Quality Large/Mid Cap US Stocks Smart Beta

Value/Growth/Quality/Dividend target 300 long positions weighted by factor attractiveness; Broad Market targets 1,000 long positions, blend of equal and cap weight

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Smart Beta Portfolios (Interactive Advisors Portfolios)

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0.20% annual (IA retains all)

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US-listed equities

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$100

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Item 4 says IA offers 15 Smart Beta Portfolios in total; Item 8 describes ten (5 large plus 5 small-cap versions) plus 5 ESG versions. The portfolios are traded in firm-owned accounts and mirrored to clients.

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Risk score 1-5 (per-portfolio scores not in brochure)

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Not available

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The Quality portfolio focuses on large and mid-sized U.S. companies selected for their financial strength and competitive advantages. Guided by smart beta principles, it uses a structured, rules-based process to identify businesses with reliable earnings and sound operations. Each holding earns its place based on measurable indicators of business excellence. This approach provides investors with focused exposure to high-quality stocks, rather than simply tracking the market by company size.

Interactive Advisors is an established name in the field of online investing, with a history of path-breaking work. The platform offers a variety of portfolios, including the Smart Beta portfolios, which are managed by Interactive Advisors's Chief Investment Officer and Investment Management team. The “Smart Beta” approach to portfolio construction is grounded in academic research. The goal of this strategy is to achieve an alternative risk-return profile which is more attractive than a simple capitalization-weighted index such as the S&P 500. Interactive Advisors Smart Beta portfolios follow rules-based investment strategies designed to provide systematic exposure to a fundamental factor or combination of factors.

Capital growth with a similar risk profile to broad equity markets. Investing in equities and prepared to accept fluctuation in portfolio value.

Fundamentals-first investors: If you prioritize owning companies with strong balance sheets and reliable earnings, this portfolio provides targeted access to quality factors across the U.S. equity market. Systematic strategy seekers: Investors who prefer a disciplined, emotion-free approach to stock selection will appreciate this portfolio's data-driven framework, which removes guesswork from the investment process. Core portfolio builders: Those looking to add a quality-oriented allocation to their broader investment plan can use this portfolio for diversified U.S. equity exposure with a deliberate tilt toward financially strong companies.

Research: This portfolio draws on academic research into factor-based investing, which studies how specific financial characteristics can shape long-term stock behavior. Interactive Advisors conducted extensive research and back-testing to identify the quality-focused factors and rules that guide stock selection. The goal is to build a portfolio with a more favorable balance of risk and return than a standard market-cap-weighted index like the S&P 500. Approach: The portfolio follows a quantitative framework that determines which stocks to include and how to weight them. This process removes subjective decision-making, relying instead on predefined quality criteria to evaluate each holding. Rebalancing occurs on a quarterly schedule, ensuring that positions consistently reflect up-to-date assessments of each company's financial health. Allocation discipline: The portfolio targets approximately 300 individual stock positions, providing broad diversification across U.S. large and mid-cap equities. Stocks with the most favorable quality profiles, such as strong return on assets and high earnings quality, receive larger allocations. To manage risk, the construction process reduces exposure to highly volatile stocks and avoids heavy concentration in any single market sector. The portfolio also screens out companies that appear significantly overvalued relative to their fundamentals. Sell discipline: Sell decisions follow the same structured process that governs the rest of the portfolio. During each quarterly rebalance, holdings that no longer score well on quality measures are replaced by those demonstrating stronger fundamentals. This consistent turnover keeps the portfolio closely aligned with its core investment objective. Exceptions: In certain cases, the normal rebalancing rules may not apply. Positions in stocks affected by corporate actions, such as mergers, acquisitions, or spin-offs, may be sold or adjusted outside the regular quarterly schedule.

Rigorous stock selection: This portfolio uses a data-driven process to identify companies with strong fundamentals, such as how efficiently they generate profits and the reliability of their earnings. You get consistent exposure to financially sound businesses without relying on subjective judgment. Built-in risk management: The portfolio is designed to limit the impact of volatile holdings and avoid overexposure to any one corner of the market. These safeguards help manage risk while keeping the focus squarely on quality. Broad market reach: With approximately 300 holdings spanning large and mid-cap U.S. equities, this portfolio offers wide coverage while maintaining a clear emphasis on companies that demonstrate financial excellence.