You just inherited a seven-figure portfolio. Now what?
Most 30-year-olds don’t wake up managing $500K—or more. But if you’re inheriting wealth, you’re facing decisions that could shape your financial future for decades.
One strategy worth understanding: direct indexing.
It sounds technical. But it could offer flexibility and tax efficiency that traditional index funds can’t match.
Here’s what it is—and whether it makes sense for you.
What Is Direct Indexing?
Think of a typical index fund. You own a slice of hundreds (or thousands) of companies bundled together. Simple. Low cost. Passive.
Direct indexing flips that model.
Instead of buying the fund, you own the individual stocks that make up the index—directly in your account.
So if you’re tracking the S&P 500, you’d own shares of Apple, Microsoft, ExxonMobil, and so on. Not a fund that holds them for you.
This potentially changes everything about how you can manage taxes, customize holdings, and align investments with your values.
Why Customization Matters
When you inherit wealth, your situation might be different from the average investor’s.
Maybe your parents worked in tech. You already own concentrated stock options from your own job. Doubling down on that sector through a standard index fund could leave you overexposed.
With direct indexing, you could exclude certain stocks or sectors. You might:
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- Remove companies that overlap with your existing holdings
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- Avoid industries you don’t want to support (tobacco, fossil fuels, etc.)
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- Tilt toward growth stocks if your timeline is long
Traditional index funds don’t let you do that. You get what’s in the box.
Direct indexing lets you customize the box itself.
The Tax Benefit Potential
This is where things get interesting.
When you own individual stocks, you can use a strategy called tax-loss harvesting.
Here’s how it could work:
Let’s say one of your holdings drops 10%. You sell it at a loss. That loss can offset gains elsewhere in your portfolio—or reduce your taxable income.
Then you replace that stock with a similar one, so your overall exposure stays consistent.
With a traditional index fund, if you want to realize a loss to offset taxes you would need to sell shares of that fund including both winners and losers. For example, in 2025, many index funds are up, negating the ability to offset any gains.
But with direct indexing, you could harvest losses stock by stock—throughout the year. That flexibility could add up over time, especially in volatile markets.
Some platforms automate this process daily. The tax savings could offset management fees—or even exceed them.
Important note: Tax-loss harvesting doesn’t eliminate taxes. It defers them. And results vary based on individual circumstances. Always consult a tax professional before making decisions.
Who It’s Best For
Direct indexing isn’t for everyone.
If you’re just starting out with $50K, a low-cost index fund is probably your best bet. Simple. Effective. No need to overcomplicate.
But if you’re managing a larger inheritance—say, $500K or more—direct indexing could make sense if:
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- You want more control over what you own
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- You’re in a higher tax bracket and want to reduce taxable income
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- You have concentrated positions you’d like to diversify around
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- You’re willing to work with an advisor who can manage the strategy
The threshold varies. Some platforms require $100K to start. Others need $250K or more.
And while technology has made direct indexing more accessible, it still requires oversight. You’re not just “set it and forget it” anymore.
The Bottom Line
Inheriting wealth is overwhelming. You didn’t ask for this responsibility. And the pressure to “do it right” can feel paralyzing.
Direct indexing won’t solve every challenge. But it could offer flexibility that traditional funds don’t provide—especially when it comes to taxes and customization.
The key is understanding whether it fits your situation. Not someone else’s.
How I Can Help
As a Financial Advisor at Measured Financial, it’s my mission to build a client relationship that goes beyond financial investment. I’m committed to putting clients first by building relationships and providing value from day one.
It’s not an investment in securities alone. It begins with an investment in trust.
At Measured Financial, our experience is used to broaden your investment opportunities through strategies not dependent on the whims of the stock market. You’re treated with a personal touch. We strive for you to feel valued, heard, and understood every time we interact with you.
We take your trust seriously. That’s why we’re straightforward, honest, and open in our communication with you.
Ready to talk?
Visit https://www.measuredfinancial.com/contact-page-alex-gibbs/, fill out the contact form, and a member of our team will call you to schedule a conversation.
Let’s figure out what makes sense for your situation.
