Before You Buy Another ETF In Your Brokerage Account, Watch This!

Title: Before You Buy Another ETF In Your Brokerage Account, Watch This!

Before You Buy Another ETF in your Brokerage Account, Watch This

Before you buy another ETF in your brokerage account... you need to hear this. Because there's a strategy right now that could save you tens of thousands in taxes-and most people have no idea it even exists. If you're still buying mutual funds or ETFs in your taxable brokerage account, you're not doing anything wrong... but you might be leaving a lot of money on the table. Today we're going to discuss Direct Indexing

So what actually is direct indexing? It's simple. Instead of buying one ETF that tracks an index like the S&P 500... You own all-or most-of the individual stocks inside that index.

So instead of just buying one fund... You own Apple, Microsoft, Amazon, Nvidia-directly. And software keeps everything aligned to the index for you. On the surface, it looks very similar to index investing... But under the hood-it unlocks something ETFs can't do. And by the way-this is exactly what we do with clients every day. Flames Financial Planning is a flat-fee financial planning firm that offers comprehensive memberships to assist with all your financial needs. We serve our flagship clients with investment management, financial planning, tax filing, and estate planning all included in a high touch, white glove service. If you're looking to upgrade your current investment strategies, we personally would love to meet you.

Investing has evolved a lot over the last 50 years.We went from expensive mutual funds...To low-cost index funds (thank you Vanguard)... To ETFs... And now-we're in the middle of the next shift: direct indexing. And the reason this is happening now is simple: Technology finally made it scalable.

Quick note-this is specifically for taxable brokerage accounts. If your money is in a 401k, IRA, or Roth IRA-this doesn't really apply. But if you've built up money outside of retirement accounts, which you should be... This is where things get really exciting.

Every single day the market is open, stocks move.Some go up... some go down...But in a traditional ETF? You can't really do anything with those movements.You just ride it out. But with direct indexing...We can actually take advantage of those down days with Tax Loss Harvesting

At a high level, this is the process of using market losses to reduce your tax bill... without actually changing your long-term investment strategy.

Here's how it works: Let's say you invest $10,000 into a fund...And over time, that investment drops to $8,000. On paper, you now have a $2,000 loss. Most people just ignore that. But with tax loss harvesting, you can actually realize that loss by selling the investment-and that loss can be used to offset gains elsewhere in your portfolio. So if you had $2,000 of gains...You can cancel them out.

And if you don't have gains? You can use up to $3,000 per year to offset ordinary income-and carry the rest forward into future years.

Now here's the key:

After you sell that losing investment... you don't just sit in cash. You reinvest the money into a similar investment-so you stay fully invested in the market. That way, you're capturing the tax benefit... Without missing out on the recovery. This is especially powerful in taxable brokerage accounts-and even more powerful with strategies like direct indexing, where you own individual stocks and create more opportunities to harvest losses. Traditional ETF investment strategies can do this and should! But they just can't do it at the same power or opportunity as direct indexing portfolios can.

Here's an extra rule to be careful of, it's called the wash sale rule.

If you sell an investment for a loss and buy the same-or a "similar identical"-investment within 30 days before or after the sale... You lose the tax benefit. So you have to be intentional about what you sell-and what you buy next.

Let me show you what this actually looks like. This is a sample client portfolio in 2026 so far. We've realized over $30,000 in losses-not because the portfolio is failing... But because we're strategically harvesting losses as opportunities come up. And by doing that- We've created over $22,000 in estimated tax savings... in just a few months. And here's the key- The portfolio is still invested. We didn't go to cash. We didn't change the long-term strategy. We just made the portfolio more tax efficient.

This is where most investors miss it. Taxes are one of the biggest drags on your long-term returns... But most people focus only on performance. Direct indexing flips that. It says: "Let's get market returns... but optimize taxes along the way." And over time, That can add up to tens of thousands... even hundreds of thousands of dollars.

Now-is this perfect for everyone? No, but it may be applicable to you in the future. It works best for: Higher income earners, Larger taxable accounts, and Long-term investors. If that's you... This is one of the most powerful tools available right now.

If you're sitting on a taxable brokerage account and still just buying ETFs...It might be time to take a second look at your strategy, and if you're paying a financial advisor, ask them, whether they're using direct indexing in your taxable account.

If you want help optimizing your investments and your taxes together... I'd love to connect.

If this was helpful-make sure to subscribe. I'll keep breaking down strategies like this so you can build real wealth over time. I will see you next time!