Years of rising markets are testing direct indexing. Early losses were easy to harvest, but as portfolios mature, fewer losses remain, and clients sitting on big gains in a few star holdings often hesitate to sell. Critics wonder if an older account becomes little more than an expensive index fund. Supporters argue the tax benefits still compound quietly, since deferred gains and ongoing savings add value that headline returns can understate. Market dispersion helps too, because swings among individual stocks keep creating fresh harvesting chances in any environment. Lower minimums have also opened the door to far more investors, and advisors report that the strategy sparks richer planning conversations around estates, giving and family wealth. Direct indexing may be less flashy in its later years, but it can still earn its place when judged on after tax outcomes rather than raw performance alone.

Finsum: Judging a tax strategy only by pre tax returns misses the point, and advisors who frame direct indexing around long term after tax results will keep it relevant long after the easy wins are gone.