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Frequently Asked Questions
Welcome to Amerivest

Tell Me More - Click Tell Me More to get more details and in-depth information about how the Amerivest program works.

Get Started - Click Get Started to enter the Amerivest tool. You will go through the steps in the program but no trading will occur until you decide it should. You can comfortably explore the entire tool up to the Execute Your Investment Plan step no trading activity will occur until you click Place Orders.

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Define Your Goal

On this page you will indicate basic investment information for your goals. If you're just exploring the tool, go ahead and enter reasonable information - no trading activity will occur unless you click the Place Orders button on the Execute Your Investment Plan page.

Name Your Goal - This will indicate what the money is intended for (example: Joe's College Fund, Jane's Retirement). Choose a name that is meaningful to you.

When would you like to begin using this money? - This is the first year that you expect to access your money. The period of time that you expect to invest is an important part of choosing the right asset allocation for you. A longer investment time period may call for a more aggressive investment mix while a shorter investment time period may call for a more conservative investment mix.

What is your initial investment? - This is the amount of money you will invest today. It will be used as the starting value for your investment.

If you plan on making future contributions toward this goal, specify the amount and frequency - This is the amount of money that you plan to contribute to this investment program in the future. You may choose a monthly or a yearly contribution.

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Risk Tolerance Questionnaire

On this page you will answer a series of questions to determine your risk tolerance. Choose an answer to each question that best represents how you feel. Click Next to go to the Assess Your Risk Tolerance page. The investment style that best fits your responses will be selected. You should review the characteristics of the selected scenario and make sure you are comfortable with it.

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Assess Your Risk Tolerance

On this page you will see the investment style indicated by your responses to the Risk Questionnaire, as well as the possible alternatives. Each alternative shows potential gains and potential losses for a year. These are an indicator of the volatility of each style of investing. You may update the selection if you desire. Please remember that the investment style with the highest expected return in the long run also has the most volatility in the short run.

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Review Your Asset Allocation

This page shows your target asset allocation, based upon your chosen risk tolerance, initial investment and the investment time period. A basic allocation among cash, stocks and bonds is shown, which may include a breakdown of the stock and fixed income components (depending on portfolio level). A list of the recommended transactions for creating your target portfolio is also included.

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Execute Your Investment Plan

This page shows the orders that result from your balancing transactions. Using the current price quote, the number of shares is calculated for each transaction. Each line item on this page represents an order that will be placed when you click the Place Orders button.

Make sure you are satisfied with all orders shown on this page before clicking Place Orders. If you click Do Not Place Orders or Exit, or if you close the browser window, no orders will be placed.

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Order Sent

This page shows that your orders have been received by your broker for execution and includes each order's transaction number. Please note: This does not mean that the order has been filled. It is important to allow all orders to fill before taking any new action with your Amerivest assets. Confirmations will be presented on the "my Account" tab of your TD Ameritrade Investing account.

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Welcome Back

This page shows you a recap of your Amerivest recommended investments including their current value, the initial funding amount, the initial funding date, the date your assets were last rebalanced and the rate of return for your portfolio based on the time horizon and comparison options you have selected. Once you have completed your Amerivest recommended investments, this will be your Amerivest home page, and will provide the links you need to maintain your investment.

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Portfolio Performance

On this page you can quickly view your portfolio value and rate of return. Simply select the time horizon you wish to view.

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Rebalance

This page shows your target allocation, your current allocation, and balancing transactions. Your target allocation is based upon your chosen risk tolerance, your initial investment and the investment time period. Your current allocation is based upon your current positions. If you're a first-time user, your current allocation will be blank. Balancing transactions shows the buy and/or sell orders that are necessary to reach your target allocation (since partial share amounts are not allowed, rounding will occur).

How often should I Rebalance? Research shows that the best way to rebalance your assets is to choose a rebalancing frequency, then faithfully rebalance on that schedule. We recommend an annual rebalance. All model portfolios are created based on extensive and rigorous investment research, whose estimates and statistical inferences are based on data with annual frequency and annual rebalance. Rebalancing once a year also allows you to take advantage of long-term treatment of any capital gains that may be recognized.

Don't try to outguess the market if there is short-term drift in your positions.

What if I drift too far from my target? Again, research shows the best thing to do is sit tight until your regularly scheduled rebalance date.

