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The difference between US Direct Indexing and Smart Beta
US Direct Indexing uses individual stocks with the largest market capitalizations in the US equity market along with a completion ETF to represent the smaller companies to track the movement of the broad US stock market instead of a single ETF. By doing so, it can take advantage of movements in individual stocks to harvest investment losses and may lower your tax bill. US Direct Indexing is an enhanced form of our Tax-Loss Harvesting strategy.
Smart Beta also uses individual stocks (along with a completion ETF) to track the movement of the broad US stock market instead of a single ETF. However, rather than hold the individual securities solely in proportion to their market capitalization, the individual securities are weighted across multiple investment factors in an effort to increase the expected after-tax return of the portfolio.
You can enable US Direct Indexing and/or Smart Beta for all taxable Automated Index Investing Accounts. Direct Indexing becomes active, if enabled, for accounts with balances of $100,000 or greater. Smart Beta can be enabled for any account with US Direct Indexing enabled. Once enabled, Smart Beta becomes active when your account balance approaches $500,000.
For more details, see the Smart Beta white paper and US Direct Indexing white paper.
Investment management and advisory services are provided by Wealthfront Advisers LLC (“Wealthfront Advisers”), an SEC-registered investment adviser, and brokerage related products are provided by Wealthfront Brokerage LLC ("Wealthfront Brokerage"), a Member of FINRA / SIPC. Financial planning tools are provided by Wealthfront Software LLC (“Wealthfront Software”). The information contained in this communication is provided for general informational purposes only, and should not be construed as investment or tax advice. Nothing in this communication should be construed as a solicitation or offer, or recommendation, to buy or sell any security. Tax-Loss Harvesting benefits vary depending on the client's entire tax and investment profile. The performance of new securities purchased may be better or worse than those sold. The strategy could introduce portfolio tracking error, meaning the portfolio's performance might slightly diverge from its intended benchmark. There may also be unintended tax implications. Wealthfront does not provide tax advice. Consult a tax professional for your specific situation. Wealthfront Advisers and its affiliates do not provide legal or tax advice and do not assume any liability for the tax consequences of any client transaction. Clients should consult with their personal tax advisors regarding the tax consequences of investing with Wealthfront Advisers and engaging in these tax strategies, based on their particular circumstances. Clients and their personal tax advisors are responsible for how the transactions conducted in an account are reported to the IRS or any other taxing authority on the investor’s personal tax returns. Wealthfront Advisers assumes no responsibility for the tax consequences to any investor of any transaction. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance. Please see our Full Disclosure for important details. Wealthfront Advisers, Wealthfront Brokerage, and Wealthfront Software are wholly-owned subsidiaries of Wealthfront Corporation. © 2026 Wealthfront Corporation. All rights reserved.
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