Thanks a ton Rob. This video, and your video on leaving your advisor was exactly what I was looking for. We try to keep our capital gains to a minimum, and last year I was "encouraged" to drop 250k into a Fidelity Managed fund that would help allow for "some tax loss harvesting". While it was in line with my questions/concerns about mutual funds that were throwing off gains, in retrospect I sensed my Fidelity advisor was just selling a product as quickly as possible. That feeling was reinforced when she bristled after I questioned its performance and utility in our annual review meeting. Now that we have let it run for a year, I'm taking a closer look at unwinding that account and your points are exactly what I needed to better understand. Thank you! While I will soon have a grab bag of stocks I'll need to unwind, it will be a good set of lessons. Your videos have helped me/us re-think many years of managed finances and reinforced my skepticism of active fiscal management in general (for me). Thanks again for your content and I'm looking forward to starting your book when it arrives tomorrow.
I currently have this in my portfolio. It’s been tracking the S&P well. It’s however very hard to see how much losses it has harvested. And it’s very hard to find any information about roughly how much money this has saved people in the real world. I asked my broker for data but they just sent me over some PDF with a bunch of blabla - so I’m basically testing this because I’m curious and I believe in the math behind it, I’m also in the highest tax bracket and make monthly contributions to it. Hopefully there will be some more real data out there for people with lesser financial knowledge to learn from in the future! Good luck :)
3rd on the distraction of slight audio static and faint baby crib music. Minor distraction but many like me listen through amplified speakers and audio defects are bothersome. Really appreciate the work you put into content, thank you. Your my favorite financial content provider keep up.
41% combined marginal rax rate (35% fed + 6% state) with $200k in a brokerage account and adding about $20k annually. I do both DI and TLH as they are no extra cost at my brokerage.
I am a US expat living in Europe. EU regulations prevent me from buying US ETFs and UCITS equivalents that Europeans typically buy are a nonstarter because of PFIC rules from the IRS. I am wondering how hard it would be to implement a direct index approach to get around this catch 22 without focusing on Tax Loss Harvesting. Isn't it the same in the end to just tolerate the capital gains every time you rebalance?
Thanks for your useful info, as always. I have one question: for someone like with with major carry over capital loss, I guess direct indexing and the subsequent tax loss harvesting could be more valuable, right? If my goal is to use up that carry over asap
Fidelity charges a flat monthly fee for their Folio/Basket "direct indexing" feature. If you are self-managing your account, the fee is only $4.95/month. Do you think that fee is reasonable? or too high?
Another excellent video Rob! I have recently been contemplating this exact decision, and was wary for the same reasons you pointed out. Perhaps other folks did a fair amount of tax loss harvesting this past year on their own - for example using VOO and VTI - which would further pushes out the benefit of adding more losses to a pool of existing yet-to-be used capital losses. Appreciate your casual, common-sense style in breaking down these topics which can seem complex at first blush. 👍
Thanks for the DI review Rob. The background music or the music choice doesn't work well with this style of speaking, though I do greatly appreciate the lack of stuttering in this well prepared video.
What about equity exchange fund? It does help diversify the concentrated positions. However, it just defers the capital gains tax. Not sure if it is worth the cost.
Rob, Thank you for doing what you do. I'm grateful there are people like you out there putting this kind of information out there. Very... very informative.
Unless you are comparing Berkshire Hathaway stock to the S&P 500 over the last 10 or 20 years, then you will see one part is greater than the sum of it’s parts
Thank you for providing a common-sense, simple explanation of this mechanism. We were considering in investing in this type of program, and much of the available content is from financial institutions trying to sell their product (biased). You earned a newsletter subscriber out of me today.
Rob. Would you do a video on looking at financial statements and find possible financial malfeasance? With your legal background this might really be worthwhile
Why would short term cap gains from other sources re-energize savings? Doesn't the index get tax advantages or not, independent of extraneous investments?
Thanks Rob for the great video. One of the main reasons that I've looked into direct indexing is indeed for the ESG side because there are a handful of companies that I would prefer to not invest in (for example Phillip Morris in the S&P500). The hassle to remove them though ends up being pretty high. What I ended up doing is using an ETF screener to find ESG screened ETFs which removed the companies I wanted and were still low expense ratio, and then I just went through the list of companies they excluded and directly invested in the handful that I wanted to add back in, based on their percentage in the underlying index. This hybrid approach lets me build effectively my own screened S&P 500 portfolio using only a handful of positions. .
