What are the portfolio options?

We currently offer three InvestStronger portfolio options, each of which is comprised of a collection of low-cost ETFs and is customized to your personal risk tolerance.

Passive Strength:

Investment factors are those characteristics of stocks that tend to drive performance. Stocks that exhibit similar core characteristics tend to deliver performance that is roughly similar as well. Examples of core investment factors are 1) value (stocks that are cheap relative to their earnings or sales), 2) quality (stocks with high quality balance sheets, low levels of debt, and strong and consistent profitability), 3) momentum (stocks that have shown market leadership over the recent 12 months). Over the long term, each of these factors has historically led to outperformance. The Passive Strength equity portfolio includes five ETFs that deliver targeted factor exposure, with target weights to each ETF adjusted on an annual basis. Factors included in the portfolio are momentum, value, high quality, high dividend, and low volatility.

Because momentum is the strongest and most consistent investment factor, the portfolio is more heavily weighted to that ETF, with the other four ETFs serving as diversifying offsets to the core exposure. This portfolio is the least active of all lnvestStronger offerings, and as such, is the most tax­efficient but offers the lowest potential for outperformance. The equity portfolio can be combined with up to 50% exposure to core fixed income for those clients desiring a balanced account.

Domestic Strength:

Within the US equity market, groups of stocks that exhibit similar characteristics tend to go through extended periods of either outperformance or underperformance relative to the overall market. When technology stocks do well as a group, for instance, they tend to do well for a period of quarters or years rather than weeks or months. The Domestic Strength portfolio is a tactical portfolio that rotates exposure to sectors, industries, and investment factors (value, momentum, quality, etc.) that are currently showing the most strength in the US market. It will maintain exposure to at least 5 sectors and 3 factors at all times, but will systematically move the portfolio to where the current strength is located. The targeted weights of each ETF are rebalanced monthly.

Due to its highly tactical nature, the Domestic Strength portfolio offers significant outperformance potential; however, it is expected to generate short-term capital gains and losses due to the monthly rebalancing. The equity portfolio can be combined with up to 50% exposure to core fixed income for those clients desiring a balanced account.  

Global Strength:

The Global Strength portfolio leverages the same core approach as the Domestic Strength portfolio but adds international and emerging market stocks to the portfolio. The portfolio will always hold a minimum amount of exposure to foreign stocks but will tactically increase that allocation based on the strength of overseas markets. Within the domestic portion, the portfolio will be concentrated in those sectors and factors that are showing the most strength, mirroring the Domestic Strength portfolio. On the international side, exposures will be at the region or country level and will again be concentrated in those areas that are showing the most persistent outperformance. The portfolio target weights are adjusted monthly.

As a global strategy, the Global Strength portfolio offers the most diversification of all lnvestStronger portfolios. However, due to its highly tactical nature and broader pool of investments from which to select, the portfolio also offers the highest potential outperformance relative to its benchmark. Like the Domestic Strength portfolio, it is expected to generate short-term capital gains and losses due to monthly rebalancing of target weights. The equity portfolio can be combined with up to 50% exposure to core fixed income for those clients desiring a balanced account.

How is my portfolio managed?

Each lnvestStronger portfolio has been developed and is overseen on a daily basis by the portfolio management team at CooksonPeirce and leverages the firm’s long-term methodology of potentially achieving market­beating returns. At its core, the underlying methodology for each portfolio is based on the idea of “relative strength,” that is, that stock market winners tend to keep winning. Holding high-performing investments for as long as they continue to perform well, and conversely cutting poor-performing investments quickly, has proven to be a highly effective approach to potentially generating strong performance. Investing in strength is the key to each InvestStronger portfolio.

An automated system monitors your portfolio closely—this includes:

Rebalancing as needed: Your portfolio won’t trade every day however, we perform daily check-ins. When an asset class exceeds its allocated portion in your portfolio, the excess ETF shares are sold, and the proceeds are used to buy positions that have fallen below their target percentage; this keeps your portfolio consistent with your Investor Profile.

Professional oversight: We will periodically evaluate each portfolio to make sure that it’s adhering to our standards and providing the best ‘relative strength’ for your goals. 

Tax-loss harvesting: If you have an account with $50,000 or more in assets, and you’ve elected to automate tax-loss harvesting, your account will be tracked daily for opportunities to offset capital gains by strategically realizing losses.

Why and when are shares sold?

Typically, exchange-traded fund (ETF) shares in your portfolio will be sold for one of two reasons: to rebalance your strategic asset allocation, or to take advantage of tax-loss harvesting opportunities. An entire ETF position might also be sold if it no longer meets the investing criteria, but such instances are rare. 

