We'll come back to Portfolio Rescue, where we take questions straight from you, the viewers. Duncan, it feels like there's a lot of people drowning these days in the markets. I have two main questions people need to ask themselves right now. This is Ben Carlson's two-part risk tolerance questionnaire. I don't have a big list of questions, I've got two.

When do I need the money? How much can I afford to lose in the meantime, both mentally and financially, before you cry uncle and have to tap out? I think every decision you make when investing more or less branches off of these two questions. Unfortunately, it's way easier to answer these questions in a bull market than a bear market, because our perception of risk changes in up markets and down markets.

There was a study done where they looked at professional institutional investors and how they felt about the market being either overvalued or undervalued based on the weather. And when it was cloudy outside, more institutional investors were apt to say, "The markets are overvalued." And when it was sunny outside, they were more apt to say, "It's undervalued." And it actually showed that they traded more when things were cloudy than when they were sunny.

Interesting. So, I guess maybe there needed to be more traders in California. I guess it makes sense, right? You're inside more, I guess. Yeah. Yeah. See, this is why I live in Michigan, because it's crappy part of the year and I have to balance things out a little bit.

But this is why I think it's so important to not only have an investment plan in place, that seems obvious to most people, but I think this is also why you need rules in place to guide your actions. You need to set good decisions ahead of time, beforehand, so you're not making these decisions right now.

Because if you're trying to come up with a plan on the fly right now, it's going to be way harder, because your emotions are either good or bad. They are. That's what makes us human. So, you can't really ignore those emotions and push them to the side. They're going to happen regardless.

I was out jogging the other day, and I jogged through this neighborhood, and there was a kid running out of his house. I think he must have been trying to get to his parents' car or the bus or something. And you know when you see something out of your periphery?

And this kid is running right at me. He didn't see me. And he's about to run into me. He's about three feet away. And you know you get your fight or flight instinct? I kind of did this and jumped. And the little kid looks at me like, "What are you jumping for, dude?" And it's like, because I thought I saw danger coming out of the savanna or whatever.

So, like those emotions you have, that flinch reaction is going to be real. So, if you don't have something in place ahead of time that's rules-based that you can follow, come hell or high water, I think it's really difficult to invest in a market like this. That's just all over the place.

One day, it seems like things are fine. The next day, it's things like, "Okay, the world is coming to an end again." It's just really tough if you don't have a process in place. See, I think I was that little kid, but I never looked up and I ran right into the street.

That's how I feel. I think I saved his life. All right, remember, if you have a question, askthecompoundshow@gmail.com. Let's get into our first one. Okay. So, first up, we have the following. "I'm 50 years old and just started investing for the first time in February. I was promptly kicked in the private parts as a welcome to the party from the stock market.

With little to no knowledge of investing, it looks like ETFs and index funds are safer than individual stocks. Is this the way to go for newbie investors like me who really don't know anything more than the basics, or is it better to be buying the dip in individual stocks now and holding for the next 10 years?" Hey, whoever this is, tell them to send us their address.

Send them a copy of my book, because I have a whole chapter here about starting late. So, start at 50. My advice is, it's not really the end of the world. You can still do it. You just have to remember that saving matters more than investing. So, I think it's the perfect time for this kind of talk.

If you just started investing at 50. The first thing to understand is that professionals have a much harder time beating the market than almost anyone, right? So, if professionals can't do it, according to Standard & Poor's, the 10 years through the end of 2021, 86% of all domestic stock mutual funds underperformed their benchmark.

These people do this for a living. They went to good schools. They got their CFA designation. They look at this stuff all the time. They're talking to company management. They're doing channel checks and supply chain checks, and they still underperform the market. I understand why people want to pick stocks.

It's fun. I mean, it's not fun now, but it can be fun when things are going up. It's entertaining. It can help you learn, but it's not easy. I think a lot of people are finding that out right now, because Duncan, we're frankly getting a lot of questions from people who are realizing this and saying, "Hey, I thought I was going to be a stock picker.

I'm not." I think everyone has to go through that in some way. I thought I was going to be ... I read The Intelligent Investor when I first started investing. I thought I was going to be the next Warren Buffett or Charlie Munger. It's not easy. Index funds, listen, they're boring, right?

