20/20 MONEY How direct index portfolio construction can offset taxes on a practice sale with Peter Lazaroff, CFA, CFP®,
Jan 13, 2025
In this engaging discussion, Peter Lazaroff, Chief Investment Officer at Plancorp and author of Making Money Simple, dives into the fascinating world of direct indexing. He explains how this investment strategy can significantly minimize tax liabilities, especially during the sale of a practice. Peter emphasizes the importance of due diligence when selecting direct indexing firms, and highlights the benefits of customizing portfolios for tax efficiency. The conversation also touches on integrating ESG concerns and maximizing returns through smart tax strategies.
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Direct Indexing Explained
- Direct indexing means owning an index fund just for yourself, unlike shared mutual funds or ETFs.
- This allows personalized tax management and potentially lower overall costs by avoiding shared trading losses.
Unwrapping the Index
- Direct indexing unwraps the index, allowing ownership of individual securities inside an index.
- This enables more active tax loss harvesting and precise portfolio rebalancing.
Tax Loss Harvesting with Direct Indexing
- Use direct indexing to capture tax losses by selling stocks at a loss and replacing with similar securities.
- This lowers your tax bill and doesn't require tracking the index perfectly.