If you rebalance your Amerivest investment without adding any money, Amerivest will sell positions that have performed well since your last rebalance (or your initial investment) and buy positions with lower performance. The relative percentage held has moved ("drifting") higher for the better performers and moved lower for lesser performers, so both Sell orders and Buy orders are necessary to achieve your target asset allocation. By adding at least the amount indicated to your Amerivest investment, only Buy orders will be required - no Sells will be needed, which could prevent you from having taxes on capital gains that can result from selling positions.

Please note: To add money to your account without rebalancing, go to the Account Services tab of your TD Ameritrade Investing account and select a funding method. A rebalance will not occur until you indicate.

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Invest Cash

Any contributions made after the last rebalance will be held in your account until you indicate those funds should be invested. The Invest Cash page allows you to invest the excess cash you have in your account. The investment recommendation will depend on the new investment amount. If the new investment is 50% or more of the account value, then a rebalance will be performed. Otherwise, the excess cash will be invested on “pro-rata” basis (meaning that cash will be distributed proportionally in the current holdings).

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Withdraw Cash

The Withdraw Cash page allows you to remove funds from your account. After you specify the amount you plan to withdraw, sell recommendations will be generated. The recommendations depend on the amount requested. If the amount is 50% or more of the current account value, then a rebalance will be performed to raise sufficient cash. If the amount requested plus the required cash buffer is less than the current cash balance, then no transactions will be recommended since the account has sufficient cash for the planned withdrawal. Otherwise, the recommended sell orders will be generated on pro-rata basis (meaning a proportional amount of each position).

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Modify Goal

On this page you can update basic investment data for your goals.

Name Your Goal - Indicates what the money is intended for (example: Joe's College Fund, Jane's Retirement). Choose a name that is meaningful to you.

When would you like to begin using this money? - Indicates the first year that you expect to access your investment. The period of time that you expect to invest is an important part of choosing the right asset allocation for you. A longer investment time period may call for a more aggressive investment mix while a shorter investment time period may call for a more conservative investment mix.

If you plan on making future contributions toward this goal, specify the amount and frequency - Indicates the amount of money that you plan to save for contribution to this investing program in the future. You may choose monthly or yearly. Savings is important to the success of any investing program. With the Amerivest program, having cash in your brokerage account can further increase your tax efficiency by limiting what you have to sell in order to "rebalance" to your target asset allocation.

It is important to recognize that changes to the year you expect to access your investment may result in a different asset allocation recommendation, so changes should not be casually made. New allocation recommendations may result in you buying and selling investments, resulting in possible tax consequences.

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Minimum Funding Requirement

Amerivest works properly only when you invest in each recommended asset class. When very small amounts are indicated, the amount to be invested in one or more asset classes may not be enough to buy at least one share of the associated ETF(s). Therefore, we require a minimum funding amount of $25,000. Any less would cause the risk characteristics of the investment to differ from the risk profile you chose.

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Definitions

Aggressive Portfolio
The Aggressive portfolio is designed to provide the best performance of the Amerivest portfolios, but will likely also have the most risk and volatility. The Aggressive portfolio performance charts you can view assume that asset classes are rebalanced annually. In addition, the performance charts do not take taxes or expenses into account. As a result, if you use the Aggressive portfolio as the recommended strategy for investing, the actual performance of your investment will be lower after expenses and may be considerably lower after taxes.

Asset Allocation
The process of spreading your investments across different types of assets. In its simplest form, this typically refers to the percentage of your investments allocated to cash, stocks and bonds. The Amerivest recommended asset allocation uses short-term bonds and further breaks the stocks asset class into small and medium domestic (U.S.) stocks, large domestic stocks, and international stocks.

Asset Class
A high-level grouping of assets by type of asset. At the highest level are cash, stocks and bonds. Amerivest further breaks stocks and bonds into sub asset classes (e.g. large cap, mid cap, small cap, international, etc. for stocks and short term, intermediate term and long term for bonds).

Balanced Portfolio
The Balanced portfolio is designed to be a middle-of-the-road portfolio in terms of both performance and risk. The Balanced portfolio performance charts you can view assume that asset classes are rebalanced annually. In addition, the performance charts do not take taxes or expenses into account. As a result, if you use the Balanced portfolio as the recommended strategy for investing, the actual performance of your investment will be lower after expenses and may be considerably lower after taxes.

