System, Method, and Computer Program Product for Cost Effective, Dynamic Allocation of Assets Among a Plurality of Investments

Abstract

A system, method, and computer program product for dynamic, cost effective reallocation of assets among a plurality of investment products comprising a processor, a memory and a computer program stored in the memory. The computer program implementing the present invention controls the reallocation of assets to reduce the transactions costs associated with rebalancing the investor's composite assets according to a composite asset allocation model. Information relating to the composite asset allocation model, the investor's assets, and the investor are stored in memory. Periodically, or upon occurrence of an event, the composite assets are evaluated to determine if rebalancing is necessary. If rebalancing is necessary, the transaction costs associated with the available transactions for performing the rebalancing are compared to select the most economically favorable transaction. Thus, the reallocation is achieved by selecting the least costly transaction that will serve to realize the composite asset allocation model, which is independent of the structure of the investor's portfolio among particular accounts or products. In addition, the computer program compares the available options for recovery of the transaction fees to select the most economically favorable means of recovering the fees associated with the transaction to further reduce the transaction cost of the reallocations.

1 . A method of managing an investment portfolio comprised of assets allocated among a plurality of investment products in accordance with a composite asset allocation model using a computer system having a memory, the method comprising the steps of:
 storing information relating to the composite asset allocation model in the memory;   storing information relating to the plurality of investments in the memory;   using the computer system, determining the current asset allocation of the investment portfolio;   using the computer system, comparing said current asset allocation with said composite asset allocation model to determine whether said current asset allocation is substantially in accordance with said composite asset allocation model;   in response to a determination that said current asset allocation is not substantially in accordance with said composite asset allocation model, identifying one or more transactions and the associated capital gains taxes for reallocating the assets of the investment portfolio to be substantially in accordance with said composite asset allocation model, the identification made using the computer system; and   using the computer system, reallocating the assets of the investment portfolio to be substantially in accordance with said composite asset allocation model, the reallocation using one or more transactions selected by the computer system from the one or more identified transactions based, at least in part, on the capital gains taxes.   
     
     
         2 . The method of  claim 1 , wherein said step of identifying one or more transactions and the associated capital gains taxes includes the steps of:
 determining at least two transactions for reallocating the assets of the investment portfolio to be substantially in accordance with said composite asset allocation model;   determining capital gains taxes for each of said at least two transactions; and   comparing said capital gains taxes for said at least two transactions.   
     
     
         3 . The method of  claim 1 , wherein said step of determining the current asset allocation is performed in response to the occurrence of an event. 
     
     
         4 . The method of  claim 1 , wherein said step of determining the current asset allocation is performed periodically. 
     
     
         5 - 7 . (canceled) 
     
     
         8 . The method of  claim 1 , further comprising the step of receiving said composite asset allocation model as an input from a user. 
     
     
         9 . The method of  claim 8 , wherein said input from said user includes information relating to a first level and elements of said first level, said elements of said first level including at least one member of a group of asset classes, asset sub-classes, and investments. 
     
     
         10 . The method of  claim 9 , wherein said composite asset allocation model includes a distribution of assets among said elements of said first level. 
     
     
         11 . The method of  claim 9 , wherein:
 said input from said user includes information relating to a second level and elements of said second level, said elements of said second level including at least one member of a group of asset classes, asset sub-classes, and investments; and   said preferred asset allocation is a distribution of assets among said elements of said second level.   
     
     
         12 . The method of  claim 1 , further comprising the step of:
 transmitting a request to trade an asset to facilitate execution of said one or more selected transactions.   
     
     
         13 . The method of  claim 1 , wherein reallocating the assets of the investment portfolio to be substantially in accordance with said composite asset allocation model, comprises using one or more transactions selected by the computer system from the one or more identified transactions as having the lowest associated capital gains taxes. 
     
     
         14 . The method of  claim 3 , wherein said event includes at least one of:
 said current asset allocation is out of balance with said preferred asset allocation by a predetermined percentage,   a withdrawal from the investment portfolio,   a deposit to the investment portfolio,   the investment portfolio investor or other selected individual or entity has reached a predetermined age,   the investment portfolio investor or other selected individual or entity dies,   a market timing signal,   a technical indicator, and   a change in status of assets of the investment portfolio investor not part of the investment portfolio.   
     