But boring is beautiful when it comes to investing. So what do you do? I have a three-word plan for this person. Dollar, cost, average. That's it. This is the perfect market for it, right? The market is down and it's extremely volatile. It's all over the place. This is the perfect environment to add to your account periodically.

And especially if you're 50 years old, and you have 10, 15, maybe 20 years left to really jumpstart your savings and your retirement, your savings are going to matter way more than your retirement, than your investment returns, because you don't have as much time to go out compounding to kick in.

So, let's say you decided to put $100 a week every Friday into the S&P 500. It started this year. No matter what, you're a buyer. Put up the first chart here, John. The amounts don't matter, but this is SPY. Just put in the S&P 500 index fund. This is the amount of shares that $100 would have bought.

You can see it's going up over time. And the number of shares isn't important here, but the only thing that matters here is that it's going up. And that's the great thing about dollar, cost, averaging, is that in a down market, you're going to be buying more shares. You were talking about this a couple of weeks ago, Duncan, maybe last week, right?

That you're paying more attention to your shares than everything. That's the beauty of dollar, cost, averaging. All right. I wrote this one in April, 2020, about like when dollar, cost, averaging matters the most. So, John, pull up this other chart about dollar, cost, averaging. I wrote this in April, 2020.

So, the numbers will be higher now, but I just said, let's say you put $100 a month every month, starting in 2007 through 2020. And then this graph shows the growth of each of those $100 purchases. How much did it turn into? So, each of those one individual dollar, cost, averaging purchases into the stock market, the S&P, what did it grow into?

You can see the spike there in 2008 and 2009, when you were buying towards the bottom. But even as you were buying into the teeth of it, the growth of those dollars is much higher. You can see it goes down over time because the stock market was going up and you're buying fewer shares.

And again, this is into the teeth of the March 2020 correction, so these numbers would all be higher. But the beauty of dollar, cost, averaging is that you're diversifying across time, you're diversifying across market environment and economic environment. And the other thing to remember is that most normal people, dollar, cost, average, not because they want to, but because they have to, because they're saving out of their paycheck.

And then they naturally invest periodically over time. And that's a good thing, because it's a really hard strategy to beat when you're just buying periodically. And when markets are high, you're buying fewer shares and markets are low, you're buying more shares. And guess what? Right now you're buying more shares.

That's actually a good thing. So, instead of trying to outsmart the market and pick stocks and jump in and out right now, just pick a timeframe. Every two weeks, every week, every month, whatever it is, I'm going to be buying stocks. And that's the rules-based part of this I was talking about, where you can shut your brain off a little bit and worry about other stuff because you know you have this plan in place to just buy, buy, buy over time.

And over the long term, that's a really hard strategy to beat. Right. And yeah, I mean, this is one of those things where people overthink it too. People are like, "Well, aren't there certain days of the week that are better traditionally? Certain months of the year that are better?" And I feel like people sometimes really, really overthink the dollar-dollar strategy.

We got a question from someone a couple weeks ago that was like, "Listen, on the 15th of every month and the last day of every month, aren't there a bunch of 401(k) purchases? So, what if I invested ahead of those and tried to get ahead?" And it's like, if that stuff's not already priced into the market, I'm sorry.

And if Jim Simons hasn't figured it out yet, then you're probably not going to. But yeah, I think trying to overthink these things and make it more complicated. The beauty of dollar-cost averaging is that it's simple. Right? It doesn't require a lot of heavy lifting on your brain. And that's what you need right now.

You want to give your brain a break during markets like this, because you're in that tense position, like I was when the little kid was running after me and I was running for my life. Speaking of which, did you see, talking about the timing, Eric Balchunas shared the other day that there's a new ETF that is literally buying at the close and selling at the open.

Like, that's what the strategy behind the ETF is. It's kind of interesting. That's a problem. I always say that complex solutions don't require complex problems. And the market at times is very complex. Right now, I've been saying for recent weeks, if you're not confused, then you're not really paying attention.

