What is the Mechanism of Direct Indexing?

The mechanism involves acquiring individual crypto assets in proportions that precisely mirror a chosen index's composition. Automated trading systems execute these purchases and subsequent rebalances to maintain index alignment, adjusting holdings based on market capitalization shifts or other predefined index criteria. This approach provides granular control over individual assets, enabling strategies like tax-loss harvesting on specific digital asset movements and tailored portfolio adjustments.

What is the Methodology of Direct Indexing?

The methodology prioritizes customizability and tax efficiency for institutional crypto investors by providing direct ownership and granular management of underlying assets. It offers a departure from traditional pooled investment vehicles, allowing precise control over portfolio construction and risk exposures within the digital asset space. The strategic intent is to optimize post-tax returns and offer greater flexibility in portfolio management, adapting to the unique characteristics and volatility of crypto markets.

Direct Indexing

Meaning

Direct Indexing is an investment strategy where an investor acquires direct ownership of the individual assets that constitute a specific market index, rather than investing in a pooled fund that tracks that index. In crypto, this means directly purchasing and managing a collection of cryptocurrencies weighted to replicate the performance of a digital asset index, such as one tracking major altcoins or decentralized finance tokens.

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▴Unrealized Loss

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Direct Indexing

Meaning

Mechanism

Methodology

The High-Net-Worth Investor’s Guide to Tax-Efficient Investing

How Does a Smart Trading Solution Incorporate Tax-Loss Harvesting into the Rebalancing Process?

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The Proactive Investor’s Guide to Tax-Efficient Investing

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