No one likes to see an investment lose value, but when that happens, strategically selling at a loss can help lower your capital gains tax liability. “Strategically” is the key word here: offsetting gains with losses is a good way to minimize taxes, but it must be done without disrupting your investment plan.
We designed SigFig’s tax loss harvesting process to do both — utilize the tax benefits of losses, while keeping your portfolio fully invested in each of the asset classes that make up your allocation. Available at no additional cost with your SigFig Managed Account, tax loss harvesting will help you:
- Accurately determine the optimal times to take advantage of tax loss harvesting; and
- Replace any securities sold at a loss with similar ones to keep you aligned with your target allocation.
Tax loss harvesting is just one of our many tax efficiency strategies. If you haven’t turned it on yet, you can do it here. If you want to learn more about it, visit our FAQ section. Start minimizing your investment taxes today.
Our investment research team is constantly looking for ways to improve your model portfolios that deliver the highest possible expected return for a given level of risk. Today, we are excited to introduce to you an update to your portfolio that will provide you with more diversification and greater tax efficiency.
Our team developed investment models which expand the number of investable asset classes. We can now execute broader, more diversified portfolio management without incurring transactions costs.
Here are the changes that are happening on October 29, 2015:
- We are introducing portfolios especially designed to address tax differences between individual taxable accounts and tax-advantaged retirement accounts.
- We are breaking fixed income into more categories—from two to five, though not necessarily increasing the total percentage allocated to fixed income.
Note: Municipal bonds are relevant only to taxable accounts, and will therefore not be implemented for tax-sheltered accounts.
- We are dropping real estate from the taxable accounts while keeping real estate exposure in your tax-sheltered account, so your tax impact is kept to a minimum.
- We added features such as multiple allocations, so different accounts can be managed to different levels of risk.
How is this beneficial for you?
A broader, more diversified portfolio is a big win. The impact of additional asset classes has wide-reaching implications for our portfolio construction. When new asset classes are included in the traditional mean-variance optimization model, their inclusion often means we can create lower-risk portfolios without losing any expected performance. Some asset classes have superior volatility and return tradeoffs, while others may exhibit worthwhile inclusion in portfolios because of correlation effects with other holdings.
With these changes, we can deliver higher expected returns to our clients by allocating portfolios sensitive to the tax impacts of the underlying holdings. For example, some asset classes, such as real estate, tend to produce higher tax liabilities than long-term stock holdings and offer better after-tax returns in retirement accounts than individual brokerage accounts.
Our investment analysis expects that over the long term, these modifications could produce additional annual returns ranging from 0.5% to 1.0%. Over a 20-year investment horizon, that could mean an additional 29% to 60% in total return.
How does this impact your portfolio?
SigFig will begin transitioning Managed Account clients automatically into this new portfolio, starting on October 29, 2015. If you prefer your current allocations, we can continue managing your portfolio accordingly. You must contact SigFig client support to do so at (855) 9-SIGFIG or email@example.com.
In practice, the transition from our existing allocations to the new portfolios means a couple things for our investment team and our customers. First, we’ll conduct a tax-sensitive rebalancing of your portfolio. We will sell ETFs in the asset classes that we plan to replace or adjust, and we will buy commission-free ETFs in the new asset classes with the goal of improving your portfolio’s performance.
In tax-advantaged accounts like IRAs, there are no tax impacts with this rebalancing. Our team will execute the transition to the new allocations. After all, we want to make sure that you have as much of your hard-earned investment dollars working for you.
In taxable individual and joint accounts, we strive to minimize tax impacts. Generally, we’ll be able to liquidate strategically in holdings to avoid a net capital gain. It is possible that the realized capital gains of some ETFs offset the realized losses of others.
Since the inception of SigFig, we’ve always focused on the mobile app experience for our investors—specifically, how we can help them better manage their wealth. In the last few months, we went back to the drawing board and redesigned our mobile apps. Today, we are releasing redesigned mobile and tablet apps for iOS and Android. In all these apps, you can now:
- Stay on top of potential investment issues: Connect your investment accounts with SigFig, and see our recommendations on how to address issues such as high fees, asset allocation, and global diversification.
- Learn from the investment pros: Flip through our new “Guide to Smart Investment Management”, which synthesizes data insights from over one million portfolios into articles like “4 easy ways to improve your investments” or “How much of your portfolio should be in international stocks?”
- Get a bird’s eye view of your returns: With updated navigation and reports, you can now slice and dice your portfolio returns by timeframe to better understand long-term returns.
For a short overview, check out this demo video:
These new apps are on the App Store and Google Play today, or install by tapping on one of the badges.
The SigFig team is updating the portfolio growth projection chart to reflect the median (i.e., 50% outcome) correctly. The projection chart on our site listed the mean outcome of a Monte Carlo portfolio simulation instead of the median outcome. This does not reflect any inaccuracy in terms of model portfolio composition or trading of client accounts.
As new technologies emerge, SigFig searches for ways to bring value to our customers. Apple Watch enables us to deliver a unique and convenient new way to engage with the SigFig App on your wrist so you can invest and track your portfolio on the go.
With the new SigFig app for Apple watch, you can easily gain the most relevant, timely insights about your investments at a glance. Swipe to see your portfolio total value, daily change, gainers and losers, asset allocation, and geographic diversification. SigFig for Apple Watch keeps you in the know by sending you personalized alerts, so you will always know how your investments are doing.
Invest with SigFig and Get a free Apple Watch
We’re excited to share this new experience with SigFig users — and even more excited to announce a limited-time promotion for new SigFig asset management clients. Until May 1, 2015, SigFig is offering a free Apple Watch to all new clients who sign up for a managed account and deposit $100,000 or more.* This offer is limited for one week only, so act now!
This is simply the beginning. The Apple Watch will help us change the way people track and manage their investments. We’re excited to hear your feedback and feature requests following this first release, and we will continue to work relentlessly to improve your experience.
* Users must remain SigFig clients for 18 months with a minimum balance of $75,000. Learn more.
No investor would set out to do the wrong thing with their money, let alone lose any of it in the process. Yet, 9 in 10 people make investing mistakes, including:
- Single-stock concentration risk. Among investors who own stocks, six in 10 have more than 10% of their portfolios invested in a single stock.
- High fees. Among those who own mutual funds or ETFs, six in 10 own at least one high-cost fund (with an expense ratio of 0.5% or higher).
- Cash drag. More than a quarter of investors (27%) have at least 10% of their portfolio sitting idle in cash.
- Home Bias. For 60% of investors, international equities represent less than 10% of their equity portfolio.
To help investors easily detect these errors, today we are proud to announce the launch of SigFig Guidance. By simply connecting your brokerage accounts to SigFig and completing a brief questionnaire, we will instantly analyze your portfolio, detect and help you address potential issues, such as:
While investors can employ SigFig to manage their accounts, the Guidance tool offers actionable suggestions at no cost, and with no commitment from the investor.
Our financial consultants are also available to speak with customers at any time.
“Traditional advisors often charge thousands of dollars to get these kinds of detailed insights, and they aren’t truly impartial in their recommendations,” says SigFig CEO Mike Sha. “We have technology that can manage investor assets at a fraction of the cost of traditional advisors. We have decided to offer free analysis to arm investors with as much information as possible to improve their performance and reduce fees.”
If you have any questions, you can speak with one of our financial consultants any time at 1-855-9SIGFIG, or email us at firstname.lastname@example.org.
Note: All data cited in this article is aggregated and anonymized from more than 250,000 investors who sync their portfolios with SigFig.