And it's very confusing right now, what's going on. And so, I think in that instance, it's not like you want to press and try harder and make things more complicated. You want to actually simplify and make things easier. Right. We have another one. Okay. Up next, we have a short and sweet one, but probably one that's going to piss some people off.

"The data against crypto being an inflation hedge has been mounting for over a year now. Can we finally put the argument to bed and call it a myth?" Alright. John, throw up the chart here first of inflation rate vs. Bitcoin vs. gold. Because I think we have to pull gold in here a little bit, too.

So, over the last year, you can see inflation is 8.3%. Bitcoin is down 35%, call it, depending on how you look. Gold is down 3% over the last year. So, finally, we get the highest inflation we've had in 40 years. Inflation finally bursts out. And what everyone wanted to think was an inflation hedge, gold and Bitcoin, haven't really worked that well.

Gold worked for a little bit. Bitcoin, for a little bit. It's not really happening. I think the problem here, of course, some people are trying to dance on the grave of Bitcoin and say, "Haha, we told you." But, crypto is a risk asset. It's still relatively new. It's still almost in the growth/startup phase.

So, I think that's part of it that I think a lot of people are realizing. It's like, okay, when risk happens, then this stuff is going to get hit, too. That shouldn't surprise too many people. There's this old saying that -- I want to talk about gold again real quick, because I think gold and Bitcoin are a good analogy here.

It took gold a while to get to that point where it was this really store of value. But there's this old saying that an ounce of gold could buy a fine men's suit when Jesus walked the earth, and it can still do so now. I think if you go to a men's warehouse, you can buy six of them for one.

But, John, show the real gold price since 1980 here. This is inflation-adjusted gold since 1980. You can see the high in, I think, 1981. We're still below those same levels on an inflation-adjusted basis. So, even over the long term, gold has been a great store of value, but that long term can be really, really long.

So, it doesn't always work like this. I think sometimes there's these misconceptions about assets like this. The problem is, especially over the short term, there's really no asset that gives you one-to-one inflation hedge. Tips are pretty good for inflation because it tracks it, but even then, you're really only hedging against unexpected inflation.

So, expected inflation is reflected in the yield. So, tips are up 6% in 2021, which is great, because the ag, which is like, if you owned a bond index fund, like the ag or BND at Vanguard, that was down 2%. So, tips did great in 2021. But this year, they're down 6% because rates are rising, and because that expected inflation was built into the yield.

The yield got negative on a nominal basis, even though you're getting that kick from inflation. Tips are down this year. So, stocks offer a wonderful hedge against inflation long term. I've said this comment before, dividend yields grow 2% over the rate of inflation over the long term. Earnings grow over the rate of inflation.

Stocks do, too, of course. But unfortunately, over the short term, sometimes it doesn't work. People get spooked by inflation. I think the problem with trying to hedge any macro risk like this over the short term is that you have to be right twice. One, you have to be right about the macro data.

That's not easy, but it's not impossible, right? Some people can predict what's going to happen with GDP and unemployment and inflation. But then, the second one is, you have to be right about the reaction from investors, and the reaction from central banks, and what the market environment is. So, this is the really hard one.

What is the reaction going to be? Because if you had told people in 2020, going into 2020, the government is going to spend more money than they ever have, trillions of dollars are going to print, there's going to be supply chain problems, there's going to be a war, there's going to be a commodities spike and oil from a war, all this stuff, you would have said, "Okay, gold's going to be up 30%." And gold is basically flat since then or down, right?

And I think a lot of people were saying, "Bitcoin can be this hedge against chaos and craziness." And maybe it was. It took off in early 2020, during the pandemic, but it's come down since then. And I think people realize, "Okay, right, there are no one-to-one inflations." Even something like cash has been a good hedge against inflation in the past, because if you have short-term rates that are rising, those get reflected in shorter-term bonds quicker.

So, if we talk about cash, we're talking about three-month T-bills for a money market or something, like a savings account. That should be reflected faster in short-term rates. But guess what's not happening? I got my email yesterday from Marcus, my online savings account. They increased my yield by 10 basis points.