What is rebalancing?

Every portfolio has a target asset allocation—a combination of stocks, bonds, and cash determined by the investor’s stated goals, risk tolerance and time horizon. Over time, however, contributions/withdrawals, gains, and losses cause your portfolio to stray from the original target and become unbalanced.

The solution is rebalancing—the act of periodically buying or selling assets to restore your portfolio to its original target allocations. Your InvestStronger account automatically rebalances, thanks to an algorithm that adjusts your mix of ETFs when an asset class shifts above or below its target range.

What is tax-loss harvesting?

If a taxable security has lost value since you purchased it, you can sell it at a loss, and use the loss to offset your capital gains, and up to $3,000 of ordinary income a year, for federal income tax purposes. This is the essence of tax-loss harvesting, a powerful process designed to reduce investment-related taxes.

Tax-loss harvesting can be complicated and time consuming but with an InvestStronger account of $50,000 or more, tax-loss harvesting will be handled automatically once you enroll in this service. Your accounts will be monitored for tax-loss harvesting opportunities—examining not only the loss itself, but also your cost basis for tax purposes, as well as the amount of time you’ve held the position. Please note, if your spouse also has an InvestStronger account, you can elect to have those accounts grouped to be considered together in the tax-loss harvesting process. 

What costs and fees are charged?

You’ll be charged an annual fee of 40 basis points (.40%) in quarterly increments at the beginning of every quarter (i.e. .10% at the beginning of Q1, .10% at the beginning of Q2, etc.). Fees are based on the market value of the assets in the Account at the end of business on the last day of the preceding quarter and are billed in advance.

Is there an additional fee for rebalancing or tax-loss harvesting? 

No, InvestStronger leverages the power of technology to automate these complex tasks. Tax-loss harvesting is available for taxable portfolios with $50,000 or more, and there are no additional fees for activating this feature in your account. You must be enrolled for tax-loss harvesting to occur.

How do I access my tax forms?

1099 Composites will be available online beginning in February. To access them, log in and select “Statements and Documents” from the menu, then “Tax Documents”. If you would like a paper copy, you can print from there. 1099 Composites are not mailed.

What is an RMD?

Once you reach age 72, the IRS requires you to take money out of your traditional IRA, SEP IRA and SIMPLE IRA accounts. In most cases, this is not required for a Roth IRA. These mandatory withdrawals are called Required Minimum Distributions (RMDs).

Do I need to take RMDs from my Roth IRA?

Required Minimum Distributions (RMDs) are not required for Roth IRAs unless you have inherited one. 

How do I calculate my RMD amount?

To determine your RMD, start by listing the fair market value* of your IRAs as of December 31 of the previous year. You’ll need to calculate you RMD separately for each IRA you own, but you can take your total RMD from a single IRA or a combination of IRAs. 

*Fair market value and RMD calculations may need to be adjusted to include any transfers or rollovers to your Schwab retirement account(s), a conversion from a traditional IRA to a Roth IRA and back, or any correction for security price after year-end.

When do I need to take an RMD?

Your first RMD must be taken no later than April 1 of the year following the calendar year in which you turn age 72. Subsequent RMDs must be taken by December 31 of each year.

How do I take RMDs from my IRA account?

Once logged into your account, select the “Add/Withdraw Money” option from the menu and select to move money from your IRA account to the taxable account of your choice. Answer the remaining questions, making sure to verify the tax withholding information.

What are the IRS requirements regarding RMDs?

Your RMD distributions, including deductible contributions and investment earnings, are subject to federal (and possible state) income tax at ordinary income tax rates. However, distributions of any nondeductible contributions to a traditional IRA are generally free from federal tax.

You’re free to withdraw more than the RMD amount, but you must pay taxes on the extra amount, too. However, amounts withdrawn in excess of your annual RMD amount won’t satisfy your RMD requirements in future years. Follow the IRS guidelines and consult your tax advisor.

Will I have to pay taxes on RMDs? 

The taxable amount of your RMD is taxed as ordinary income at the federal income tax rate. State taxes may also apply. When you take your RMD, you may have state or federal taxes withheld immediately, or you may be able to wait until you file your taxes. Unless you give us different instructions, the IRS requires us to automatically withhold 10% of any RMD for federal income taxes.

What kind of IRS reporting can I expect?

Each year, withdrawals and any tax withholding from your tax-advantaged retirement accounts will be reported on Form 1099-R to both you and the IRS. We’re also required to notify the IRS that you must take an RMD for the year.

Are there any penalties if I don’t take my RMD?

You may be liable for a 50% penalty on insufficient or late RMD withdrawals. Follow the IRS guidelines and consult your tax advisor.