الجمعة, 10 شباط/فبراير 2023 03:44

Direct Indexing Better at Minimizing Taxes Than ETFs

Written by
Rate this item
(0 votes)

There’s no question that ETFs are a popular way to gain access to the market. They’re low-cost and tax efficient when compared to mutual funds. But, according to a new research paper, ETFs are not the most profitable after taxes are paid. That distinction belongs to large baskets of individual stocks that aren't found in a fund. The paper, which was posted recently by Roni Israelov, the president and chief investment officer of NDVR, and Jason Lu, a research economist in the economic modeling division of the International Monetary Fund, sought to quantify tax-loss harvesting, the strategy of selling losing assets to offset taxable gains that arise when selling winning ones. The paper found that tax-loss harvesting produced the best results when it's used for groups of individual stocks, not ETFs. In a recent interview, Israelov said "You make more money harvesting single stocks across an entire portfolio than you do in an ETF." The paper adds to a growing body of wealth management firms that have been promoting the merits of tax-loss harvesting and boosting the case for direct indexing, a strategy in which investors chose a basket of securities that mirror an index, but is personalized to their specifications.


Finsum: A new research paper found that tax-loss harvesting produced the best results when it's used for groups of individual stocks, not ETFs, boosting the case for direct indexing.

Contact Us

Newsletter

اشترك

Subscribe to our daily newsletter

Top