So, from 60 to 70 basis points. Thanks, I guess. Maxfield: They're still wagging Robinhood, though. Robinhood's up to 1% now. Lewis: That 1% is great against an 8% inflation rate. Maxfield: It's a little consolation when your portfolio's down 40%. Lewis: (laughs) Well, that 1% looks pretty good then, doesn't it?

But my whole point is that, every environment, there's going to be a different sort of hedge that makes sense and sounds good. Honestly, the best hedge for this time around has been a house. Because the cost of materials has gone up, the cost of labor has gone up, all these things in a house has done well.

Could there be a time when there's an inflationary period and housing does poorly? It's possible. You never know with these things. But right now, a house has probably been the best one-to-one inflation hedge, where housing prices have gone up and your fixed payments stay the same. But there really aren't many where you can say, "This is going to hedge inflation no matter what." That's hard for people to understand, to wrap their mind around and accept, but it's true.

Maxfield: Right. Whenever I need a little crypto pick-me-up, I just look at the Winklevii twins, I look at their Twitter, or Scaramucci, Pomp, all those accounts. They make me feel a little better. Lewis: Okay. The way to survive a bear market, I tweeted this last week, is not to look at your portfolio, it's to look at the portfolio of someone else who's doing worse than you.

That makes you feel better. We go from FOMO to, "Oh god, thank god I don't own that." I think it's why so many people were gleefully enjoying the Tara Luna thing. "Oh, someone did worse than me." Maxfield: Yeah. Alright, let's do one more. Lewis: Up next, we have a question from Kyle.

"Could you please explain to a dullard how capital gains impact your AGI?" Maxfield: That's a word you don't hear too often, right? Dullard? Lewis: I know, yeah. I can't not laugh when I read that. "Anyway, can you please explain to a dullard how capital gains impact your AGI and taxable income?

I have a taxable account and I'm wondering if it is advantageous for me to be selling the long-term portion of my account and rebuying immediately to realize gains for the year, as my taxable income is under the $80,800 limit for married couples. I see sources saying this won't affect my regular income, but when I look at the 1040 tax form, it appears it would still be counted towards my taxable income." I have no idea what they're talking about, so we're going to need help.

Maxfield: It sounds like you're reading hieroglyphics here. Let's bring in our tax expert, Bill Sweet. It's possible I had to ask him, "Bill, what does AGI mean?" You can try to interpret for us all this means. What are we trying to get out of this here? Sweet: Great, great question from Kyle.

Generally, the questions today are just hotter than a blowtorch. I love it. What Kyle's getting at is he's trying to hunt the mythical, the magical 0% long-term capital gains rate. That, to me, is like the kid that was hunting Ben on the Grand Rapids Savannah over the weekend. Best way to answer this question, let's pull up a chart.

John, can you pull up number one? I need to do this in graphic form. Let's take a taxpayer that happens to have $50,000 of ordinary income. This is a married filing joint taxpayer. Let's take off a standard deduction. Everybody gets that for free. That leaves $24,000 of taxable income.

That equates to roughly 10% income tax, so roughly $2,400 of tax. Let's add on top of that $50,000 of capital gains. What do we do now? Guess what? The tax is the same. Because as the taxpayer indicates, long-term capital gains tax rates, if your total income, your taxable income, is below $80,800, you are not going to pay anything on long-term capital gains or tax-qualified dividends.

That is one of the best deals in the tax code. It obviously requires you to make a relatively small amount of income. Medium household income in the U.S. is about $70,000 today. But that's a great tax planning tool for somebody who, let's say, is young. Let's say you take a pause from work.

Let's say you've retired and you have not filed for Social Security. That long-term capital gains rate is extremely, extremely tasty. John, can we pull up chart three? What happens if you go over that threshold? Capital gains only applies to the income on top of that threshold. That's what the taxpayer is getting at.

What your AGI is doesn't matter, particularly if it depends on the nature and the type of income that you have underneath. What I'm trying to display here is the stacking effect. You get long-term capital gains on top of the rest of your income. It all depends at the end of the year.

