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Legacy Portfolio Overview

Losing a loved one can be painful, and we are here to help you navigate your inheritance. If you’re reading this, you probably have aging family, or there’s a possibility you have lost or are close to losing a loved one; in which case, we at Demand Wealth stand beside you during this difficult time. We have developed a low-cost portfolio that is meant to help ease this transition through 3 distinct stages, Legacy, Patience, and Horizon, explained in detail below.

Managing your inheritance money requires discipline, structure and often expertise. A national study found that adults who receive an inheritance spend, donate, or lose about half of what they receive. It’s important to allow time for mourning and emotional settling before making any major financial decisions, putting a priority on liquidity and risk reduction in the early stages of the inheritance process. After you’ve had time to gather your thoughts, you will be in touch with a Demand Wealth Advisor*. But before you go and invest in your 2nd cousin’s video game startup, Demand Wealth advocates a portfolio that transitions with you, first in a conservative way, then in a way to meet long-term goals soon after seeking professional counsel.


*Estates with existing investments and personal property often require more complex, legal, estate planning and tax advice. To navigate through the complexities of your personal situation, Email inheritance@demandwealth.com

Our ‘Demand Legacy’ Portfolio

 The ‘Demand Legacy’ portfolio is broken down into 3 investment stages, each uniquely diversified to align with the inheritance process:

“Legacy” Model (100% Bonds)- 0-6 months
Designed for those who just received an inheritance, this low-risk model allows you to set your money aside and focus on more personal matters. Your money will be invested in a wide array of short-term bond funds, which are highly liquid and carry lower risk than the stock market.

“Patience” Model (90% Bonds, 6% Stocks, 4% Real Estate)- 6-12 months
Designed for those who have received their inheritance within the last several months, this model provides slightly more market exposure. We will maintain some exposure to the short-term bond funds included in the “Legacy” model while adding in some exposure to the stock market, real estate, and some higher yielding bonds.

“Horizon” Model (70% Bonds, 20% Stocks, 10% Real Estate)- 12-18 months 
Designed for those who have received an inheritance within the last year, this model provides even more exposure to the market. We maintain the same investments included in the “Patience” model, while placing a higher weight in stocks and real estate.

What’s Next? Ongoing Management Approach

After determining which stage is best for your situation through afocused questionnaire, we will transition your portfolio to the next model every 6 months (‘Legacy’… ‘Patience’… ‘Horizon’…). Once your portfolio has been invested in the “Horizon” model for 6 months, you will work directly with a Demand Wealth Advisor to transition your portfolio into a more personalized model to meet your long-term goals.

The ‘Demand Wealth Inheritance Portfolio’ is not designed to be a long-term solution, rather it is designed to be a wise, conservative option for you as you mourn the passing of a loved one.

Investment Selection

The ‘Demand Legacy’ portfolio includes funds with low fees, solid managers, low tracking error, and high Sharpe Ratios.

Low Expense Ratios
As you know, past performance of an investment does not indicatefuture performance. There is significant uncertainty in the investment world, but through that uncertainty, there is one constant: fees. Every fund has an expense ratio: this is the fee that a manager collects for managing each fund and is expressed as a percentage of the money that you have invested. The average ETF expense ratio is currently around  0.44%. While this may seem negligible, if your nest egg grows to $100,000, you end up paying $440 a year.

That’s why we choose funds with lower expense ratio. On average, our Inheritance Portfolio has an expense ratio of 0.12%, so less of your money is going to managers and more of it is staying invested.

Reputable Managers
Even though past performance can’t predict future returns, fund managers can serve as a clue to a fund’s quality. We sort through thousands of funds, and carefully select those with reputable managers.

Low Tracking Error
While Demand Wealth provides an actively managed overlay, most of the funds included in our portfolios are “Passive Funds”.  Passive funds that follow an index, such as the S&P 500, generally have lower expense ratios and have historically outperformed actively managed funds.  However, some passive funds track their underlying index more closely than others.  The further away passive funds get from tracking the index, the more likely they are to deviate from that index.  We account for this by selecting funds that historically have low tracking errors.

High Sharpe Ratio
Imagine you are deciding between two different funds: Fund A and Fund B. One has an expected return of 10%, while the other has an expected return of 7%. At first glance, Fund A would seem to be the much better option. However, if Fund A took on significantly more risk than Fund B, then Fund B could have a better risk-adjusted return. That’s why it’s so important to consider risk as well return when looking at investment options.

The Sharpe Ratio gives insight into this characteristic. An investment’s Sharpe Ratio helps quantify how much return you’re getting compared to the amount of risk that you’re taking. Our portfolios are managed to contain funds that have yielded solid returns while taking on less relative risk.

Portfolio Management Strategies

Your portfolio is continually being monitored by our team of financial professionals, and we are constantly looking for opportunities to optimize your portfolio via Tax Loss Harvesting and Rebalancing strategies.

Tax Loss Harvesting
If you have a taxable account with multiple holdings, chances are there will be some down positions in any given year, even if your total portfolio is net positive. Tax loss harvesting is the process of selling investments at losses, which can provide a tax deduction (for 2020 up to a -$3000/ year loss can be written off against your annual income).
Annually we will analyze the positions in your non-retirement accounts then sell the appropriate losses and repurchase them after the 31 day wash sale rule has been satisfied.  During this interim period, those funds will be invested in a placeholder similar to the sold position, so your money stays comparably invested.

Rebalancing
Portfolio rebalancing is a staple of effective investment management. Demand Wealth sets your portfolio to an optimal allocation of stocks, bonds and real estate. This allocation will change over time as market conditions and investment performance evolve. Rebalancing is the discipline of resetting your portfolio back to its original optimal allocation. For example, if a 50% stock/50% bond portfolio evolves to be 57% stocks/43% bonds after a period of time. Rebalancing involves selling enough stocks and buying enough bonds to reset your portfolio back to its appropriate 50%/50% allocation. Of course, as your financial situation changes, Demand Wealth works to ensure that your portfolio stays properly diversified, optimized and in sync with your financial goals.

The Demand Wealth rebalancing process is performed by our skilled team. Unlike many of the robo-strategies, which only rebalance at a defined interval (e.g. +/-10%), a Demand Wealth portfolio manager rebalances when it makes optimal sense. We also incorporate macroeconomic factors which may evolve over years, rather than months, that current computing models simple aren’t able to perform.

Demand More from your investments, planningand advice. Open a ‘Demand Legacy’ portfolio with us today.