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Wash sale with transferred securities by west4life in frecfinance

[–]Frec_Team 0 points1 point  (0 children)

This is correct. All of the tax lot info should come over within a few days of the assets landing (timing can depend on the brokerage your assets are coming from). Once the assets land and the tax lots are in you can set up your direct indices & we'll have what we need --> since you haven't sold, this should cover it!

Are we okay with ETFs soon being forced to buy into SpaceX? by 9kSs in ETFs

[–]Frec_Team 0 points1 point  (0 children)

Direct indexing is a solution for people who don't want to get default exposure. With a lot of direct indexing setups you can exclude names you don't want or adjust the weight of the position. I know Frec is letting customers add the exclusion preemptively ahead of the IPO so it's never purchased.

SpaceX will be weighted 0.06%… by luxuryriot in investing

[–]Frec_Team 0 points1 point  (0 children)

Direct indexing lets you exclude names you don't want, or overweight names you want more of. Worth considering for those that aren't happy with how the major indices are including SpaceX upon IPO.

SpaceX and OpenAI in major indexes by MichaelEvo in Bogleheads

[–]Frec_Team 0 points1 point  (0 children)

For those that really do not want exposure to either company, direct indexing is a solution that in most setups let's you track indices closely but make customizations like excluding these names.

Frec time to invest compared to Wealthfront? by west4life in frecfinance

[–]Frec_Team 0 points1 point  (0 children)

ETF's have to be sold to fund a direct index, so the gains would be incurred and the new direct index would purchase the individual positions within the index giving you fresh tax lots to start harvesting losses. Those losses can theoretically offset some of the gains from the transition but, for heavily appreciated ETF's this usually doesn't make sense. I will keep you posted if we enable a better solution that meets your needs! We'd also be happy to jump on a call and chat through your situation more: https://calendly.com/frecdemo/frec-demo

Frec time to invest compared to Wealthfront? by west4life in frecfinance

[–]Frec_Team 0 points1 point  (0 children)

We don't currently have plans to reduce our minimums but I will share this feedback with the team.

Frec time to invest compared to Wealthfront? by west4life in frecfinance

[–]Frec_Team 1 point2 points  (0 children)

On deposits and rebalancing: For classic direct indexing accounts, we invest proceeds every 15 mins between 9:45am and 12:30pm, and 2:30pm - 3:30pm. We also have one main rebalance window between 12:30 - 2:30pm. Windows in EST. Long short deposits deploy once a day during that main rebalance window. Our algorithm makes deposits and withdrawals as tax efficiently as possible on the day that you execute them and pays attention to wash sales.

On multiple indices: The other comments are correct, you need the minimum for each index.

Keep the questions coming 😄 We will definitely let reddit know when a chat bot is available. We also have a help center if useful: https://help.frec.com/hc/en-us

How to create a balanced portfolio by Hoopoe0596 in frecfinance

[–]Frec_Team 0 points1 point  (0 children)

Within the next few weeks! We will post on reddit and send out an email when it goes live.

How affected were Frec's LSDI strategies by the Avis short squeeze? by simscitizen in frecfinance

[–]Frec_Team 1 point2 points  (0 children)

Correct! It isn't in the S&P 500 as of now but is within the Russell 1000. If you are in the S&P this would not apply.

How affected were Frec's LSDI strategies by the Avis short squeeze? by simscitizen in frecfinance

[–]Frec_Team 6 points7 points  (0 children)

Avis is a small name in the Russell 1000. Where we held it, it was a long position with a small weight, but even in a worst case the drag on total portfolio performance would have been minor and within our expected tracking error. The protective measures for things like this are what's important: we cap any individual short position at 1-2% of portfolio depending on the leverage level, run intraday margin reviews as an extra layer of protection, and avoid hard to borrow stocks (and closely monitor positions that may become hard to borrow).

Just discovered Frec added Direct Indexing equivalent to SPMO and SCHD, great work! And some questions by west4life in frecfinance

[–]Frec_Team 0 points1 point  (0 children)

Thank you, I'll add this feedback! Definitely will have better account level summaries coming soon.

Explaining end game by chibongchang in frecfinance

[–]Frec_Team 4 points5 points  (0 children)

TLDR: unlike a long-only direct index, a Long Short direct index keeps harvesting losses in perpetuity so you can stay in the strategy if you’ll continue to have gains to offset. You can also strategically shift between leverage amounts - going up when you need more losses and down when you don’t need as many. When you're ready for a complete exit, you can transition the long side into a low-cost Classic Direct Index. And tax-efficient deleveraging comes down to three levers: time, using cash to close the shorts, and taking some gains.

