InverseWealth Direct Indexing

Invest in the market. Keep more after taxes.

Invest in an index like the S&P 500. Capture losses to offset gains and defer taxes.

CA Registered Investment Adviser
Fiduciary
Assets held at Charles Schwab / Altruist
SIPC protection

Direct Indexing Account Size

Potential Tax Savings Over 10 Years

Up to $81,150

Hypothetical. Assumes about $150,000 in harvested losses over 10 years, offsetting at least that much in short-term gains, taxed at the top CA rate (54.1%). Not guaranteed. Excludes advisory fees and trading costs. How we estimate this

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Why taxes matter

In California, taxes can take over half of your short-term gains

54.1%

lost to tax

Top combined rates for a California resident in the highest bracket. Short-term gains: 37% federal, 3.8% net investment income tax and 13.3% California (54.1%). Long-term gains: 20% federal, 3.8% and 13.3% (37.1%). Your rate depends on your income and filing status.

The mechanism

How Direct Indexing lowers taxes

Your accountThe index

You invest in an index such as the S&P 500.

The account holds each individual stock of the S&P 500 directly. It grows in line with the index, within a small tracking error.

Stocks that are upStocks that are down

The index is up. Some stocks are down.

A rising index still contains stocks trading below the price you paid.

Losers sold, similar stock bought

We sell the losers.

We replace the losers with similar companies. A loss is realized. Your market exposure stays on track.

Household gainGain

−

Harvested lossesLosses

Taxable gainTaxable

The losses cancel the gain.

These losses subtract from gains anywhere in your household — an RSU sale, a business, a property — so far less of it is taxable.

Loss harvesting lowers cost basis, so the taxes may be deferred rather than eliminated. Harvesting depends on market conditions and is not guaranteed. The benefit may slow down in later years, as most holdings increase in value. Direct Indexing accounts will have a tracking error against the index and performance may deviate from it. Visuals are illustrative only. Shapes show how the mechanism works and are not drawn to scale, not based on an actual account, and not a projection of results.

Want the research behind it, including when it's worth it? Read our complete guide to Direct Indexing.

Who it's for

When direct indexing helps most

High-income investors

In the top bracket, each dollar of harvested losses can save up to 54 cents in tax.

Sell appreciated stocks/RSUs

Sell gradually and keep more of your gains, without a giant tax bill.

Upcoming or frequent capital gains

Planning for an upcoming gain? Have frequent short-term gains? Start early to build losses that offset the gains when they come.

Rebalance your portfolio

Unused losses carry forward, building a bank you can draw on whenever your portfolio needs rebalancing or adjusting.

Hypothetical case study

How Sarah offset 87% of the tax on selling her employer stock

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Hypothetical illustration; Sarah is fictional. Assumes a $500,000 position with a $250,000 basis sold gradually over 10 years, $25,000 contributed quarterly, gains taxed at a combined 37.1% (top federal and California rates), harvested losses of 7.5% of new money in its first year, 4% in the second and 2.5% after, and no fees or transaction costs. Loss harvesting depends on market conditions and is not guaranteed.

Custody and protection

Your assets, in trusted hands.

Charles Schwab

Custodian

Your assets are held at Charles Schwab in your name, not by InverseWealth.

Nuveen

Sub-advisor

In partnership with Nuveen, an asset manager with $1.4 trillion in assets under management.

SIPC protected

Account protection

Up to $500,000 through SIPC, plus private insurance from Charles Schwab.

Fiduciary

Standard of care

InverseWealth is a California-registered investment advisor. We are a fiduciary — legally required to act in your best interest.

Why InverseWealth

Sophisticated technology. Expert advice.

Feature	InverseWealth	Robo-advisor direct indexing
Dedicated, licensed advisor	Yes	No
Personalized transition plan	Yes	No
Wide range of investments	Yes	Limited
Flexibility and personalization	Yes	Limited
Household wash-sale coordination	Yes	Limited
Annual fee	0.49%	About 0.09% to 0.40%

Dedicated, licensed advisor
Expert guidance from a dedicated, licensed investment advisor.
Personalized transition plan
Your advisor builds a plan around your existing stocks/RSUs and tax situation.
Wide range of investments
Choose from a wide range of indexes such as the S&P 500, Nasdaq-100 and dozens more. Go beyond equities and include other assets such as bonds, commodities and alternative investments.
Flexibility and personalization
Exclude any stock that you already own. Add advanced strategies such as factor tilts for performance.
Household wash-sale coordination
Your advisor coordinates with you on wash sales across your entire household (IRAs, 401(k)s, spouse's accounts, etc.).
0.49% annual fee
Includes a dedicated advisor who helps you choose the right strategy and advises you along the way, plus account setup, portfolio management and loss harvesting.

Comparison reflects published fees and features of widely used robo-advisor direct indexing platforms as of October 2026, and may change. Features and fees vary by provider. See our Form ADV Part 2A for our complete fee schedule.

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FAQ

Frequently asked questions.

What is direct indexing, in one sentence?

Instead of buying one fund that tracks an index, you own the individual stocks that make up that index, which means you can sell the ones trading below what you paid and use those losses to lower your tax bill.

