Direct indexing allows investors to access the individual stocks in their portfolio, providing opportunities for tax-loss harvesting. Unlike index funds, direct indexing offers the performance and diversification benefits of an index but with the ability to customize holdings. 

This strategy enables investors to manage exposure to specific companies or sectors and capitalize on market dips for tax-loss opportunities. While index funds offer simplicity and tax efficiency, direct indexing takes these benefits a step further by allowing more personalized portfolio adjustments. 

However, setting up a direct indexing account can be costly and involves higher fees due to its active management. Despite this, the customization and tax benefits can be worthwhile for certain investors, especially those in higher tax brackets or with concentrated stock positions.

Finsum: With fees and minimums getting lower and lower, direct indexing is becoming an option for a wider audience.