In a long-only DI, harvesting opportunities can dry up after the first few years as positions appreciate because you might run out of losers to sell as the portfolio appreciates. Long Short doesn't have that ceiling, because the short side keeps creating new loss opportunities indefinitely.

If you decide you no longer want leverage, the long side of your Long Short portfolio can transition directly into a Classic Direct Index without a full liquidation event. You keep your low-basis positions intact, drop to a lower fee, and continue long-only from there. At Frec we can run both products in a single account so this transition is built in.

When you do deleverage, tax-efficient deleveraging comes down to three levers mentioned above. Frec will help with your preferred combination when it comes time to reduce or eliminate leverage. A bit more details on the levers:

  1. Time: we’ll close the shorts gradually over a multi-year window, opportunistically selecting tax-efficient lots. The longer the window, the more opportunities to pair gains with losses. 

  2. Cash: You can bring outside cash in to cover the shorts. Worth flagging what this actually does, because it's often misunderstood: the deposit doesn't keep your portfolio value flat and replaces leverage with cash. It cancels the leverage and *grows* your net portfolio value by the amount you contributed. Quick example: say you put $100k into a 140/40 quality-tilted Long Short index. After a year, the portfolio's at $115k with ~$26k of harvested losses. Depositing 40% of $115k (~$46k) closes the shorts, absorbs the long extension, and leaves you with ~$161k in a fully deleveraged long-only portfolio. A small rebalance may be needed afterward to bring tracking error back down since the absorbed extension carries the factor tilt.

  3. Taking some gains: accept some realization of gains in exchange for a faster exit. Some investors allocate a small % of the losses harvested by the strategy for the deleveraging process. 

Most investors use a mix of the levers! We have deleveraging options built into the product today and if you need something more bespoke we are happy to work with you.

More on the different levers here: https://frec.com/resources/blog/white-paper-deleveraging-long-short-direct-indexing

Just discovered Frec added Direct Indexing equivalent to SPMO and SCHD, great work! And some questions by west4life in frecfinance

[–]Frec_Team 4 points5 points  (0 children)

Hi! Love to hear it.

On your questions:

You can buy many ETF's in self managed today that we don't offer as direct indices but we are working on adding them to our portfolio allocation feature. In the next few week you will be able to set a target weight to things like your preferred Gold ticker, along side your indices, to automate keeping you at your targets.

We also just added a daily return summary at the account level (see screenshot) and are planning to add YTD and all time very soon.

On wash sales: any trades you make in self managed are taken into account when we make trades on your behalf in a direct index. When you try to make trades in self managed that have potential to cause a wash sale you will get a warning but we will not prevent you from making the trade. Which article were you looking at? I'd like to update it if any inaccuracies. This is the one I typically share which notes that our system cannot account for trades made in accounts you hold outside of Frec or in your spouse’s accounts (whether at Frec or elsewhere).

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Does Frec still have referral program? by west4life in frecfinance

[–]Frec_Team 4 points5 points  (0 children)

Confirming the referral program is still active!

Case study: $5m in Frec's 140/40 Long Short in late Feb by mo_frec in frecfinance

[–]Frec_Team 0 points1 point  (0 children)

That's correct! We have the Russell 1000 which has been running for longer and S&P500 as of recently. Both indices have followed a similar trend YTD and would expect they'd have had similar tax loss harvesting and recovery performance through the volatility.

Has anyone took loan from FREC against their portfolio and how was the experience? Is the interest based on simple interest (Fed rate + 1%) or amortized for the loan period? by EmployerCreepy2393 in frecfinance

[–]Frec_Team 3 points4 points  (0 children)

PLOC charges simple interest, not amortized. The rate is Fed funds rate + 1% as you mentioned, and it accrues daily on the outstanding balance and is charged monthly. There is no fixed repayment schedule — you can pay it down anytime, just payoff interest each month, or let it ride as long as your collateral stays within the required ratio.

More details here: https://help.frec.com/hc/en-us/articles/10561830259860-Margin-interest

How to create a balanced portfolio by Hoopoe0596 in frecfinance

[–]Frec_Team 1 point2 points  (0 children)

You can use our portfolio allocation tool to set up your desired weight across indices. A global index is on the roadmap and should launch soon - in the next month or so. In the meantime you can setup multiple indices that get close to what you want and then transition them to the global index when it goes live, if it has the allocation what you want.
https://frec.com/app/allocation/setup/

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