Direct indexing, an advanced investment strategy, allows investors to own individual stocks within an index instead of a mutual fund or ETF, offering greater control and flexibility. This approach is particularly valuable for tax-loss harvesting, where selling underperforming stocks and reinvesting can offset gains and reduce taxes without losing market exposure.
Ideal for high tax brackets, concentrated stock positions, or charitable giving, direct indexing can boost returns by 0.5%-1.85% annually over decades, a benefit known as “tax alpha.” Once reserved for ultra-wealthy investors, advances in technology now make it accessible to portfolios starting at $500K. However, success requires sophisticated tools and tax expertise, making it a powerful strategy for the right investors.
Questions answered:1. How can direct indexing and tax-loss harvesting improve investment returns without increasing risk?2. Who benefits most from using a direct indexing strategy?Submit your request to join James:On the Ready For Retirement podcast: Apply Here)On a Retirement Makeover episode: Apply Here)Timestamps:0:00 - The strategy - direct indexing3:57 - Tax loss harvesting7:22 - More than locking in losses9:36 - The research11:38 - An involved process13:05 - Criteria 1, 2, and 317:04 - Criteria 4 and 519:52 - More accessible due to technology
Create Your Custom Strategy ⬇️
Get Started Here.)
