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Detailed Instructions About How it Works

Customer Instructions for the Initial Setup and Launching an AI Investor 360 Portfolio

  1. Access and review our custom portfolio details. We our customers these details in an Excel spreadsheet that contains the list of stocks that make up each portfolio and the relative percentage weights of each stock within the portfolio.
  2. Determine which of our portfolios you want to invest in and the initial amount you will invest in each portfolio. As a best practice, your initial investment should be small to start with and then built up over a few weeks or months. This strategy is referred to as “dollar cost averaging” and helps you not have to worry about timing the market just right as you build up your initial portfolio investment amount.
  3. Log into either your Fidelity (fidelity.com) or M1 Finance (m1.com) brokerage accounts. If you are using Fidelity, you need to sign up for their “Fidelity Basket Portfolios” tool, which cost $4.99/month. M1 Finance calls custom portfolios “Pies” and they do not charge customers for their Pie building tool. You can use either brokerage platform. However, Fidelity has more features and a much larger customer base, so it is our preferred brokerage platform.
  4. Using either Fidelity’s Basket builder or M1 Finance’s Pie builder, create the draft portfolios for each portfolio you want to invest in. This is accomplished by adding each stock to the draft portfolio and specifying its target percentage weight. Note that Fidelity allows you to specify weights down the first decimal level and M1 is only specified at the whole number level.
  5. After you have completed building the draft portfolio, the next step is to go ahead and buy the draft portfolio. You must specify which investment account to use to buy the portfolio and the initial fund amount from that account you will use launch the portfolio. After completing the required steps to buy the portfolio, click on any remaining buttons to finalize the purchase. Your brokerage platform will then automatically execute the trades on your behalf to create the portfolio.
  6. Validate that the portfolio was created by viewing the account details that contain the portfolio. You should now see the portfolio you just created show up and you should be able to review its details.

Customer Instructions for the Ongoing Management of an AI Investor 360 Portfolio

Over time, you will need to manage each of your portfolios for various reasons. Your online brokerage account allows you to buy into, sell out of, rebalance, and adjust the target weights of your portfolio. Rebalancing and adjusting the target weights to keep your portfolios current with the latest AI Investor 360 specification for a particular portfolio. It is up to each investor to determine how closely they will mirror the latest released portfolios, since there are tax implications to be considered, as described below, when making any portfolio updates.

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Buying:

If you want to add funds into a portfolio over time, our recommendation is that you add funds on regularly scheduled or incremental basis. It is risky to add one large sum of money to a portfolio at one point in time, since you might make this large addition of funds when markets are up over a short time window. One reason you must buy into a portfolio over time is that each portfolio will generate dividend payments into your account. You have two options to reinvest dividends back into the portfolio that generate them. One option is for you to periodically, say every 3 months, go into your account and make an additional of funds into your portfolio using the accumulated cash from dividends. The second option is to set an optional preference to have any dividends from a stock to be automatically invested back into that specific stock. This second option could cause a slight drift in your portfolio weights over time, but it is relatively small and is managed through periodic portfolio rebalancing.

Selling:

If you want to reduce your investment in any portfolio, it straightforward to make a sell request through your brokerage platform. Typically, this is done by going into the specific portfolio that you want sell out of and specifying the amount of the portfolio you want to sell. If the portfolio you selling out of is in an individual account and you have held the positions in the portfolio for less than one year plus one day, then you will be taxed on any gains or losses according to income tax rates. You will pay your marginal tax rate on any gains, and you will lower your AGI on any losses.

Rebalancing:

The need to rebalance arises because the values of the stocks within a portfolio all increase or decrease over time at different rates of change. As an example, suppose a portfolio calls for weighting stock A at 8% and stock B at 8%. Let’s suppose that stock A increases in value by 40% and stock B only increase by 5% over a period of a 6 months, while all the other stocks in portfolio stay flat. Even your portfolio had each stock originally weighted at 8%, after the growth of stock A its portfolio weight has increased to 9.1% and stock B’s weight is 6.9%. If our portfolio update after 6 months still has stocks A and B both weighted at 8%, then you can choose to rebalance your portfolio so that weights of A and B are reset to 8%. Note the decision to rebalance a portfolio is dependent on your tax implications. For retirement accounts, you can rebalance a portfolio as many times as you like without any tax implications. For individual accounts, you are taxed at income tax levels for any investments you hold for less than one year plus one day. So, if you rebalance a portfolio within a year then you will have file any gains or losses from the rebalancing adjustments at income tax levels. If you rebalance after one year plus one day, then your net gains or losses are taxed at your specific capital gains tax rate.

Adjusting Target Weights:

Adjusting the target portfolio is required when the weights of stocks in a portfolio significantly change, when new stocks are added to a portfolio, or when stocks need to be removed from a portfolio. Both the Fidelity and M1 brokerage platforms allow you to edit your portfolios so that you can easily adjust target weights and add/remove stocks from a portfolio. After making the adjustments, you will click on the button to finalize the request and then the trades will be executed. As discussed in the rebalancing step above, there are tax implications for individual account portfolios when you adjust portfolios since you will sell stocks within the portfolio to perform most portfolio adjustments.