There are a couple good direct indexing threads in this forum already. But this particular point by Roth is dumb, you get a consolidated 1099 at the end of the year that has the gains/losses/dividends and you only need to input the 3 or 4 numbers there.One of the reported cons is that your taxes get more complex. I believe it was Allan Roth who reported 45 pages of reported sales and purchases on a small trial investment. Sorry, I could not find the article for you to read for yourself.
If simplicity is important to you, this might not be a good choice.
I have spent a fair bit of time looking into it and discussing on this forum, here's my view on the more important things to consider:
Bad:
1 - You have to have external capital gains, the tax advantages you get on the $3k/yr offset to ordinary income are probably not worth the hassle/fees.
2 - Fees matter, a lot. Every deposit into direct indexing has diminishing returns in terms of tax loss harvesting, after 7-10 years your not getting any harvesting at all. So the fees will catch up to you fast. At a 0.4% fee you need to move all of your stocks out to self-directed within ~10 years of deposit or you are worse off than if you had just bought VTI/VOO. Then you are stuck with all those positions, IMO it only makes sense at a fee < 0.2% and the lower the better.
Good:
3 - It's the only way to reliably "beat the market" (i.e. your target index) -- on average.
There are a dozen of other minor issues/benefits that folks tend to bring up but (IMO) they are insignificant in contrast to the above, I really like Rob Berger but I don't feel like his direct indexing video misses the key points.
Statistics: Posted by nvrmnd — Thu Jun 20, 2024 11:29 pm — Replies 3 — Views 253