Method and apparatus for tax efficient investment management

A method for providing a tax efficient portfolio to each of a plurality of investors, the method comprising steps of:

• constructing an investment portfolio based on a capitalization weight parameter and an industry balance parameter, the investment portfolio comprising a plurality of securities selected to substantially track the performance a selected index;
• establishing an individual portfolio for each of the plurality of investors wherein each investor owns shares in each security comprising the investment portfolio;
• periodically determining a change in value between a present value and a past value of each security and comparing the change in value to a predetermined tax loss threshold to identify a tax harvest security;
• combining the tax harvest securities from each of the plurality of investors' portfolios to form a block trade;
• automatically rebalancing the investment portfolio to substantially track the selected index, wherein the investment portfolio is rebalanced based on the capitalization weight parameter and the industry balance parameter;
• electronically trading the block trade and allocating the corresponding tax loss to each of the plurality of investors;
• and
• delaying a period of time required by Internal Revenue Service Wash Sale Rules before repurchasing the tax harvest securities.

A method for cost-effectively providing a tax efficient investment portfolio to a plurality of investors with a range of account sizes comprising steps of:

• constructing a plurality of individual investment portfolios wherein each investment portfolio comprises a plurality of securities selected to model and substantially track the performance of a selected index, the plurality of securities in each individual account being owned by an individual investor;
• automatically optimizing each individual account by periodically calculating a difference between a present value and a past value of each security, comparing this difference to a predetermined loss threshold value, and designating each security which has a difference which is at least substantially equivalent to the predetermined threshold as a tax harvest security;
• periodically rebalancing the investment portfolios based on a capitalization weight parameter and an industry balance parameter to substantially track the performance of the selected index, wherein at least one security is designated as rebalance security to be traded;
• establishing at least one block trade comprising the tax harvest securities and the rebalanced securities from each individual account;
• automatically trading the securities in the block trade;
• allocating a brokerage cost to each of the individual accounts;
• allocating a security position and a tax lot to each individual account;
• and
• periodically optimizing each individual account, wherein a time period between successive optimizations is at least equivalent to the time required by the Internal Revenue Service Wash Sale Rules.