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The following demos illustrate different aspects of the intelligence of our investing algorithm.

Direct Indexing can increase returns in taxable accounts

With Direct Indexing, instead of buying a fund that tracks a stock index, we buy the individual stocks. This strategy can increase after-tax returns through tax loss harvesting. Selected losses are harvested, and the proceeds are invested in a way that attempts to maintain similar overall portfolio exposure to the stock index.

More details here.

Direct Indexing can increase returns in taxable accounts

With Direct Indexing, there is a tradeoff between tracking a stock index closely and increasing returns through tax loss harvesting. Our backtest infrastructure, together with automatically generated web-based charts, allows us to simulate investing behavior over a multi-year period and investigate the results, which allows us to choose an optimal point in the tradeoff.

More details here.

Tax-sensitive rebalancing

We rebalance less closely to the target portfolio if it is not worth the upfront tax cost. We quantify and evaluate the tradeoff of tax efficiency vs. tracking accuracy, instead of using a simple rule such as "never sell gains" which would only consider the tax efficiency side of the tradeoff. For example:

More details here.

Improved risk reduction using a dynamic factor model

We use a sophisticated mathematical model to offset external unsellable holdings. This tracks the target allocation better than a simple approach.

More details here.

Considering external assets vs. ignoring them

We track the target portfolio better when we do not ignore external holdings.

More details here.

Tax loss harvesting activity scales with tax bracket; also, TLH can coexist with external holdings

The lower the account holder's tax bracket, the less the benefit from TLH will be. We consider the tax bracket when deciding how aggressively we should harvest losses, instead of treating TLH as an on/off feature and always doing the same actions when it is turned on.

Additionally, there is never a choice between using one feature or another; the system is perfectly capable of handling TLH in conjunction with tracking the target.

More details here.

Simple pairs-based tax-loss harvesting (TLH) can increase after-tax returns

After-tax returns are higher when we apply a simple ETF-pair-based tax loss harvesting strategy. We are not the only ones who can do this, but we have the ability to display an individualized benefit to clients based on their tax bracket, external holdings, etc.

More details here.

Tradeoff of misallocation vs. tax efficiency

If we start with a big amount of securities at a high gain:

We consider this tradeoff intelligently.

The code that does this exists; the demo is coming soon.