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Direct Indexing

What is Direct Indexing?WhatisDirectIndexing?

Jul 15, 2024

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Direct indexing is an investing strategy that seeks to provide index-aligned pre-tax performance (i.e, S&P 500), while aiming to deliver tax benefits to help lower investors’ tax bills. Watch this video to learn about how direct indexing works and why it is receiving increased attention from financial advisors as a staple component in core asset allocations.

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Please consult with your tax advisor as PGIM Investments does not provide tax advice. Clients may be able to use losses from their Direct Indexing account to offset gains in other investments. After netting out short-term gains and losses and long-term gains and losses, investors have the option to use long-term losses to offset your short-term gains (and vice versa). Using short-term losses to offset long-term gains is generally not recommended because the long-term gains are taxed at a reduced rate. Using the short-term losses to offset regular income or carry them forward might be better use of any short-term losses that might be left over at the end of the year.

After-tax performance, tax alpha and after-tax excess returns are shown for maximum Federal tax rates. After-tax returns decrease as the investor's tax rate decreases. An investor should evaluate the after-tax performance shown above in light ofthe investor's applicable tax rate; the tax rates shown above are used for illustrative purposes only, results will vary by investor. The after tax returns are subject to the limitations of the specific calculation methodology applied and the tax rate assumptions made The after tax returns shown may not reflect a client’s actual after tax performance due to differences in tax rates relative to those used in the scenario presented and other circumstances As examples, clients with lower applicable tax rates, capital loss carryforwards or no capital gains outside the portfolio are likely to experience lower levels of after tax returns In addition, estimated tax benefits relating to a tax loss harvesting transaction are added to portfolio returns in the same year as the transaction, even though the tax benefits do not become available until the following tax year.

This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation. Clients seeking information regarding their particular investment needs should contact their financial professional. The investment strategies described herein are those of PGIM Custom Harvest. These materials are being provided for illustrative and informational purposes only. The information contained herein is obtained from multiple sources that are believed to be reliable. However, such information has not been verified, and may be different from the information included in documents and materials created by the sponsor firm in whose investment program a client participates. Some sponsor firms may require that these materials are preceded or accompanied by investment profiles or other documents or materials prepared by such sponsor firms, which will be provided upon a client’s request. For additional information, documents and/or materials, please speak to your Financial Advisor.

For compliance use only 1080844-00002-00

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