Direct Indexing
I’m 57 with ~$500K concentrated in AAPL and BRK-B (significant embedded gains). An advisor suggested Direct Indexing over 5 years to gradually exit the positions and harvest tax losses to offset future gains — at a 1.2% AUM fee. Is this a sound strategy for my situation, and is the fee justified? Thanks! (My dad bought us your book in the 80s or 90s for Christmas!)
Terry Says
That all depends on the costs involved. And those transitions can be expensive, as well as limiting of your choices for withdrawals. And you’re still exposed to the stock market. I’ve always thought you might as well stick with great companies, instead of diversifying into mediocre ones! And if the company isn’t great any more, bite the bullet and sell — and reinvest in companies of your choice. Capital gains tax rates are at historic lows right now. And at your age, you don’t have to worry about the impact of a capital gains bump on your Medicare premiums.
I think this “advisor” is going to make more on this deal than you are!
PS — you don’t have to sell ALL your shares. You could “lighten up” a bit by selling just some.