Why can't I do this with an S&P 500 ETF?

An ETF is a single security. If the fund is up, there is nothing to sell at a loss, even when many of the companies inside it are down. Owning the stocks directly is what creates the harvesting opportunity.

How long does it take to offset gains?

Harvested losses can offset a portion of your gains each year. The higher your gains, the longer it will take to generate offsetting losses. Direct Indexing is a long-term strategy. Your advisor will walk you through a transition plan designed for your situation and goals.

Do I have to sell my stock to get started?

No. You can transfer appreciated shares in kind. We then sell them down over time against a capital gains budget you approve each year, rather than all at once.

What is a wash sale, and why does it matter?

If you sell a stock at a loss and buy the same or a substantially identical one within 30 days before or after, the loss is disallowed. That rule applies across every account you and your spouse own, including IRAs and 401(k)s. We coordinate across your household so a purchase in one account does not cancel a loss harvested in another.

Do I own the stocks?

Yes. Your account is opened at Charles Schwab. It is managed by us, but you own everything and you can see every holding.

Does loss harvesting work consistently?

Loss harvesting is not guaranteed and depends heavily on market conditions. Volatile markets may create more loss harvesting opportunities. Steady growth years may create fewer harvesting opportunities. Loss harvesting benefits also slow down over time. The first year or two usually generates the maximum loss harvesting benefit. As your holdings rise above what you paid, fewer positions sit at a loss. Adding new money — quarterly vests, for example — keeps bringing in positions bought at current prices, which is why ongoing contributions extend the life of the strategy.

How does borrowing against the account work?

You can borrow against your portfolio through a line of credit from Charles Schwab Bank, subject to their approval. This allows you to borrow money at attractive, discounted rates with your portfolio held as collateral. For high earners, this may be a more tax-efficient strategy for funding major expenses instead of liquidating highly appreciated investments.

Are there any lock-up periods?

No, there are none. You can cancel anytime and transfer the account to your own brokerage.

Next step

See what this could look like for you.

Schedule a complimentary, no-obligation consultation.

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Not ready to talk? Get a custom analysis by email.

How we estimate tax savings

Potential tax savings assume a direct indexing account funded with a one-time cash deposit harvests losses equal to 30% of the amount invested over 10 years, and that you have at least that much in short-term capital gains to offset, realized gradually over the same period. The "up to" figure is those losses multiplied by a combined 54.1% rate: 37% federal ordinary income, 3.8% net investment income tax and 13.3% California, the top brackets. Harvested losses offset short-term gains first. Against long-term gains the combined rate is 37.1% (20% federal), so the savings are lower: for a $500,000 account, up to $81,150 against short-term gains versus about $55,650 against long-term gains. If your gains are smaller than the losses harvested, or you are in a lower bracket, your savings will also be lower.

The 30% figure comes from Khang, Paradise and Cummings, "Expected Loss Harvest From Tax-Loss Harvesting With Direct Indexing," The Journal of Beta Investment Strategies 14(3), 2023, which found that a lump-sum direct indexing portfolio harvested about 30% of principal and dividends over 10 years across 64 historical simulations from 1982 to 2013, with outcomes ranging from 12% to 62%. Liberman, Krasner, Sosner and Freitas (same journal, 2023) report a similar result.

Losses cannot be applied to gains from earlier tax years. Harvesting lowers the cost basis of the direct indexing account, so much of the benefit is a deferral of tax rather than a permanent reduction. This is a hypothetical estimate for illustration, not tax advice and not a projection of any actual account. It does not reflect fees or transaction costs.

Direct Indexing and Loss Harvesting disclosures

Losses save tax only against realized capital gains. Excess losses can offset up to $3,000 a year of ordinary income and the balance gets carried forward for use in future years. Loss harvesting lowers cost basis, so the tax benefit may be deferred rather than eliminated.

Tax-loss harvesting results vary with markets and your tax situation and are not guaranteed: harvestable losses may be smaller than the gains you want to offset, and not all gains can be offset. Direct indexing accounts will have a tracking error against the index and performance may deviate from it. Factor tilts, themes and customizations may cause returns to differ from the index.

InverseWealth LLC is a California-registered investment adviser, independent of and not affiliated with Charles Schwab or Nuveen. SIPC and excess coverage protect against custodian failure, not market losses. Securities-based lending carries risk, including collateral calls and forced sales. All investing involves risk, including loss of principal. Past performance is not an indication of future results. InverseWealth does not provide legal or tax advice; consult a qualified tax professional. Not a solicitation of advisory services outside California or where otherwise legally permitted.

In California, taxes can take over half of your short-term gains

How Direct Indexing lowers taxes

When direct indexing helps most

High-income investors

Sell appreciated stocks/RSUs

Upcoming or frequent capital gains

Rebalance your portfolio

How Sarah offset 87% of the tax on selling her employer stock

Your assets, in trusted hands.

Charles Schwab

Nuveen

SIPC protected

Fiduciary

Sophisticated technology. Expert advice.

Dedicated, licensed advisor

Personalized transition plan

Wide range of investments

Flexibility and personalization

Household wash-sale coordination

0.49% annual fee

Frequently asked questions.

See what this could look like for you.

InverseWealth