Generate better after-tax returns with direct indexing
August 19, 2021
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3 min read
Kevin Maeda, Chief Investment Officer, Direct Indexing, Natixis Investment Managers Solutions, explains the tax differences between index funds, ETFs, and separately managed accounts.
- While index mutual funds and ETFs are reasonably tax-efficient, investors must still pay taxes on their dividends and periodic capital gain distributions.
- For tax-sensitive investors, there’s another way to index, using a separately managed account, also known as an SMA.
- With a direct indexing SMA, investors have the potential for higher returns after taxes, because they own the stocks directly.
- This means any losses in the portfolio can be used to offset taxable gains, so investors can keep more of their investment earnings after taxes.
