Is direct indexing worth the fee?
Direct indexing holds the individual stocks of an index instead of a fund, so losing stocks can be sold to offset taxes elsewhere. The fee is certain; the losses aren't. This calculator shows both, under three clearly labeled sets of assumptions.
23.8% is the top long-term capital gains rate plus the 3.8% surtax. If your losses offset short-term gains, use your ordinary rate (up to 40.8%). Losses beyond your gains offset only $3,000 of ordinary income a year; the rest carries forward, so they're worth this much only if you have gains to use them on.
Year by year, middle scenario
| Year | Portfolio | Losses harvested | Tax offset | Extra fee | Net |
|---|
- It mostly defers tax. Each harvested loss lowers your cost basis, so you'll owe more when you eventually sell. The benefit becomes permanent only if you hold until death (stepped-up basis) or donate the shares.
- The harvest rates are assumptions, not forecasts. Losses depend on market swings you can't predict, and they shrink after the first few years unless you keep adding money.
- Fees are certain and recur. We count only the fee above a low-cost index fund (0.03%), since you'd pay that anyway.
- Wash-sale rules apply across all your accounts, including your spouse's and IRAs. Buying the same stock within 30 days disallows the loss.
- Your holdings will track the index closely but not exactly, and moving out later can mean selling hundreds of positions.
Fees and minimums from each provider's own page, checked October 24, 2026: Wealthfront S&P 500 Direct 0.09%, $5,000 minimum (0.12% for Nasdaq-100); Frec S&P 500 0.09%, $20,000 minimum (Other indexes 0.12% to 0.35%); Schwab Personalized Indexing 0.40%, $100,000 minimum (0.35% on amounts above $2,000,000). Not investment or tax advice.