Diversification allows us to build portfolios properly tailored to each client’s preference to attempt to maximize returns at their preferred level of risk. We invest in a diverse pool of asset classes, primarily a mix of stocks, bonds, and cash, in order to create an investment strategy that seeks to have collectively lower risk than if you were to solely invest in any one individual asset.
We Use ETFs
For investment purposes, we use a portfolio of passively managed exchange-traded funds ("ETFs") selected from a database of over 1,400 different ETFs based on their investment focus, tracking error, historical performance, and operational efficiency. Our strategy focuses on Modern Portfolio Theory ("MPT"), which provides the framework for targeting the highest portfolio returns possible given a certain level of portfolio risk.
Buy & Hold Investment Strategy
We’re going to get really meta here. We passively-manage your ETFs. Our buy-and-hold investment strategy means that we’re not regularly buying and selling the ETFs in your account. Instead we encourage our clients to hold their ETF investments in their account in order to capture the possible long-term increase in value. So instead of paying short-term capital gains tax on sale of securities within a year of purchase, when we do sell your assets, you’ll most likely be paying the lower long-term capital gains tax on assets that you have held for more than a year.
Minimize Capital Gains to Maximize Your Return
Every time you make a deposit or your account earns dividends, we invest the cash so that all of your money can start earning returns.
Every time we invest your money, you’re “buying” ETFs. Like the price of a stock, the price of each ETF will vary on a day-to-day basis. So, let’s say you invest on two days – on day one the ETF costs $10, on the second day the ETF price goes up to $11.
If you withdraw some of the money from your Axos Invest account a few months later, the ETF price may have risen to $12. We’ll sell the ETF we bought for your account at $11 first to minimize the amount of capital gains you get ($12 - $11 = $1 gains), which in turn minimizes tax consequences.
We Automatically Rebalance Your Portfolio
Let’s say there’s a price fluctuation in the ETFs in your account. When your portfolio allocation swings by 5% or more, we’ll rebalance.
Rebalancing means we’ll adjust the allocation in your portfolio so it matches the allocation you originally selected. The kicker is instead of just selling your ETFs to rebalance your portfolio, we’ll first use your dividends and deposits. Less securities sold=less capital gains taxes for you.
Tax-Loss Harvesting Takes Tax Efficiency To The Next Level
While we typically use a buy-and-hold investment strategy, our tax-loss harvesting feature will automatically sell ETFs that have experienced small losses and replace them with similar ETFs. Your portfolio value and your investment in the ETF asset classes stays the same. The difference is that you “realize” the loss and are therefore able to claim it as a tax deduction (i.e. – capital losses).
Invest and Chill
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Axos Invest and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Before investing, please carefully consider your investment objectives, charges and expenses. Advisory services provided by Axos Invest Inc., a registered investment advisor. Brokerage services provided to clients of Axos Invest Inc., by Axos Invest, LLC a broker-dealer and member FINRA / SIPC. Investments: NOT FDIC Insured | No Bank Guarantee | May Lose Value. Axos Invest, Inc., and Axos Invest, LLC are subsidiaries of Axos Financial, Inc., (NYSE: AX). All rights reserved.
For a free copy of our ADV Part 2A (Disclosure Brochure), please visit our page on the Investment Adviser Public Disclosure.