can view all the portfolios and estimate your cost to invest in them here with details.

Portfolios are managed either by our Chief Investment Officer and his Investment Management team or by carefully selected Registered Investment Advisors. We also offer portfolios we oversee that are built on data provided by industry leaders, such as FTSE Russell, Legg Mason, State Street Global Advisors, Global X and Wisdom Tree.

Portfolios managed by our Investment Management, which is also responsible for constructing the portfolios, are continually monitored for any relevant events and also periodically rebalanced.

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.

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

To ensure that you invest only in a portfolio that is 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 creating the right Asset Allocation portfolio for you. More information about risk scoring can be found on the Risk scores page.

Customizing means you can change the target allocations of the ETF components that make up the Asset Allocation portfolio. There is a permissible range for each ETF component, protected by guardrails. This is so your overall investment stays diversified. You do not need to customize your Asset Allocation investment. However, if you have an opinion that you want taken into consideration then there is the ability to customize.

You can specify the level of ESG focus in your Asset Allocation portfolio by adjusting the ETF focus slider on your portfolio dashboard.

Note that since all ETFs do not have an ESG counterpart with reasonable expense ratio, liquidity, appropriate ESG characteristics, availability and a high degree of correlation with the standard ETFs, only a subset of ETFs are different in the standard version versus the ESG focused version. Decisions to select specific ESG-focused ETFs as replacements for standard ETFs (when you select an ESG focus for your Asset Allocation portfolio investment) are based on the ESG-focused ETFs having:

• reasonable expense ratios, liquidity, and availability;
• appropriate ESG characteristics as determined based on the ESG ETF issuers’ public representations; and
• high degree of correlation between the standard and ESG ETFs in terms of asset class exposure and risk-return ratios based on issuer data. Without prior notice to you, we retain the discretion to choose which ESG ETFs to use as replacements for standard ETFs and to use additional ESG ETFs as alternatives for standard ETFs without an ESG counterpart at this time if you select an ESG focus for your investment.

The specific ESG focus you select is your ultimate responsibility. The performance of an Asset Allocation investment with an ESG focus may be worse or better than the performance of a standard Asset Allocation investment without an ESG focus.

A focus of 0% will result in your portfolio being composed of standard non-ESG-focused ETFs, while a focus of 100% will result in a subset of the ETFs being completely replaced by ESG-focused ETFs that provide similar asset class exposure. A partial ESG focus of 25%, 50% or 75% will result in a partial replacement of a subset of standard ETFs with ESG-focused ETFs.

ESG-focused ETFs generally have higher expense ratios than their standard counterparts, resulting in higher ETF fees for clients who decide to invest in them by choosing to select an ESG focus for their Asset Allocation portfolio investment.

Harvesting a tax loss is the action of selling an asset in your portfolio at a loss to offset a gain, which can potentially reduce your year-end tax liability. The asset sold is replaced with a different asset, which provides similar exposure to your initial position. This value-add strategy of selling assets at a loss to harvest tax losses will be implemented algorithmically in your IA Asset Allocation portfolio if you choose to activate this algorithm for your account. By activating the tax loss harvesting functionality for your account, you acknowledge you have received and reviewed the tax-loss harvesting disclosure picture_as_pdf .

Each quarter, the tax-loss harvesting algorithm checks to see which of your ETFs have unrealized net losses. If the loss is deemed sufficient, the algorithm sells the ETF and replaces it with a different, but historically correlated ETF. When deciding whether or not to harvest a loss and swap an ETF, the algorithm considers factors such as the size of the unrealized loss, the expected value of harvesting the loss, and wash sale avoidance considerations.

The Interactive Advisors tax-loss harvesting algorithm is available to all clients who are invested in our custom Asset Allocation portfolio with a taxable account. Tax-loss harvesting is not available for tax-advantaged retirement accounts, such as IRAs.

You can activate the tax-loss harvesting strategy in your Asset Allocation portfolio by checking the box on the Asset Allocation portfolio page in your IA client dashboard. By activating the tax loss harvesting functionality for your account, you acknowledge you have received and reviewed the tax-loss harvesting disclosure.

When swapping ETFs, we aim to leave the risk and return profile of your Asset Allocation portfolio unchanged. Each replacement ETF is evaluated based on its correlation to the primary ETF, the expense ratio, liquidity, as well as the underlying index of the ETF. If tax-loss harvesting gets invoked based on harvesting rules being met, the entire position is swapped with the alternate ETF.

The implementation of our tax-loss harvesting algorithm assumes you do not hold and trade the ETFs held in your Asset Allocation portfolio in other brokerage accounts outside of IA, which could negate the tax benefit of harvesting tax losses at IA. Interactive Advisors does not provide tax advice. Please consult with your tax advisor if you have further questions.

Avoiding paying capital gains tax by offsetting the gains with harvested losses does not mean that you never need to write a check to the IRS. By harvesting losses now, you are deferring when you write a check to the IRS.

Our tax-loss harvesting algorithm is run as a part of our quarterly rebalance of the Asset Allocation portfolio.

If you choose to activate tax-loss harvesting in your Asset Allocation portfolio, we will harvest losses on positions each quarter automatically. Information on your taxable gains and losses can be found in the reports section of your dashboard.

Tax-loss harvesting is a value-add investment strategy that can potentially add between 0.3% and 0.9% in excess return. Learn more about the strategy in our TLH white paper.