Rob, one of the big brokerages have continued to push this on me. When they said they would sell all my investments and create the direct index, I immediately said no. Thanks for an easy to understand video on this.
Would it be approved by you to invest in taxable Wealthfront fund direct indexing with tax harvesting as my main investment vehicle, as a joint account with my spouse? Reason being as your example I trade options in an outside brokerage with a smaller chunk of money and incur extra short term capital gains. Thanks.
@Rob for someone who's in tech where roughly 45% of my salary comes in RSUS where I get taxed (sell to cover) on vest whether I sell the rest or not, does DI make sense? What should one do with the proceeds from the RSU? Sell them all or re-invest into index funds? Ticker is SQ
Your RSUs are no different than a bonus. Your company has given you a bonus with the value that has not been fixed. However, when rsu vests, it is treated as earned income, so you will pay taxes whether you keep it or not. So, once you think about them the right way, you realize you should sell them immediately as soon as you can, and do whatever you need to, such as buying index funds, paying off debts, with the resulting proceeds.
Thanks for the feedback. I hear no static when I play it and audio levels are good. Curious if others are hearing static. I do have a sound track in the background (and effect many RUclips videos use), but it's set to a -45 db. I wonder if that's what you're hearing.
I love how you make things simple.
Thanks a ton Rob. This video, and your video on leaving your advisor was exactly what I was looking for. We try to keep our capital gains to a minimum, and last year I was "encouraged" to drop 250k into a Fidelity Managed fund that would help allow for "some tax loss harvesting". While it was in line with my questions/concerns about mutual funds that were throwing off gains, in retrospect I sensed my Fidelity advisor was just selling a product as quickly as possible. That feeling was reinforced when she bristled after I questioned its performance and utility in our annual review meeting. Now that we have let it run for a year, I'm taking a closer look at unwinding that account and your points are exactly what I needed to better understand. Thank you! While I will soon have a grab bag of stocks I'll need to unwind, it will be a good set of lessons. Your videos have helped me/us re-think many years of managed finances and reinforced my skepticism of active fiscal management in general (for me). Thanks again for your content and I'm looking forward to starting your book when it arrives tomorrow.
I currently have this in my portfolio. It’s been tracking the S&P well. It’s however very hard to see how much losses it has harvested. And it’s very hard to find any information about roughly how much money this has saved people in the real world. I asked my broker for data but they just sent me over some PDF with a bunch of blabla - so I’m basically testing this because I’m curious and I believe in the math behind it, I’m also in the highest tax bracket and make monthly contributions to it. Hopefully there will be some more real data out there for people with lesser financial knowledge to learn from in the future! Good luck :)
DI also benefits those who plan to die with a large portfolio and give to an heir because of step-up in basis. Similar benefit to gifting to charity.
Like the new positioning of the desk
3rd on the distraction of slight audio static and faint baby crib music. Minor distraction but many like me listen through amplified speakers and audio defects are bothersome. Really appreciate the work you put into content, thank you. Your my favorite financial content provider keep up.
41% combined marginal rax rate (35% fed + 6% state) with $200k in a brokerage account and adding about $20k annually. I do both DI and TLH as they are no extra cost at my brokerage.
I am a US expat living in Europe. EU regulations prevent me from buying US ETFs and UCITS equivalents that Europeans typically buy are a nonstarter because of PFIC rules from the IRS. I am wondering how hard it would be to implement a direct index approach to get around this catch 22 without focusing on Tax Loss Harvesting. Isn't it the same in the end to just tolerate the capital gains every time you rebalance?
Thank you. I liked this because it was clear and straightforward. I became a subscriber.
Thanks for your useful info, as always. I have one question: for someone like with with major carry over capital loss, I guess direct indexing and the subsequent tax loss harvesting could be more valuable, right? If my goal is to use up that carry over asap
Fidelity charges a flat monthly fee for their Folio/Basket "direct indexing" feature. If you are self-managing your account, the fee is only $4.95/month. Do you think that fee is reasonable? or too high?