It's kind of difficult to plan for. This is what good tax planners do. But that's a great, great, great question for my man, Kyle. So this person, they're talking about selling and then trying to realize gains. When does that ever make sense to take that? Isn't it almost always better to just push those taxes out into the future and defer, defer, defer?

See, I think it depends. I think he's on to something pretty interesting because each year you get that standard deduction of $25,200. Each year you get that $80,000 up to of long-term capital gains rate at 0%. So I think it's actually a really insightful point. Why wouldn't you fill up those 0% tax brackets?

Effectively, if he's able to pull it off, he's stepping up his basis every year, Ben. So I'd actually say no. If you just defer and you, let's say you have $100,000, you have $200,000 of gains, you rip that all off all in one year to buy a house, retire, take a vacation, you're going to pay tax probably at 15% on most of that.

So I think the taxpayer's on to, so Kyle's on to something really interesting. And again, it's something I think that good tax planners can see. It's not each year what matters. It's what is your tax rate over the next 10 years, over the next 20, or even over a lifetime?

Difficult to nail. The tax code changes. It can be kind of slippery. My man, Wes, down there in Puerto Rico, maybe he wishes he hadn't realized those gains two, three years ago before he moved. But I think it's a great point by Kyle. And it's something I think that good tax planners think about.

Kyle is not a dullard then. He knows what he's talking about, kind of. No, I think he graduated straight from dullard to tax ninja. So I guess to your point, if you have that 80,800 limit or whatever it is, and potentially his income is going to rise over time, take advantage of it now if your income is going to rise and take some of those gains, and then you're not paying as much taxes on them.

Potentially, yep, got to thread the needle. And do not forget about state income tax. That's something that there's no capital gains rate that I'm aware of on most state taxes outside of Tennessee. All right, Duncan, next question. Okay. Question four is from Victor. How does an individual investor get more money into their IRA accounts if they've already met their contribution limit for the year?

With the market sell-off intensifying, I think this is a great opportunity for long-term index investors like myself. I fund a Roth IRA and a spousal traditional IRA each year. I want some investment, tire them out immediately, so I'm fully contributed and invested for 2022. Is it possible to make another contribution this year and classify it as a 2023 contribution?

All right, I'm going to give -- this may not be applicable here, but the advice Bill has given me in the past, since I have some income outside of my employer, then Bill told me four years ago, maybe five years ago, "Ben, what are you doing? Set up a SEP IRA.

You can increase your limit that you can give for tax deferred gains." And now every year I fund a SEP IRA in addition to my 401(k). So that's one way. So this person may not have a side hustle or whatever it's called, but that was one thing you did for me.

And you said, "What are you waiting for? Fund a SEP IRA." Yeah, I mean, you nailed it, Ben. You got to the answer. I mean, just the quick answer is no. Oh, sorry. Did I steal your thunder there? No, definitely not. You set me up great with the thunderbolt.

For the noobs watching, though, can you explain what a SEP is? Yeah, definitely. But just to answer the question quickly, unfortunately, no, you cannot make a 2023 IRA contribution in 2022. You can do so retroactively, right? And so in 2023, you can make one for 2022, but the contributions to traditional Roth IRAs are limited per year.

So unfortunately, unless you've crossed age 50, you're limited $6,500 per year. So that's the total limit there. So let's shift gears. Let's talk about a SEP. Ben, you set me up great. If you happen to have your own business or side hustle, if you're doing something that involves self-employment income, you can fund on top of your regular IRA contributions and your spouse contribution, a SEP IRA.

The limit is calculated differently, and it's tied to 20% of your net taxable income adjusted slightly for self-employment taxes. And so that is an option if this taxpayer has other types of income coming in. Another thing that you could do with self-employment income is set up your own solo 401(k).

And if you're not funding your $20,500 limit at work, that's another place to go. You can set up also a solo 401(k) tied to your small business income. And so both of those things are an option for a taxpayer with that type of income. I've got two other options, but any questions on that, guys?

Nope. Duncan, do you know what a SEP stands for? What is it? What is the acronym stand for? I can't even think of it. I think it's a self-employed pension. I think that's what it's called. OK, that makes sense. Yeah, it's just tied to the IRA rules. But two other quick options for our taxpayer here.

