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EP 41: Cutting Your Tax Bill With Direct Indexing!

Feb 1, 2025

Using exchange-traded funds (ETFs) and mutual funds to create diversified portfolios and track well-established indices has provided a great way for many investors to grow their wealth over the past few decades. However, simply using ETFs and mutual funds can restrict the investor’s ability to maximize the tax savings available since access to the underlying positions is not available. Direct indexing offers the ability to track a particular index while providing the additional flexibility of actually holding each underlying position. While this strategy used to only be feasible for the wealthiest Americans, the transition to commission-free trading at the major custodians and the advancement of technology has made this strategy available to many more individuals. Direct indexing can offer significant tax efficiency by maximizing the benefits of tax-loss harvesting, gifting appreciated positions to charity, and implementing a stepped-up basis strategy for the next generation. Combined, these opportunities can keep more money in your pocket and reduce your tax bill to Uncle Sam! If you are interested in learning more about direct indexing and its tax efficiencies, we think you'll enjoy this month’s episode. Thanks for listening! For more details we recommend that you check out our blog post covering the same topic at https://pw-wm.com/learn/investing/cutting-your-tax-bill-with-direct-indexing/.

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About The Podcast Hosts

Steve & Nathan

Steve and Nathan have a passion for teaching others about finances and how to build the financial independence that is achievable with the proper planning. In their roles at Prairiewood Wealth Management, both Nathan and Steve focus on providing comprehensive financial advice to ensure their clients have a coordinated plan that covers all aspects of their finances including their investments, insurance, estate plan, and charitable giving goals.

As Certified Public Accountants (CPAs), both Nathan and Steve believe that one of the most overlooked aspects of financial advice is the tax impacts that result. Accordingly, a core focus of the advice they give centers on integrating tax strategy into the overall financial advising process.

Steve and Nathan are excited to share their knowledge through this podcast as well as their blog with the goal of helping you effectively manage your family’s wealth and ensure you have a comprehensive and coordinated plan for your future.

About Steve & Nathan