March 26, 2025

When your tax strategy runs out of steam, it’s time for a smarter, longer-term solution.

When Tax Strategies Stall

Over the last decade, direct indexing has become a go-to strategy for building wealth in a tax-efficient way—harvesting losses to offset gains while mirroring a broad market index. But what happens when that once-powerful approach stops delivering results?

It’s a common problem: the portfolio becomes “frozen.” After a few years, most of the embedded tax losses have already been harvested. The gains remain—but selling would mean triggering significant capital gains taxes. And without fresh opportunities for tax loss harvesting, the portfolio’s tax alpha dries up.

Many investors—and even advisors—find themselves at a crossroads. Do you continue holding a stagnant portfolio? Or realize gains and start over, potentially facing a substantial tax hit?

A More Dynamic, Tax-Efficient Portfolio Strategy

There’s a better option: reinvigorating your frozen direct indexing account by transitioning into a strategy specifically designed for long-term, tax-aware growth.

This advanced approach uses a long/short portfolio construction to help:

• Generate pre-tax excess returns
• Realize ongoing capital losses while deferring gains
• Maintain market exposure while adapting to evolving client needs (e.g., liquidity, charitable giving, or withdrawals)

Compared to traditional tax-aware strategies, this structure is built to go beyond passive tracking and compound wealth more effectively over time.

And for investors sitting on appreciated positions in their existing account, there’s good news: many can use their current holdings to fund the transition, avoiding the tax shock of a full liquidation.

A Structural Advantage: More Dollars Working for You

One of the most powerful features of this strategy is its ability to put more capital to work for every dollar invested. By incorporating both long and short positions, the portfolio unlocks opportunities to realize losses and manage gains—regardless of market direction.

This enables:

• Greater tax efficiency even in rising markets
• More consistent opportunities to generate net capital losses
• A better shot at long-term after-tax alpha

For investors frustrated with a stalled strategy, this is more than just a portfolio tweak—it’s a complete upgrade in how wealth is grown and protected.

Your Portfolio Isn’t Broken—It Just Needs a Reset

At Omni 360 Advisors and Omni Wealth, we specialize in helping investors make smart transitions—especially when they’ve hit a wall with once-successful strategies like direct indexing.

We combine deep expertise in investment advisory, tax strategy, and estate planning to help reposition your portfolio for tax-smart growth, enhanced flexibility, and greater alignment with your long-term financial goals.

Let’s Unfreeze Your Portfolio—The Right Way

If your current direct indexing account has stopped adding value, it may be time for a second opinion. With the right guidance, you can reboot your strategy and re-enter the game—without being trapped by taxes or stuck in neutral.

Contact Omni 360 Advisors and Omni Wealth to discover how to unlock fresh tax benefits, create new flexibility, and take control of your portfolio’s next chapter.

Frequently Asked Questions (FAQs)

Q: What does it mean when a portfolio is ‘frozen’?
A: A “frozen” portfolio typically refers to a direct indexing strategy that has exhausted its tax loss harvesting potential. The investor may be left with appreciated positions and few new opportunities to generate tax savings.

Q: Why does direct indexing stop working after a few years?
A: Direct indexing works best in the early years when there are ample losses to harvest. Over time, as those losses are used and gains accumulate, the portfolio becomes less tax-efficient and often underperforms net of fees.

Q: How can I reinvigorate a frozen portfolio?
A: By transitioning into a long/short, tax-aware strategy that allows for ongoing loss harvesting and deferred gain realization—without needing to fully liquidate your existing positions.

Q: Is this strategy suitable for taxable investors only?
A: Yes. This approach is especially effective for high-income or high-net-worth individuals in taxable accounts who are looking to optimize after-tax returns and reduce tax drag over time.