My situation is that I have large cap gains from selling AMD (cap gains alone of 570K+ in 2026) with a good amount of short term sales. I have sold so much, because 1) I am moving to a higher tax state with much higher W2 income in the latter half of 2027 2) I am hoping to buy a house within the next 2-3 years and 3) did feel that the market was euphoric.
However, I've been fretting over the impending tax bill which is going to be enormous. That's when I started looking into direct indexing.
As I understand, direct indexing has a short-term benefit for those with very large taxable portfolios, such as from windfalls. I would probably only do this for this year, because I have so much capital gains this year and I want to defer some of that to the first half of 2027 when I am still in a lower tax state (and overall still making much less than I would be starting in 2028). As I said before, my long term goal is liquidation of the majority to fund a house purchase in 1-3 yrs.
1) Overall, does direct indexing make sense in my case?
My plan would be to keep approximately 40 percent of my cash for direct indexing and 60 percent as cash/SGOV (which would be reserved for tax payment and possible re-entry of AMD in case of crash).
2) If so, should I go with a platform like FREC or try to DIY direct indexing (method listed below)?
With "diy" direct indexing, my concerns would be imperfect tracking of the index and not creating enough dispersion to meaningfully tax harvest.
3) What should be my strategy for DIYing?
My current plan would be to choose a few sectors/indices to track, generally putting less weight on tech and more on defensive/commodity/cyclical because I still hold 20 percent AMD and my overall thesis/goal is now defensive ie. being vigilant about possible market downturns.
I would probably buy 2-3 individual representative stocks in the sector (to create dispersion) along with the index (possibly also including foreign assets and some materials like gold, platinum). Sell when there's more than 8 percent loss to capture loss, and rebuy similar. Keep the winners until I need the funds for house purchase in 1-3 years. Does this sound reasonable?
Thank you for your advice in advance!