Tax Loss Harvesting Explained: How Wealthy Investors Cut Tax Bills (And How You Can Too)

Direct indexing's tax-loss-harvesting boom now faces IRS scrutiny and brokerage pullback on its riskier, leveraged long-short variants.

• Direct indexing scales tax alpha: Owning individual index stocks instead of an ETF lets investors harvest losses stock-by-stock, adding roughly 1-2% in after-tax returns early on (0.8-1.2% long run), or $8-12K/year on a $1M portfolio.
• Industry ballooned fast: Direct indexing assets hit ~$900B by end-2024, projected to top $1T by end-2025, growing 12-15% annually, faster than ETFs, with minimums now as low as $100K.

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