Expanding tax-efficient investing options, firms are now utilizing direct indexing technology to make separately managed accounts (SMAs) more advantageous for tax management. Unlike funds, SMAs allow for individualized tax strategies because the investor owns the underlying assets directly, an option now expanding with high demand.
Direct indexing remains the most common approach for tax-efficient SMAs, enabling tailored tax-loss harvesting by strategically selling select stocks. Some firms are also adapting this approach to actively managed equities, though balancing loss harvesting with stock selection can be complex.
Tax management in fixed-income portfolios, though more limited, still offers advantages, especially during interest rate hikes.
Finsum: Model portfolios are gaining traction, for similar tax efficiency reasons.
- managed accounts
- porfolio management
- tax efficiency
- direct indexing
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