I am trying to move forward or put the Direct Indexing with Tax-Loss Harvesting SMA concept to bed, at least for my situation, but I am struggling with the big picture.

I am recently retired with hopefully a few decades to go.  Shockingly, I hate paying ever increasing **taxes in CA driven by expenses**, driven in large part by home costs, medical costs, and college tuition. I struggle with the (irrational?) balance of progressive tax avoidance and selling to live and **diversify** my over-weighted low basis stock position (CG-fed and OI-CA).

If I place $1M to $2M in an **SMA** that tracks the broad market, while trying to **harvest losses** so that I can every year keep my **overall taxes low over many years** to come. Does this work in reality after expenses (\~1%)?  Ideally the SMA should also focus on **consuming the over-weighted stock**, so not just raising the basis, but having minimal exposure to that stock in its portfolio (one of the seven).  I would think that missing one or two of the mag seven, would make it hard to approach the performance of the S&P500 (or other) from decade to decade, but I don’t know if that is a fair comparison, as there is no value weighting for the diversification effort. 

How do I attach a **rough value to portfolio diversification** and how do I **calculate and balance the tax efficiency savings against the management costs**? How could I **fund the SMA**, as selling the concentrated position would be an enormous tax burden.