Weights & Target Weights

Each security in a folio accounts for a weight (a percentage) of the entire value of the folio. A security can account for any percentage of the total folio value, for example below is a folio just after it was purchased, before any of the securities prices have changed:

*The total value of the weights will always equal 100%

1. Equal Weights

   If you select this option, we will divide 100% by the number of securities in the folio. The resulting percentage will be each security’s weight.

   For example, if you have four securities, each security will receive a weight of 25%. If you then select a dollar amount of $2,000, we will buy $500 of each security.

   If you have 20 securities, each security will receive a weight of 5%. If you invest $2,000, we will buy $100 of each security.

   This is the best option to choose if you want equal exposure to each security you selected.

2. Market Cap Weights

   A company’s market capitalization is calculated by multiplying its stock price by the number of shares outstanding. For example, if a company has 10 million shares outstanding and it is currently trading at $20, its market capitalization is $200 million.

   Here are the dollar amounts that usually make a company either large-cap, mid-cap, or small-cap:

   • Large-cap – over $11 billion in market capitalization.
   • Mid-cap – between $1.7 billion and $11 billion in market capitalization.
   • Small-cap – $1.7 billion or less in market capitalization.

   If you select this option, we will add the market capitalizations of each security in the folio. Then, we will divide each individual security’s market capitalization by the total folio’s market capitalization. The result will be that security’s weight.

   Example

   You are buying three securities:

   • Security 1 has a market capitalization of $2 billion.
   • Securities 2 and 3 both have market capitalizations of $1 billion.

   The folio’s totals market capitalization is $4 billion:

   $2 billion + $1 billion + $1 billion = $4 billion

   Since $2 billion is ½ of the folio’s total market capitalization, the weight of Security 1 will be 50%.

   Since $1 billion is ¼ of the folio’s total market capitalization, the weight of Securities 2 and 3 will be 25% each.

   If you invest $2,000, you would buy $1,000 of Security 1 and $500 of Securities 2 and 3. This is the best option to choose if you want more money invested in larger securities than in smaller securities.

3. Enter Your Own Weights

   If you choose to enter your own weights, keep in mind that they must add to 100%.

Target weights are weights you set for each security in a folio. When you rebalance a folio or add money to it, we will place the trade based on the folio’s set target weights. You can change the target weights at any time.

Target weights are set by you when you first create a folio; each security’s percentage of the whole folio is saved as the target weight.

You can take the following actions to alter a security’s target weight:

• Modify a folio or a trade
• Buy more or sell some of an existing security
• Add a new or remove an existing security
• Update a folio’s target weights from the Weights page

Note: When you modify a folio, the new target weights will be based on the market values of the securities at the time the order is placed, not when it is executed. The new target weights will be saved even if you cancel the order after placing it.

When you rebalance a folio or add money to it, we will place the trade based on the folio’s set target weights.

The Folio Weights page provides you with the ability to view and change your target weights anytime after buying a folio.

The “Target Weights” column on the Weights page displays the current target weight of each security in your folio.

The values of securities in a folio will change over time, as the relative values of the securities in your folio change. Managing the securities in your folio to their target weights helps manage your diversification and risk.

You can view the “Current Weights” and “Difference” columns on the Weights page to see how the current weights of your securities have changed since you last updated your folio.

• Adjust Selected Securities

  For example, if you own a folio that holds a mix of technology, healthcare, industrial, and financial securities, and you would like to increase the amount of financial securities, because you feel they are undervalued, then you can update your target weights to a higher percentage of financial securities and a lower percentage of other securities in your folio.

  You can make this change on your Weights page by entering new target weights for the folio, and then placing a rebalance order.

• Sell and Reallocate

  You can sell an entire security by adjusting your target weight for that security to 0% and spreading the remaining weight among the securities you want to keep. The securities you give the target weight of 0% will be sold and the remaining securities will be rebalanced based on your new set target weights the next time you place a rebalance order.

• Change Your Focus

  For example, if you created a folio with 10 of your own security picks and you gave each security an initial weight of 10% but later decided you would rather allocate more money to the securities with a greater market capitalization, you can do this by selecting resetting your target weights to market cap weights on the Weights page.

  The larger a security’s market cap, the more money you’ll have invested in it once your rebalance order is processed.

Trade at market weights if you want to:

• add more money to all the securities in this folio,
• remove money from all the securities in this folio, or
• sell all of this folio.

When you trade at market weights, we will automatically spread the amount of your order among all the securities in this folio.

Example

Let’s say you want to add $100 to a client’s folio. We’ll spread the $100 among the securities according to how much of each security is in this folio when you place your order.

Suppose this folio has two securities. The securities changed in value since you bought them. You want to buy $100 more of the folio today. This diagram shows you how we would spread $100 across this folio.

I bought this folio	Today it looks like this	Buy $100 of folio as it is today
*	*	Buy $40 of Stock A (40% of $100) Buy $60 of Stock B (60% of $100)

*Percentage of each stock in this folio.