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What is direct indexing?

Direct indexing is an investment approach where you own the individual stocks that make up an index, rather than a single index fund. Because you hold the underlying positions directly, your advisor can harvest tax losses and manage taxes at the position level while keeping market exposure similar to the index.

How it works

An index fund is a single wrapper holding hundreds of stocks. Direct indexing unwraps it: you own the individual stocks themselves, in weights that track the index. Your portfolio still behaves like the index, but now every position is its own tax lever, because you hold it directly instead of through the fund.

Why bother?

Taxes, mostly. In any given year, some stocks inside an index are down even when the index itself is up. Own them directly, and those individual losses can be harvested to offset gains elsewhere, something a fund wrapper can't do for you. Direct indexing also helps when you arrive with existing investments: holdings can be transitioned gradually under a capital-gains budget instead of sold in one big taxable event.

The honest trade-offs

You'll own a lot of positions, which makes statements longer and do-it-yourself management genuinely hard. This is a strategy that wants software and someone watching it. The tax benefits apply to taxable accounts, not IRAs or 401(k)s. And it's a way to potentially improve after-tax outcomes, not a guarantee. It's a tool, not a magic trick.

How this works at Hunt Wealth

We use direct indexing in taxable accounts through our custodian, Altruist, paired with systematic, wash-sale-aware tax-loss harvesting and position-level basis tracking. The goal is simple: keep your market exposure boring and your tax bill deliberate.

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