In December 2024, we rolled out per index optimization, which changed how we optimize your account. This article discusses the various options available for optimizing your investments.

Double offers several optimization types for each index, though it's important to note that not all optimization types are available for every index. Choosing the right optimization method depends on your investment goals, risk tolerance, and the specific characteristics of the index you're tracking.

Buy & Hold: This is a passive, long-term investment strategy where Double buys the securities in your chosen index and holds them indefinitely. This approach is ideal for smaller strategies where minimizing trading activity and associated costs is a priority. By avoiding selling winners to buy losers, you can potentially reduce capital gains taxes and maximize long-term growth. This strategy is particularly well-suited for investors with a "set it and forget it" mentality who believe in the underlying growth potential of the index over time.

Rebalance Regularly: This option offers a more proactive approach to index tracking. Double will automatically monitor your portfolio and rebalance it to match the target index when it drifts beyond a certain threshold. This rebalancing process takes into account tax consequences, selling securities strategically to minimize your tax liability. This optimization type is best suited for investors with larger portfolios and a diverse range of holdings who want to maintain a specific asset allocation and risk profile while minimizing tracking error. Regular rebalancing ensures that your portfolio stays aligned with the index's performance over time.

Note that rebalancing in this case only applies to the selected strategy, and not across strategies which is explained in this article.

Buy & Hold w Quarterly Rebalancing: This option provides a middle ground between the passive Buy & Hold approach and the more active Rebalance Regularly option. Double will primarily focus on identifying buy opportunities to build your portfolio, similar to the Buy & Hold strategy. However, to ensure your portfolio doesn't stray too far from the target index, it will also rebalance your holdings quarterly. This rebalancing process is carefully managed to respect wash sale rules depending on your wash sale settings, which can sometimes hinder precise index tracking. This option is suitable for investors who want to maintain a relatively passive approach while ensuring their portfolio periodically realigns with the index. The quarterly rebalance date is the 15th of the first month of the quarter (January 15th, April 15th, July 15th, Oct 15th).

Note that rebalancing in this case only applies to the selected strategy, and not across strategies which is explained in this article.

Tax Loss Harvesting with Pairs: This optimization is specifically designed for tax-efficient investing within smaller strategies, typically those with fewer than 20 stocks or ETFs. You pick the pairs when constructing your portfolio this way - Double helps by identifying correlated stocks and ETFs. When a stock in a pair experiences a loss, it is sold to realize that loss for tax purposes, and simultaneously replaced with the correlated stock, maintaining a similar market exposure. This strategy allows you to offset capital gains with realized losses, potentially reducing your tax burden and improving after-tax returns. It's important to note that each stock can only be included once in the strategy to avoid wash sale violations.

Tax Loss Harvesting with Factors: This sophisticated optimization method is best suited for larger, diversified strategies that track a specific index. It employs a factor model to analyze your target portfolio and identify stocks with specific characteristics, such as momentum, value, quality, and low volatility. When a tax-loss harvesting opportunity arises, Double replaces the losing stock with another stock that exhibits similar factor characteristics to maintain the desired factor exposures within your portfolio. This strategy allows you to realize tax losses while preserving the overall investment style and risk profile of your original strategy.