Another excellent video Rob! I have recently been contemplating this exact decision, and was wary for the same reasons you pointed out. Perhaps other folks did a fair amount of tax loss harvesting this past year on their own - for example using VOO and VTI - which would further pushes out the benefit of adding more losses to a pool of existing yet-to-be used capital losses. Appreciate your casual, common-sense style in breaking down these topics which can seem complex at first blush. 👍
Great content once again, plus I've noticed the added graphics you did in this video! Very nice!
Thanks for the DI review Rob. The background music or the music choice doesn't work well with this style of speaking, though I do greatly appreciate the lack of stuttering in this well prepared video.
What about equity exchange fund? It does help diversify the concentrated positions. However, it just defers the capital gains tax. Not sure if it is worth the cost.
My retail brokerage account has one company in each of the 11 sectors - my own personal mutual index fund and I DCA on a monthly basis - buy and hold
Rob, Thank you for doing what you do. I'm grateful there are people like you out there putting this kind of information out there. Very... very informative.
How would the 5 year diminishing return timeline be impacted if the fee structure was only 10 basis points?
First LIke! Another great and understandable analysis for us Rob! Thanks!
Unless you are comparing Berkshire Hathaway stock to the S&P 500 over the last 10 or 20 years, then you will see one part is greater than the sum of it’s parts
Thank you for providing a common-sense, simple explanation of this mechanism. We were considering in investing in this type of program, and much of the available content is from financial institutions trying to sell their product (biased). You earned a newsletter subscriber out of me today.
I'd like to get your thoughts on tax loss harvesting in general and using ETFs/mutual funds - separate from the direct investing question.
I would like a video on this as well. Thank you for all your great videos!
Rob. Would you do a video on looking at financial statements and find possible financial malfeasance? With your legal background this might really be worthwhile
It's a great topic, but very heard to condense into one video. Let me give it some thought.
Thank you
Never heard of this, thanks for educating me!
Why would short term cap gains from other sources re-energize savings? Doesn't the index get tax advantages or not, independent of extraneous investments?
How much do contributions change your opinion
This sounds like a lot of work. I’ll stick with DCA into index etf’s
hi - I got dinged and let my advisor put all my investments in DI - can you advise on how I can transition out?
Thanks Rob for the great video. One of the main reasons that I've looked into direct indexing is indeed for the ESG side because there are a handful of companies that I would prefer to not invest in (for example Phillip Morris in the S&P500). The hassle to remove them though ends up being pretty high.
What I ended up doing is using an ETF screener to find ESG screened ETFs which removed the companies I wanted and were still low expense ratio, and then I just went through the list of companies they excluded and directly invested in the handful that I wanted to add back in, based on their percentage in the underlying index. This hybrid approach lets me build effectively my own screened S&P 500 portfolio using only a handful of positions. .
Rob, one of the big brokerages have continued to push this on me. When they said they would sell all my investments and create the direct index, I immediately said no. Thanks for an easy to understand video on this.
Would it be approved by you to invest in taxable Wealthfront fund direct indexing with tax harvesting as my main investment vehicle, as a joint account with my spouse?
Reason being as your example I trade options in an outside brokerage with a smaller chunk of money and incur extra short term capital gains. Thanks.
@Rob for someone who's in tech where roughly 45% of my salary comes in RSUS where I get taxed (sell to cover) on vest whether I sell the rest or not, does DI make sense?
What should one do with the proceeds from the RSU? Sell them all or re-invest into index funds? Ticker is SQ
Sell and reinvest into the constituents of your predetermined asset allocation investment.
Your RSUs are no different than a bonus. Your company has given you a bonus with the value that has not been fixed. However, when rsu vests, it is treated as earned income, so you will pay taxes whether you keep it or not.
So, once you think about them the right way, you realize you should sell them immediately as soon as you can, and do whatever you need to, such as buying index funds, paying off debts, with the resulting proceeds.
There's a lot of static in the background
Thanks for the feedback. I hear no static when I play it and audio levels are good. Curious if others are hearing static. I do have a sound track in the background (and effect many RUclips videos use), but it's set to a -45 db. I wonder if that's what you're hearing.
Would you know of a retirement planner similar to Capital but for Canadian? Thanks JB
I think we can all easily manage our own DIY direct indexing in a brokerage like M1 finance. There's no need to lose basis points over this.
ESG is nonsense