     
         15 . A computer program embodied on a computer readable medium for enabling a computer system to manage an investment portfolio comprised of assets allocated in accordance with a preferred asset allocation, the computer program comprising:
 a computer code segment which determines an asset allocation for the investment portfolio;   a computer code segment which compares said asset allocation with said preferred asset allocation;   a computer code segment which identifies one or more transactions and the associated capital gains taxes for reallocating the assets of the investment portfolio to be substantially in accordance with said preferred asset allocation; and   a computer code segment which selects said one or more identified transactions based, at least in part, on the capital gains taxes to reallocate the assets of the investment portfolio to be substantially in accordance with said preferred asset allocation.   
     
     
         16 . The computer program of  claim 15 , wherein said computer code segment which identifies one or more transactions and the associated capital gains taxes includes:
 a computer code segment which determines at least two transactions for reallocating the assets of the investment portfolio to be substantially in accordance with said preferred asset allocation;   a computer code segment which determines a transaction cost of each of said at least two transactions; and   a computer code segment which compares said transaction costs of said at least two transactions.   
     
     
         17 . The computer program of  claim 15 , wherein determining the current asset allocation is performed in response to the occurrence of an event. 
     
     
         18 . The computer program of  claim 15 , wherein determining the current asset allocation is performed periodically. 
     
     
         19 . The computer program of  claim 15 , further comprising a computer code segment which stores data input from a user that includes information relating to a first level and elements of said first level, said elements of said first level including at least one member of a group of asset classes, asset sub-classes, and investments. 
     
     
         20 . The computer program of  claim 19 , wherein at least a portion of said stored data corresponds to the preferred asset allocation. 
     
     
         21 . The computer program of  claim 19 , further comprising:
 a computer code segment which stores data input from a user that includes information relating to a second level and elements of said second level, said elements of said second level including at least one member of a group of asset classes, asset sub-classes, and investments; and   wherein at least a portion of said information relating to said second level corresponds to the preferred asset allocation.   
     
     
         22 . The computer program of  claim 15 , further comprising a computer code segment which transmits a request to trade an asset to facilitate execution of said one or more identified transactions. 
     
     
         23 . The computer program of  claim 15 , wherein said computer code segment which selects said one or more identified transactions, selects said one or more transactions with the lowest associated transaction costs. 
     
     
         24 . The computer program of  claim 17 , wherein said event includes at least one of:
 said current asset allocation is out of balance with said preferred asset allocation by a predetermined percentage,   a withdrawal from the investment portfolio,   a deposit to the investment portfolio,   the investment portfolio investor or other selected individual or entity has reached a predetermined age,   the investment portfolio investor or other selected individual or entity dies,   a market timing signal,   a technical indicator, and   a change in status of assets of the investment portfolio investor not part of the investment portfolio.   
     
     
         25 . The computer program of  claim 15 , wherein said computer code segment 
       which selects said one or more identified transactions includes a code segment which substantially implements the greedy algorithm. 
     
     
         26 - 39 . (canceled) 
     
     
         40 . A method for managing an investment portfolio comprising a plurality of assets, the plurality of assets having a distribution among a plurality of investment products, the method implemented using a computer system, the method comprising:
 using the computer system, defining a preferred asset allocation of the investment portfolio among the plurality of assets;   using the computer system, determining whether an existing distribution of the assets of the investment portfolio differs at least a predetermined degree from said preferred asset allocation;   in response to a determination that said existing distribution of the assets differs from said preferred asset allocation at least said predetermined degree, identifying at least two transactions for reallocating the assets substantially to said preferred asset allocation, the identification made using the computer system;   using the computer system, comparing capital gains taxes of said at least two transactions; and   using the computer system, selecting a transaction for reallocating the assets substantially to said preferred asset allocation based, at least in part, on said comparison of said capital gains taxes.   
     
     
         41 . A method for managing an investment portfolio comprising a plurality of assets, the plurality of assets having a distribution among a plurality of investment products, the method implemented using a computer system, the method comprising:
 using the computer system, defining a preferred asset allocation of the investment portfolio among the plurality of assets;   using the computer system, determining whether an existing distribution of the assets of the investment portfolio differs at least a predetermined degree from said preferred asset allocation;   in response to a determination that said existing distribution of the assets differs from said preferred asset allocation at least said predetermined degree, identifying at least two transactions for reallocating the assets substantially to said preferred asset allocation, the identification made using the computer system;   using the computer system, comparing tax penalties of said at least two transactions; and   using the computer system, selecting a transaction for reallocating the assets substantially to said preferred asset allocation based, at least in part, on said comparison of said tax penalties.   
     
