Have markets and technology advanced enough that investors should consider owning the individual stocks in an index rather than investing through a pooled vehicle such as an ETF or mutual fund?

In Episode 39 of The Decision Dividend, we’re joined by Brant Cavagnaro to explore how direct indexing works, who may benefit most, and when a low-cost commingled fund may still be the better choice.

You’ll learn:

• What distinguishes direct indexing from an ETF, mutual fund, or traditional separately managed account
• How direct indexing may turn tax drag into potential tax alpha, even in rising markets
• Which investors may benefit most from personalizing portfolios, harvesting losses, offsetting large gains, and donating appreciated securities
• The limits of direct indexing, from the downsides of personalization to tax benefits that may fade over time

Sources

1. Shomesh E. Chaudhuri, Terence C. Burnham, and Andrew W. Lo, “An Empirical Evaluation of Tax-Loss-Harvesting Alpha,” Financial Analysts Journal, 2020
   https://rpc.cfainstitute.org/research/financial-analysts-journal/2020/0015198x-2020-1760064
2. Vanguard, “Tax-Loss Harvesting: Why a Personalized Approach Is Important”
   https://corporate.vanguard.com/content/dam/corp/research/pdf/tax_loss_harvesting_why_a_personalized_approach_is_important.pdf
3. Libor Gromis, Nathan Sosner, and Steven Krasner, “The Tax Benefits of Direct Indexing: Not a One-Size-Fits-All Strategy,” AQR
   https://www.aqr.com/Insights/Research/Journal-Article/The-Tax-Benefits-of-Direct-Indexing
4. Savina Rizova and Mark Krasniewski, “A Historical Perspective on Multifaceted Tax Management,” Dimensional Fund Advisors, 2025
   https://www.dimensional.com/us-en/insights/a-historical-perspective-on-multifaceted-tax-management

For a broader look at how direct indexing fits alongside other investment innovations, revisit Episode 27, The Future of Investment Management:
https://www.youtube.com/watch?v=NktNNSc44NM&t=492s

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Information contained herein has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. It is not intended as the primary basis for financial planning or investment decisions and should not be construed as advice meeting the particular investment needs of any investor. This material has been prepared for information purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Past performance is no guarantee of future results.