System and method for optimizing investment location

• US 6,240,399 B1
• Filed: 07/02/1999
• Issued: 05/29/2001
• Est. Priority Date: 12/24/1998
• Status: Expired due to Term

• Current Assignee: Frank Glenn, Jay Whittaker
• Original Assignee: Frank Glenn, Jay Whittaker
• Inventors: Keller, Robert, Whittaker, Jay, Frank, Glenn
• Primary Examiner(s): Stamber, Eric W.
• Application Number:
  US09/346,602
• Time in Patent Office: 697 Days
• Field of Search: 705/36
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

An investment optimizing system and method. Once an investor or investment advisor determines the appropriate asset allocation and that there are both taxable accounts and tax-deferred investment accounts, the invention will optimize/maximize the investor'"'"'s ending after-tax asset accumulation, which is the objective of all investors. This is accomplished by allocating the chosen investment vehicles between the taxable and tax-deferred accounts in an optimum way. The invention runs on a computer system and searches for an allocation which results in a maximal return. Intelligent heuristics measure increased performance based on different asset allocations.

Claims

1. A system, for running on a computer, for determining an investment strategy for an entity with assets in taxable and tax-deferred accounts, comprising:

an account information input component, to accept information regarding said assets in said taxable and tax-deferred accounts for said entity;

an investment selection input component, to accept information regarding a plurality of investments, including an indication of a percentage amount of said assets to invest in each of said plurality of investments;

an account amount selection component, to determine an amount to invest from said taxable accounts and tax-deferred accounts in each of said plurality of investments, wherein said determined amounts substantially match said indications of a percentage amount to invest in each of said plurality of investments;

a time horizon input component, to accept an indication of a time horizon; and

a return on investment calculation component, to calculate a return on investment for said entity based on said information regarding said assets, said information regarding a plurality of investments, said indication of a percentage amount, said selected amount to invest from said taxable and said tax-deferred accounts, and said indication of a time horizon;

wherein said account amount selection component determines an amount from said taxable and tax-deferred accounts in order to produce a maximal after-tax accumulation for said entity at said time horizon.

2. The system of claim 1 wherein said account amount selection component randomly selects amounts from said taxable and tax-deferred accounts, and said return on investment calculation component calculates an after-tax accumulation for said entity based on said randomly selected amounts.

3. The system of claim 2 wherein steps of randomly selecting amounts from said taxable and tax-deferred accounts, and calculating a return, are performed a plurality of times, and said system outputs selected amounts from said taxable and tax-deferred accounts which produce a maximal return.

4. The system of claim 1 wherein said account amount selection component selects an amount from said taxable and tax-deferred accounts using Genetic Algorithms (GA) in order to produce a maximal return on investment for said entity at said time horizon.

5. The system of claim 4 further including:

a chromosome structure, for use with said Genetic Algorithms, wherein said chromosome structure includes a plurality of values, each value being an indication of an amount from said tax-deferred accounts to invest in a selected one of said plurality of investments; and

said return on investment calculation component calculates an after-tax accumulation for said entity based on said values in said chromosome structure.

6. The system of claim 1 further including:

a personal tax component, to accept information regarding personal tax rates for said entity, wherein said a return on investment calculation component calculates a return on investment for said entity based on said information regarding said personal tax rates.

7. The system of claim 1 wherein said system also determines an improvement value of said after-tax accumulation based on said selected amounts from said taxable and tax-deferred accounts over an initial after-tax accumulation based on initial selected amounts from said taxable and tax-deferred accounts.

8. On a computer system, a method of determining an investment strategy for an entity with assets in taxable and tax-deferred accounts, said method comprising:

receiving information regarding a plurality of investments;

receiving information regarding a percentage amount of said assets to invest in each of said plurality of investments;

receiving information regarding a time horizon; and

for each of said plurality of investments, determining an amount to invest from said taxable and tax-deferred accounts in said investment, wherein said determined amount to invest substantially matches said percentage amount to invest in said investment;

wherein said determinations will produce a substantially maximal after-tax accumulation for said entity at said time horizon.

9. The method of claim 8 wherein said step of determining an amount to invest from said taxable and tax-deferred accounts includes calculating tax consequences over said time horizon for said entity based on said amounts to invest.

10. The method of claim 8 wherein said step of determining an amount to invest from said taxable and tax deferred accounts further includes:

performing sampling steps a plurality of times, said sampling steps comprising;

randomly selecting amounts from said tax-deferred accounts to invest in each of said plurality of investments;

determining appropriate amounts from said taxable accounts so that said selected percentage amounts for each of plurality of investments is satisfied; and

determining a result if said amounts were invested as selected and determined for said time horizon.

11. The method of claim 8 wherein said step of determining an amount to invest from said taxable and tax deferred accounts further includes:

creating a plurality of GA chromosome structures, each GA chromosome structure including a value for each of said plurality of investments, each value being an indication of an amount from said tax-deferred accounts to invest in said corresponding investment;

setting said values in said plurality of GA chromosome structures to initial settings;

evaluating fitness of said plurality of GA chromosome structures;

selecting at least one of said GA chromosome structures with an optimal fitness; and

using said values from said selected GA chromosome structure as amounts from said tax-deferred accounts to invest in said corresponding investment for said substantially maximal accumulation.

12. The method of claim 11 wherein said initial settings for said values are provided by a user.

13. The method of claim 11 wherein said initial settings for said values are randomly generated.

14. The method of claim 11 further including the step of:

calculating an improvement value of said substantially maximal after-tax accumulation based on said determined investment amounts from said taxable and tax-deferred accounts, as compared to an after-tax accumulation based on said initial settings.