     
         42 . A method for managing an investment portfolio comprising a plurality of assets, the plurality of assets having a distribution among a plurality of investment products, the method implemented using a computer system, the method comprising:
 using the computer system, defining a preferred asset allocation of the investment portfolio among the plurality of assets;   using the computer system, determining whether an existing distribution of the assets of the investment portfolio differs at least a predetermined degree from said preferred asset allocation;   in response to a determination that said existing distribution of the assets differs from said preferred asset allocation at least said predetermined degree, identifying at least two transactions for reallocating the assets substantially to said preferred asset allocation, the identification made using the computer system;   using the computer system, comparing tax implications of said at least two transactions;   using the computer system, selecting a transaction for reallocating the assets substantially to said preferred asset allocation based, at least in part, on said comparison of said tax implications.   
     
     
         43 . The method of  claim 42  wherein comparing tax implications of said at least two transactions comprises comparing both capital gains taxes and tax penalties of said at least two transactions. 
     
     
         44 . A method of managing an investment portfolio comprised of assets allocated in accordance with a preferred asset allocation using a computer system having a memory, the method comprising the steps of:
 storing information relating to the preferred asset allocation in the memory;   storing information relating to the plurality of investments in the memory;   using the computer system, determining the current asset allocation of the investment portfolio;   using the computer system, comparing said current asset allocation with said preferred asset allocation to determine whether said current asset allocation is substantially in accordance with said preferred asset allocation;   in response to a determination that said current asset allocation is not substantially in accordance with said preferred asset allocation, identifying one or more transactions and the associated capital gains taxes for reallocating the assets of the investment portfolio to be substantially in accordance with said preferred asset allocation, the identification made using the computer system; and   using the computer system, reallocating the assets of the investment portfolio to be substantially in accordance with said preferred asset allocation, the reallocation using one or more transactions selected by the computer system from the one or more identified transactions based, at least in part, on the capital gains taxes.   
     
     
         45 . The method of  claim 44 , wherein said step of identifying one or more transactions and the associated capital gains taxes includes the steps of:
 determining at least two transactions for reallocating the assets of the investment portfolio to be substantially in accordance with said preferred asset allocation;   determining capital gains taxes for each of said at least two transactions; and   comparing said capital gains taxes for said at least two transactions.   
     
     
         46 . The method of  claim 44 , wherein said step of determining the current asset allocation is performed in response to the occurrence of an event. 
     
     
         47 . The method of  claim 44 , wherein said step of determining the current asset allocation is performed periodically. 
     
     
         48 . The method of  claim 44 , further comprising the step of receiving said preferred asset allocation as an input from a user. 
     
     
         49 . The method of  claim 48 , wherein said input from said user includes information relating to a first level and elements of said first level, said elements of said first level including at least one member of a group of asset classes, asset sub-classes, and investments. 
     
     
         50 . The method of  claim 49 , wherein said preferred asset allocation includes a distribution of assets among said elements of said first level. 
     
     
         51 . The method of  claim 49 , wherein:
 said input from said user includes information relating to a second level and elements of said second level, said elements of said second level including at least one member of a group of asset classes, asset sub-classes, and investments; and   said preferred asset allocation is a distribution of assets among said elements of said second level.   
     
     
         52 . The method of  claim 44 , further comprising the step of:
 transmitting a request to trade an asset to facilitate execution of said one or more selected transactions.   
     
     
         53 . The method of  claim 44 , wherein reallocating the assets of the investment portfolio to be substantially in accordance with said preferred asset allocation, comprises using one or more transactions selected by the computer system from the one or more identified transactions as having the lowest associated capital gains taxes. 
     
     
         54 . The method of  claim 46 , wherein said event includes at least one of:
 said current asset allocation is out of balance with said preferred asset allocation by a predetermined percentage,   a withdrawal from the investment portfolio,   a deposit to the investment portfolio,   the investment portfolio investor or other selected individual or entity has reached a predetermined age,   the investment portfolio investor or other selected individual or entity dies,   a market timing signal,   a technical indicator, and   a change in status of assets of the investment portfolio investor not part of the investment portfolio.