Question 1

What makes direct indexing at Wealthfront better?

Accepted Answer

Wealthfront was a pioneer in bringing tax-loss harvesting and direct indexing to the mass market. We offer industry-leading low annual advisory fees on our direct indexing products (0.09% and 0.12% on S&P 500 Direct and Nasdaq-100 Direct respectively) and allow you to borrow against your portfolio at industry-leading rates (4.96%) through our Portfolio Line of Credit. For advanced investors, we offer additional customization opportunities, dividend reinvestment and for your uninvested cash, access to a 3.55% APY in our Cash Account from our program banks, which can be transferred to your Wealthfront investment accounts or your outside accounts instantly, for free. APY and margin rate as of 10/01/2026 and subject to change.

Question 2

What’s the minimum investment?

Accepted Answer

Our S&P 500 Direct and Nasdaq-100 Direct portfolios both have a $5,000 minimum investment. This allows us to buy enough stocks aimed at tracking the respective performance for each index. Many traditional institutions and advisors require over $100,000 investment minimums for direct indexing products.

Question 3

How is this different from an ETF?

Accepted Answer

An index ETF is a single investment fund that holds a collection of stocks or bonds that tracks a particular index and trades on a public stock exchange like an individual company stock. ETFs are not allowed to pass along losses incurred within the fund. With Direct Indexing, you directly own the individual stocks that comprise an index which allows us to perform tax-loss harvesting at the individual stock level. Unlike an ETF, the investor can recognize these losses, which generally represent a large multiple of the fee paid for our Direct Indexing products. Owning the individual stocks also allows you to customize the index to your preferences and exclude any stocks you do not want to own. A common example is excluding your employer's stock to reduce your concentration in one company. Despite the greater value created through Direct Indexing, our automation makes it just as easy to invest in a Direct Indexing portfolio as it is to buy or sell an ETF.

Question 4

Can I customize my portfolio?

Accepted Answer

Yes. You can exclude or restrict individual stocks, such as your employer stock, companies you are restricted from trading, or companies that don't align with your personal preferences or goals when you set up your portfolio. If you restrict a stock in your portfolio after opening your account, we'll continue to hold it indefinitely since we don't buy or sell restricted stocks. If you choose to exclude or restrict stocks, the portfolio may experience wider tracking error to the index.

Question 5

How are these direct indexing portfolios different from the Automated Investing Account?

Accepted Answer

S&P 500 Direct and Nasdaq-100 Direct invest in individual stocks that make up their respective US public equities indexes, whereas our Automated Investing Account is a diversified portfolio of low cost index ETFs that include a mix of global asset classes. Our Automated Investing Account does tax-loss harvesting at the ETF level, while our Direct Indexing products do tax-loss harvesting at the individual stock level, which creates more opportunities to harvest losses. Our Direct Indexing products are appropriate for investors who want to diversify their portfolio across asset classes on their own, whereas our Automated Investing Account is appropriate for investors who want Wealthfront to diversify and manage their entire portfolio.

Question 6

Does tax-loss harvesting really add value?

Accepted Answer

Many people mistakenly believe tax-loss harvesting provides no benefit because you must ultimately pay a tax on the gain that results from the lowered cost basis achieved through tax-loss harvesting. What they fail to realize is the tax rate you pay on the ultimate gain is almost always lower than the rate at which you can benefit from your harvested loss. That’s because your loss creates value at the short-term capital loss rate and the ultimate gain is taxed at the much lower long-term capital gains rate. In addition, the savings you create from tax-loss harvesting can be reinvested and compounded over the long term until you withdraw all your money from your investment account.

Question 7

Does tax-loss harvesting stop creating value after a few years?

Accepted Answer

While tax-loss harvesting can become more challenging over time when no additional deposits are made, we can still generate losses that more than cover our fees well into the future for two primary reasons: Index turnover: Over time the makeup of an index changes. Component stocks periodically decline in value and get removed (and others added) which creates opportunities to sell stocks and purchase new ones, creating new tax lots. The S&P 500® Index has nearly 4% turnover each year, and the Nasdaq-100 Index® has annual turnover of almost 11%. Removals from and additions to an index each year create significant tax-loss harvesting opportunities. Dividend reinvestment: Over 80% of the stocks that comprise the S&P 500® index pay dividends to shareholders, which means you get cash to invest in new tax lots even without making add-on deposits. Annual dividend yield for the S&P 500® Index is over 1.5%, and a little less than half that for the Nasdaq-100 Index®. These new tax lots create new tax-loss harvesting opportunities.

Question 8

How well does Direct Indexing track the index?

Accepted Answer

We seek to balance two competing objectives when managing the S&P 500 Direct and Nasdaq-100 Direct portfolios: Maximizing the after-tax benefit of harvesting losses and minimizing tracking error, which measures the difference in performance between the portfolio and the index it is tracking. Some tracking error is expected in exchange for generating tax losses, and can further occur if you choose to exclude stocks or have a small portfolio balance. In 2025, the S&P 500® index had a pre-tax return of 17.88% while the S&P 500 Direct had a pre-tax, net of fee return of 17.25% (with no stock restrictions) and a 13.37% annualized return since inception. Considering our portfolio harvested losses equal to 10.26% of the average S&P 500 Direct portfolio value over the same period, you can see the tax advantages far outweigh the minor tracking differences. In any given year tracking differences can be positive or negative, meaning we may outperform or underperform the index. Over the long term, we expect the tracking difference to be insignificant. Read more in our whitepaper: https://research.wealthfront.com/whitepapers/s-p-500-direct/

Features	Wealthfront	Schwab	Fidelity	Traditional Advisor
Annual Advisory Fee	0.09%–0.12%	0.35%–0.40%	0.40%	~1.00% (Parametric fee + advisor fee)
Minimum Investment	$5,000	$100,000	$5,000	$250,000+
Margin Interest Rate	4.96%	10%–11.825%	10.025%–11.825%	Variable
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Wealthfront Direct Indexing

The most sophisticated way to invest in major indexeswith the cost and ease of an ETF

1.5M+

$100B+

10 years

1.5M+

$100B+

10 years

Choose from two leading indexes

S&P 500®

0.09%

Nasdaq-100®

0.12%

Estimated tax benefit

Your estimated tax benefit will be a function of your combined state and federal marginal tax rate. Let us help you determine what it could be worth to you.

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“Wealthfront beats out Fidelity, Schwab and Vanguard when it comes to direct indexing and tax-loss harvesting.”

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