Excellent article Andrew. You sure hit that nail on the head, All my jobs for delivery boy, to stock clerk, to COOP student, was not so much the job itself, but the people from every background. I learned to Observe people. I think that is what college does today.
Since age 8, I liked having money in my pocket. At that age I was the delivery boy for my Uncle's Meat Market. My pay was $1 for all of Saturday, plus any tips. My transportation was my bicycle a shopping bag on each side of the handle bars. Then Newspaper boy, then checker of the delivery of each boys newspapers. Next, was stock clerk for $1.50 per hour at a grocery store, and I worked there part time from age 16 to 23! Also summer time jobs each summer in addition. I actually earned my way through college in 5 years graduating in 1969 with a BSEE from IIT in Chicago. I was very fortunate, as loans were not even discussed in those days. My Dad paid my first semester to get me started, and I commuted to school with COOP programs and working a lot in summer as well as always working part time at the grocery store. After that my Masters in Management was paid in full by my employer. Very fortunate to this day in Retirement at 80 years old and still some money in my pocket! I will bet this Humble crowd remembers slide rules for my engineering calculations!
I also hate to pay for advice on Finances, I have been doing it alone for 57 years. The part that strikes me most, is when I pass, I will need someone to step in, so my plan is to get affiliated with a Wealth Firm. They will give me a FREE tuneup, and then we will have a relationship for my wife if I am gone. To me good insurance, and I will be happy to pay their fee so my wife can sleep at night.
Each week I learn from Humble Dollar. On this subject I needed more explanation which I found in a summary. This may help explain more as it did for me. Sure hope this helps many.
What is direct indexing accounts A direct indexing account is a personalized investment strategy that gives you the benefits of an index fund (like the S&P 500 or Nasdaq-100) but with a massive twist: instead of buying a single share of an ETF like VOO or QQQ, you directly buy and own the individual stocks that make up that index. It is typically set up as a Separately Managed Account (SMA) through a wealth advisor or a major brokerage platform.
To understand why investors use them, it helps to look at the contrast between a traditional fund and direct indexing, along with the specific benefits it offers. The Difference: ETF vs. Direct Indexing
The ETF Approach (VOO): You buy one share of VOO. Vanguard pools your money with millions of others and owns the 500 stocks behind the scenes. You own a "basket," but you cannot look inside and sell off just the shares of Apple or Exxon Mobil by themselves.
The Direct Indexing Approach: A computer algorithm buys fractional shares of all 500 individual stocks inside your account in their exact market weightings. Your dashboard won't show one line item for an ETF; it will show hundreds of individual stock positions.
Why Do Investors Use It?There are two primary reasons why someone moves capital into a direct indexing account: 1. Aggressive, Continuous Tax-Loss Harvesting (The Big Draw)In a standard taxable account, you can only harvest a loss if the entire index fund drops. If the S&P 500 is up 12% for the year, your ETF is up, and there are no losses to harvest.
With direct indexing, you own the individual components. Even when the S&P 500 is having a banner year and is up overall, there are always 50 to 100 individual companies inside the index that are losing money at any given moment.
The automated direct indexing software constantly scans your account.
It automatically sells off those specific losing stocks to "harvest" the capital losses, and immediately replaces them with similar stocks to keep your market tracking accurate.
The Result: You generate constant capital losses that you can use to offset capital gains elsewhere in your portfolio (like a major real estate sale or rebalancing a concentrated position), potentially lowering your tax bill significantly.
2. Portfolio CustomizationBecause you own the raw ingredients of the index, you can filter things out.
If you spent your career working for an auto manufacturer and own a massive, concentrated block of that company's stock, you can tell the direct indexing software: "Replicate the S&P 500, but do not buy any auto stocks for this account so I don't over-expose myself."
You can also filter out entire industries based on personal philosophies (e.g., completely blocking defense contractors, tobacco companies, or oil producers).
The Trade-OffsWhile direct indexing sounds ideal, it isn't a perfect fit for every portfolio due to three main constraints:
High Minimums: Because you have to purchase hundreds of individual stocks, most firms require a minimum investment of $100,000 to $250,000 to open a direct indexing account.
