America's Best Direct Indexing Buyers Guide 2024 - 37

2024 DIRECT INDEXING BUYERS GUIDE
DIRECT INDEXING GLOSSARY OF TERMS
Navigating the world of direct indexing can be complex, but having a clear understanding
of key terms can help you make informed decisions. Here's a glossary of terms to guide
you through the Direct Indexing Buyers Guide:
Direct Indexing: An investment
strategy that involves constructing
portfolios by directly holding
individual securities that replicate the
composition of a specific index.
Customization: The ability to tailor
investment portfolios to align with
clients' unique preferences, values,
and financial goals.
Tax Efficiency: A key benefit of
direct indexing, where strategies are
implemented to minimize tax liabilities
by optimizing capital gains and losses.
Tax-Loss Harvesting: A strategy
within direct indexing that involves
strategically realizing capital losses to
offset capital gains, reducing overall
tax liabilities.
Loss Offset: The process of using
capital losses to counterbalance
capital gains, which can result in lower
tax obligations and potentially higher
after-tax returns.
Portfolio Diversification: Spreading
investments across a range of assets
to reduce risk. In direct indexing, this
can involve holding a carefully selected
subset of securities from an index.
ETF (Exchange-Traded Fund):
A fund that tracks an index and is
traded on stock exchanges, offering
diversification and liquidity.
Capital Gain: A profit earned from
selling an asset at a higher price than
its purchase price.
Capital Loss: A loss incurred when
selling an asset for less than its
purchase price.
Index Fund: A type of mutual fund
or ETF designed to replicate the
performance of a specific market
index.
Separately Managed Account
(SMA): A customized investment
portfolio managed for an individual
client, allowing for personalized
strategies.
Unified Managed Account (UMA):
A fee-based account that houses
various investment products within
multiple separate account sleeves,
managed as a unified portfolio.
Unified Managed Household
(UMH): An extension of UMA,
aggregating all aspects of a client's
wealth, including various types of
accounts and investments.
Estate Planning: The process of
arranging and managing assets
to ensure their efficient transfer to
beneficiaries, often involving tax
considerations.
ESG (Environmental, Social,
Governance): Investment criteria that
consider a company's environmental
impact, social responsibility, and
corporate governance practices.
Liquidity: The ease with which an
asset can be converted into cash
without significantly affecting its price.
Understanding these terms will empower you to navigate the Direct Indexing Buyers Guide with confidence
and make well-informed decisions when exploring direct indexing solutions for your clients.
Legacy Portfolio: An existing
investment portfolio that might be
transitioned into a direct indexing
strategy.
Robo-Advisor: A digital platform that
provides automated, algorithm-driven
financial planning and investment
services.
Capital Gain Tax: The tax levied on
the profit gained from the sale of an
asset.
Separate Account: An investment
portfolio managed individually for
a client, distinct from a pooled
investment fund.
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America's Best Direct Indexing Buyers Guide 2024

Table of Contents for the Digital Edition of America's Best Direct Indexing Buyers Guide 2024