Tax-Smart Investing Today Helps Build a Stronger Tomorrow

Value of Direct Indexing

Investors seeking tax-smart portfolio management solutions for their highly appreciated assets are increasingly turning to an innovative strategy known as direct indexing.

Direct indexing aims to provide index-aligned returns and simultaneously lower investors’ tax bills by regularly harvesting portfolio losses that can be used to offset gains inside or outside of the portfolio. With its tax-tempering potential, it can serve as a critical component of long-term wealth management success.

Direct indexing assets are expected to grow 12.3% annually and top $800 billion by the end of 2026.1

 

PGIM Custom Harvest: An Industry Leader With a Distinct ETF-Based Approach

PGIM Custom Harvest is taking direct indexing in an innovative direction. While most direct indexers use individual securities to capture losses, we use low-cost exchange-traded funds. We believe this approach provides investors with an opportunity for the following three key benefits:

 

STRONGER AFTER-TAX RETURNS

 

A portfolio can maintain full market exposure without needing to hold cash. By immediately swapping into similar ETFs, investors can benefit in both rising and declining markets.

GREATER TAX-LOSS CAPTURE POTENTIAL

 

Monitor ETFs throughout the trading day for opportunities to capture tax benefits.

A SIMPLIFIED INVESTOR EXPERIENCE

 

Investors can gain broad equity exposure through at most 20 sector/regional ETFs versus hundreds of individual stocks.

FEATURED INSIGHTS

1The Case for Direct Indexing: Differentiation in a Competitive Marketplace: Cerulli Associates, December 2022

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