Higher Fees: A standard S&P 500 ETF charges next to nothing (VOO's expense ratio is a tiny 0.03%). Direct indexing requires a management fee—often between 0.15% and 0.35%—because of the complex software and management required. (Investors justify this by ensuring their tax savings outpace the fee).
Tax Bracket Dependancy: This strategy is almost entirely useless inside a tax-sheltered account like a Roth IRA or traditional IRA, because those accounts don't pay capital gains taxes anyway. It is strictly a tool for taxable, non-retirement brokerage accounts, and it benefits high-income earners in top tax brackets the most.
The SummaryThink of an ETF as buying a pre-made cake from the bakery, while direct indexing is buying all the flour, sugar, and eggs separately. It takes more work and costs a bit more to organize, but it allows you to change the recipe and use the scraps to offset your taxes.
Excellent article Bogdan. I am trying to teach all my Grand Children about the IRA's and Roth's, and the mighty power of compounding and the enemy of inflation. Take any % of Free Money. OK live now, fine, but what happens to those people when they reach my age of 80! Keep teaching our youth the real lessons of Finance. Thanks.
Another great article. You can say what you want about bonds, and how they balance your portfolio. Buffett also said for his wife, if he died her money should go to 90% S&P500 and 10% Treasuries. I am no Buffett, but at 80 years old, I like the goal of 85% S&P500 and 15% Cash. My personal ballast is Cash. I slept very well during the downturns recently, because over 57 years of investing, you watch when the market goes down, sell nothing and buy stocks if you have some cash in your equity accounts. That other 15% cash gets you through any long term down cycles. It is just what I did, and bought some S&P 500 at levels of 6800, and now are at 7500. This works well for me.
Never send money to anyone, especially when the story does not jive. Be Alert. No need to answer your phone either, if it is important your fried will leave a message.
Comments
Excellent article Andrew. You sure hit that nail on the head, All my jobs for delivery boy, to stock clerk, to COOP student, was not so much the job itself, but the people from every background. I learned to Observe people. I think that is what college does today.
Post: Starting Up – Part 2
Link to comment from May 16, 2026
Since age 8, I liked having money in my pocket. At that age I was the delivery boy for my Uncle's Meat Market. My pay was $1 for all of Saturday, plus any tips. My transportation was my bicycle a shopping bag on each side of the handle bars. Then Newspaper boy, then checker of the delivery of each boys newspapers. Next, was stock clerk for $1.50 per hour at a grocery store, and I worked there part time from age 16 to 23! Also summer time jobs each summer in addition. I actually earned my way through college in 5 years graduating in 1969 with a BSEE from IIT in Chicago. I was very fortunate, as loans were not even discussed in those days. My Dad paid my first semester to get me started, and I commuted to school with COOP programs and working a lot in summer as well as always working part time at the grocery store. After that my Masters in Management was paid in full by my employer. Very fortunate to this day in Retirement at 80 years old and still some money in my pocket! I will bet this Humble crowd remembers slide rules for my engineering calculations!
Post: First Job, Lasting Impact
Link to comment from May 16, 2026
I also hate to pay for advice on Finances, I have been doing it alone for 57 years. The part that strikes me most, is when I pass, I will need someone to step in, so my plan is to get affiliated with a Wealth Firm. They will give me a FREE tuneup, and then we will have a relationship for my wife if I am gone. To me good insurance, and I will be happy to pay their fee so my wife can sleep at night.
Post: Direct Indexing Anyone?
Link to comment from May 16, 2026
Each week I learn from Humble Dollar. On this subject I needed more explanation which I found in a summary. This may help explain more as it did for me. Sure hope this helps many. What is direct indexing accounts A direct indexing account is a personalized investment strategy that gives you the benefits of an index fund (like the S&P 500 or Nasdaq-100) but with a massive twist: instead of buying a single share of an ETF like VOO or QQQ, you directly buy and own the individual stocks that make up that index. It is typically set up as a Separately Managed Account (SMA) through a wealth advisor or a major brokerage platform. To understand why investors use them, it helps to look at the contrast between a traditional fund and direct indexing, along with the specific benefits it offers. The Difference: ETF vs. Direct Indexing
- The ETF Approach (VOO): You buy one share of VOO. Vanguard pools your money with millions of others and owns the 500 stocks behind the scenes. You own a "basket," but you cannot look inside and sell off just the shares of Apple or Exxon Mobil by themselves.
