How Direct Indexing Automation Aids Tax-Loss Harvesting

Tax-loss harvesting is one of the direct indexing’s biggest benefits. The automation that direct indexing provides greatly increases the strategy’s potential benefits.

Tax-loss harvesting involves selling an investment at a loss, then reinvesting the proceeds of that sale into another asset. Since harvesting opportunities don’t just spring up at the end of the year, the frequency at which a portfolio is scanned for tax-loss harvesting opportunities matters.

However, finding these opportunities remains a very manual process. That’s why most advisors wait until the end of the year to review their clients’ portfolios. But by then, many of the best opportunities have already passed.

The More Scans, the Better

Direct indexing software scans the portfolio for tax-loss harvesting opportunities at a set frequency (daily, quarterly, or monthly). Generally, the more frequent the scans, the higher and more consistent the results.