SeasideWealth Advisors
Schedule

Strategy

Direct Indexing

Indexing that harvests losses for years, not minutes.

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ETFs are great until you need a tax loss. Direct indexing replicates the same exposure using the underlying securities, and lets us harvest losses against your gains, year after year, without selling the position out from under you.

Losses are harvested one position at a time

The index, position by position

Index up 11% this year. 10 of 48 positions are down anyway.

+12.4%
−8.2%
−3.1%
+6.1%
−14.6%
+21.7%
−5.4%
−2.7%
+4.8%
−11.3%
+9.3%
−6.8%
−4.2%
−9.5%
+15.2%
−1.9%

$0

in losses banked

The fund wrapper: one price, nothing to harvest.

Illustrative. Wash-sale rules and tracking error are managed as part of the strategy.

  • 01

    The play

    Own roughly 150–300 individual stocks that together replicate the index of your choice (S&P 500, Russell 1000, custom factor tilt). Throughout the year, sell the names trading at a loss and replace them with similar-but-not-identical exposure to maintain the benchmark fit while booking the loss. The harvested losses offset gains elsewhere in your plan: Roth conversions, business sales, concentrated-stock unwinds, real-estate dispositions.

  • 02

    Worked example

    A $1M direct-indexed portfolio tracking the S&P 500 typically produces $25K–$60K of harvestable losses in a typical year, without changing the market exposure. Over a decade, the compounded tax savings can outweigh the slightly higher trading and software costs by a meaningful margin.

  • 03

    Who it works for

    Taxable accounts of $250K or more, especially when you've got large gains to offset or anticipate large gains in coming years. Less compelling inside IRAs and 401(k)s where the tax benefit doesn't translate.

Common questions

  • Won't this trigger wash-sale rules?

    The replacement positions are similar-but-not-substantially-identical, which keeps the harvests valid under IRS wash-sale rules. The execution discipline matters; the rule exists for a reason.

  • How much does it cost?

    Slightly more than a vanilla ETF in trading and platform expense (typically 10–25 basis points), but materially less than the after-tax benefit it generates in a typical year for taxable accounts of size.

  • Will my returns track the index?

    Within a tight tracking error, yes. The point of direct indexing is that you get index-like returns AND the tax optimization, not one at the expense of the other.

Related

Adjacent work that often runs alongside this.

Most clients leave their first call with something their last advisor never gave them: a plan.

Thirty minutes. No prep needed. We'll walk through your situation and tell you what we'd do differently.

Schedule a 30-Minute ConsultOr start with the Estimator →