- The Direct Indexing Approach: A computer algorithm buys fractional shares of all 500 individual stocks inside your account in their exact market weightings. Your dashboard won't show one line item for an ETF; it will show hundreds of individual stock positions.
Why Do Investors Use It?There are two primary reasons why someone moves capital into a direct indexing account: 1. Aggressive, Continuous Tax-Loss Harvesting (The Big Draw)In a standard taxable account, you can only harvest a loss if the entire index fund drops. If the S&P 500 is up 12% for the year, your ETF is up, and there are no losses to harvest. With direct indexing, you own the individual components. Even when the S&P 500 is having a banner year and is up overall, there are always 50 to 100 individual companies inside the index that are losing money at any given moment.- The automated direct indexing software constantly scans your account.
- It automatically sells off those specific losing stocks to "harvest" the capital losses, and immediately replaces them with similar stocks to keep your market tracking accurate.
- The Result: You generate constant capital losses that you can use to offset capital gains elsewhere in your portfolio (like a major real estate sale or rebalancing a concentrated position), potentially lowering your tax bill significantly.
2. Portfolio CustomizationBecause you own the raw ingredients of the index, you can filter things out.- If you spent your career working for an auto manufacturer and own a massive, concentrated block of that company's stock, you can tell the direct indexing software: "Replicate the S&P 500, but do not buy any auto stocks for this account so I don't over-expose myself."
- You can also filter out entire industries based on personal philosophies (e.g., completely blocking defense contractors, tobacco companies, or oil producers).
The Trade-OffsWhile direct indexing sounds ideal, it isn't a perfect fit for every portfolio due to three main constraints:- High Minimums: Because you have to purchase hundreds of individual stocks, most firms require a minimum investment of $100,000 to $250,000 to open a direct indexing account.
- Higher Fees: A standard S&P 500 ETF charges next to nothing (VOO's expense ratio is a tiny 0.03%). Direct indexing requires a management fee—often between 0.15% and 0.35%—because of the complex software and management required. (Investors justify this by ensuring their tax savings outpace the fee).
- Tax Bracket Dependancy: This strategy is almost entirely useless inside a tax-sheltered account like a Roth IRA or traditional IRA, because those accounts don't pay capital gains taxes anyway. It is strictly a tool for taxable, non-retirement brokerage accounts, and it benefits high-income earners in top tax brackets the most.
The SummaryThink of an ETF as buying a pre-made cake from the bakery, while direct indexing is buying all the flour, sugar, and eggs separately. It takes more work and costs a bit more to organize, but it allows you to change the recipe and use the scraps to offset your taxes.Post: Direct Indexing Anyone?
Link to comment from May 16, 2026
Thanks for the info, Jonathan was the BEST, and a genius of finance.
Post: Money and Me by Jonathan Clements
Link to comment from May 16, 2026
Excellent article Bogdan. I am trying to teach all my Grand Children about the IRA's and Roth's, and the mighty power of compounding and the enemy of inflation. Take any % of Free Money. OK live now, fine, but what happens to those people when they reach my age of 80! Keep teaching our youth the real lessons of Finance. Thanks.
Post: Retirement Accounts
Link to comment from May 16, 2026
Another great article. You can say what you want about bonds, and how they balance your portfolio. Buffett also said for his wife, if he died her money should go to 90% S&P500 and 10% Treasuries. I am no Buffett, but at 80 years old, I like the goal of 85% S&P500 and 15% Cash. My personal ballast is Cash. I slept very well during the downturns recently, because over 57 years of investing, you watch when the market goes down, sell nothing and buy stocks if you have some cash in your equity accounts. That other 15% cash gets you through any long term down cycles. It is just what I did, and bought some S&P 500 at levels of 6800, and now are at 7500. This works well for me.
Post: Resilient Investing
Link to comment from May 16, 2026
Excellent article, waiting for the REST of the story.
Post: Starting Up
Link to comment from May 9, 2026
Never send money to anyone, especially when the story does not jive. Be Alert. No need to answer your phone either, if it is important your fried will leave a message.
Post: New Face, old scam
Link to comment from May 9, 2026
Wonderful discussion. Mom's are the BEST. Happy Mother's Day to ALL/
Post: Sundry Memories of Mom
Link to comment from May 9, 2026