Great, great, great question, by the way. Another thing is an HSA. If you happen to have access to a high deductible health care plan at work, HSAs function a lot like super IRAs in that you can sock away up to $7,300 for a married couple per year, take that completely off your income tax in addition to an IRA.

And then if you happen to use that money, if you don't use it for medical expenses, it just functions like an IRA, and you get penalty-free distributions once you hit age 65. The last option I would throw at this taxpayer, I'm a company man, so I'm going to talk about low-cost ETFs in a basket.

Liftoff is our platform. Go to liftoffinvest.com. It's built on Betterment's back engine. Extremely tax-efficient investing option. Or you can think about a direct indexing option. These are non-qualified. They're not IRAs. They don't come with these tax bells and whistles. And we're going to discuss direct indexing on the next question, I believe.

That's called a transition. Spoiler alert. Spoiler alert. Yep. I'm a pro. Okay. Up next, we have a question from Brian. I have a question on direct indexing and its benefits versus passive indexing in a taxable account. By the way, we get a lot of questions on direct indexing, so I'm excited to hear your answer to this.

I'm planning to open a taxable account with Fidelity and have been researching their direct indexing tool. I currently max out 403(b) and 457(b) accounts through work. I'm planning on investing in this taxable account annually for my working career, which will probably be for the next 30 years. And I'm currently in the highest tax bracket.

Is there any way to quantify the tax savings and potential benefit of a direct indexing approach over a long time horizon? How do the fees compare? Also, I worry that deciding to change course in the future would leave me stuck with many individual stocks to sell and manage. What are your thoughts?

Lewis: We have a lot of experience with direct indexing on our side of things. We use Canvas, which is a platform started by Ashaunus, the asset management, recently sold to Franklin Templeton. The number of levers you can pull on this are pretty cool. I think a lot of the ETF people are not fans of direct indexing.

They think, "What's the point? We have ETFs. They're already tax-efficient. What's the point of it?" There are some interesting things you can do with it. You can do unique investment strategies, because it costs nothing to buy and sell a stock now. I think that is something that a lot of our advisors were concerned about when we first rolled this out, is, "But I'm going to be holding 5,000 stocks or something.

What does that mean? How hard is that to handle?" I think a lot of these places, if they have it at Fidelity or Vanguard or T. Rowe Price or whatever who's going to do these, and they're going to be coming everywhere soon, so you're going to have the option.

But I think for this conversation, the tax-loss-harvesting side of things is probably the easiest, Bill. My way of explaining it to people is that even in a good year when stocks are up, so last year, the stock market had a booming year. There's still probably 20% to 25% of stocks in the market that are down, those individual names, and you can use some of those losses to offset gains.

Why don't you talk about that, the tax-loss-harvesting portion, because that's probably the main selling point for us. Yeah. Love this question from Brian. Brian, I think you're right to be skeptical. My opinion is direct indexing ain't for everybody. It's not this solve for all the problems of investing, but it does come with some really neat features.

Ben, you set me up perfectly. Brian mentioned that he's in the highest income tax bracket, and that's 37% for ordinary income. When I've done the math on the benefits of direct indexing model, and these are all back-tested, unfortunately, I've only been running this live for two, three years, the primary benefit comes from the ability to deduct $3,000 per year of capital losses against your ordinary income.

And when you happen to be fortunate, by the way, to be in the highest possible income tax bracket, that's worth about $1,100 per year. You're able to deduct $3,000 against ordinary income at the highest rate. And over time, assuming at the end of the model, whatever sample period you've used, it's worth roughly about 40 basis points relative to a non-tax-loss-harvested model.

I don't want to get into too much of the details because it's really wonky. Hit me up on email if you really want some charts coming your way. But in general, that's the idea. And it all comes from the ability to potentially deduct that $3,000 per year. That's limited by the tax code.

The IRS hasn't touched it, I think, since '74 or '78. And back then, that was worth about $15,000 in today's dollars. And so I do expect that benefit to shrink. But that's more or less where it comes from. And I do think it's a really powerful thing. Wealth indexing doesn't really solve a lot of tax problems today.