Conservative Portfolio
Although the Conservative portfolio is designed to provide the lowest risk of all the Amerivest portfolios, it will likely also provide the lowest return of all Amerivest portfolios. The Conservative portfolio performance charts you can view assume that asset classes are rebalanced annually. In addition, the performance charts do not take taxes or expenses into account. As a result, if you use the Conservative portfolio as the recommended strategy for investing, the actual performance of your investment will be lower after expenses and may be considerably lower after taxes.

Dollar Value Contributed
This is a term for the net amount that has been contributed to the Amerivest portfolio: Initial investment + money contributed - money withdrawn. It does not include distributions from your investments, such as dividends and interest.

Drift
A measure of how much an asset class varies from the target established for that asset class. If your target asset allocation calls for you to hold 20% of a particular asset class, but you are currently holding 25%, you have 5% drift in that asset class.

Exchange Traded Fund
An investment vehicle that, like a mutual fund, invests in a wide variety of companies. Exchange Traded Funds, or ETFs, may have lower expense ratios and are often more tax efficient than mutual funds. However, they are typically subject to commissions whereas many mutual funds can, if properly traded, have no transaction fees. In addition, the price of an ETF is subject to market pressure and may trade above or below the net asset value, unlike a mutual fund, which trades at its net asset value.

Expense Ratio
A measure of the administrative costs associated with running a mutual fund or Exchange Traded Fund. Expense ratios are typically specified in percentages or basis points, which are 1/100ths of a percentage point (100 basis points = one percent).

Growth Portfolio
Although the Growth portfolio is designed to provide better performance than all of the Amerivest portfolios except the Aggressive portfolio, it will likely also have more risk than all Amerivest portfolios except for the Aggressive portfolio. The Growth portfolio performance charts you can view assume that asset classes are rebalanced annually. In addition, the performance charts do not take taxes or expenses into account. As a result, if you use the Growth portfolio as the recommended strategy for investing, the actual performance of your investment will be lower after expenses and may be considerably lower after taxes.

Moderate Portfolio
Although the Moderate portfolio is designed to provide lower risk than all of the Amerivest portfolios except for the Conservative portfolio, it will likely also provide lower return than all Amerivest portfolios except for the Conservative portfolio. The Moderate portfolio performance charts you can view assume that asset classes are rebalanced annually. In addition, the performance charts do not take taxes or expenses into account. As a result, if you use the Moderate portfolio as the recommended strategy for investing, the actual performance of your investment will be lower after expenses and may be considerably lower after taxes.

Modern Portfolio Theory
An approach to investing that focuses on investing in various securities and market segments rather than trying to pick the best stocks and properly time trades. This approach provides an investment methodology that maximizes the investor's expected rate of return for a particular level of acceptable risk, or minimizes the investor's risk for a given expected rate of return. Maximizing return or minimizing risk is done by creating an appropriate target asset allocation among asset classes that has the risk and return characteristics desired. Investing in the broad market eliminates risks associated with investing in specific companies, and implementing a schedule of rebalancing the investor's portfolio to the target asset allocation reduces risks associated with timing the market. Over longer investment time horizons this approach has historically significantly outperformed the majority of active investment managers both in terms of rate of return and in minimized volatility.

Portfolio Dollar Value
The current value of the portfolio, calculated by multiplying the number of shares in each position by the current share price and adding any cash values held. This figure includes distributions from your investments, such as dividends and interest.

Rebalance
To bring your current actual asset allocation (percentage) back into alignment with your target asset allocation (percentage). Over time some asset classes will outperform others, increasing the percentage of the stronger-performing assets relative to the weaker-performing assets. Rebalancing is accomplished either by selling the stronger-performing assets and buying the weaker-performing assets, or by bringing more funds to buy the weaker-performing assets.

Return
The annual percentage by which your investments grow, also called the investment rate of return.

S&P 500
The S&P 500 Index is an index created by looking at 500 leading U.S. companies in important industries. Members of the index are chosen by a committee and while there is no requirement that a stock be a large capitalization stock, nearly all of them are. The S&P 500 is not only the most popular proxy for large U.S. companies, it is often used to define the entire U.S. market. Amerivest uses the S&P 500 as the performance measure or benchmark index for large capitalization stocks.

Tax Efficiency
A measure of the tax consequences of holding a particular investment. Investments that have a high degree of turnover, or internal buying and selling, generally will have higher tax consequences than those that have low turnover. The low-turnover, lower tax consequence is considered to be more tax efficient.

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