But in my opinion, it solves a lot of distribution problems in the future. But I do want to talk about the specific concern that the investor mentioned, Ben, which was what happens over time. And so, Ben, do you remember-- there was a great Longbird Asset Management study that showed where the market returns come from.

Do you remember that chart that just sticks in my head? Yeah. It's all in the tails, right? Yeah. Can you describe it just briefly? Where does it come from? Well, it's basically just that the majority of gains in the stock market come from a handful of stocks. And there's a lot of stocks that do really poorly and go out of business, or just they crash 70%, 80% and never come back, more or less.

Yep. And that's my memory, too. And I remember it roughly at a 2/3, 1/3 ratio. And so everybody knows about the Apples and Amazons, the big winners, over time. But there's this churn that happens on the bottom end of the market, right? And a direct index model allows you to unlock potential tax losses from that segment.

But one great criticism of direct indexing is over time, you just end up owning the winners, right? Those become a bigger and bigger part of your portfolio. Yes, you're offsetting losses with gains over time. But my bias is there's always going to be underperforming segments of the market. There's always going to be a part of that.

And especially if you're continuing to add to a direct index model, it's not static, right? You're adding cash. You're buying a house. You're sending kids to college. That, to me, is a really powerful part of direct indexing, because you can predetermine ahead of time, what is my taxable exposure?

What do I want to see in gains each year? And back to our first question, in a year that your ordinary income is relatively low, hey, I kind of want to realize $100,000 of capital gains this year, right, to fill up on a 0% capital gains bracket. And the final point is, you're going to own those stocks if you own them through an ETF or a mutual fund anyway.

You just won't be able to segment them for tax purposes when the time comes. They'll be embedded in a broader portfolio. So the problems in investing are there. There's really no way to avoid them. But I think directing that indexing offers a lot of solutions, specifically for folks at the higher end of the tax bracket.

I do think the hard part about direct indexing for a lot of people is going to be, this is not like a humble brag, but we have advisors working on this in concert with clients. And there's a lot of back and forth in this. And I think people trying to do it on their own is going to be very difficult.

So I think some of these places are going to be in trouble if they try to have people do this on their own and pull the levers themselves, because there is a lot more than one or two decisions that go into this kind of thing. Yeah, that's a great point.

And that was something we realized very early on, was that we needed to spend a lot of time with our folks, with our operations folks, Patrick Haley, Erica Morrow, and our team to kind of get it right for clients up front. And that's where the heavy lifting was. And I don't know anything about Fidelity or anybody else's model.

But I'm skeptical, because I think it's something, to bend to your point, that I think needs a lot of thought ahead of time before you implement. All right, one more question. I'm really good at the tax loss part of it. Everybody is this year, man. Lock them in. One follow-up question, though, for people that are a little confused.

If you have a $10,000 loss this year, you can write off $3,000 over the coming several years, right? Against your income, yeah, per year, right? And then it carries forward, right? So the benefit of direct indexing in theory is that you're stacking those losses up. You're building them up over time to offset a future gain.

Cool. All right, OK. I want to thank Bill for coming on again. Thanks for wearing a tie. Bill, I decided, I think, in the pandemic, I'm throwing all my ties out. I'm never wearing a tie again. So I thank you for carrying the torch. It's a choice. It's a choice.

I'm a company man. I'm the CFO. I got to play the part, man. Come on. That's true. You are a suit. All right. Keep those questions and comments coming. Ouch. One of these weeks. You wear the ties. Duncan wears the hats. Your Midwest bias looking down on us New Yorkers from the pedestal.

I like how we are like we're like a progression, you know, like dressed up, casual, t-shirt and hat. All right. I'll pull a Fetterman next time, a hoodie, a beard. I'll pull it off. Thanks for everyone who comes to the live chat. We always will take some of the questions from there.

Occasionally, we'll have questions from the comments on YouTube. Email us, askthecompoundshow@gmail.com. The inbox continues to be full every week. So we appreciate it. And thanks, everyone, for watching. Thanks. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.

Thank you. Thank you. Thank you. Thank you. (upbeat music)