Trump’s 21,000 Trades and the Rise of Direct Indexing

President Donald Trump executed 21,000 trades in 2025, more than any other president and likely any other politician, while reporting more than $2 billion in income that included about $1 billion in cryptocurrency income. The Trump Organization has said the trading is automated, and Democratic lawmakers — including Senator Elizabeth Warren — are asking who manages those accounts. The company dismisses the inquiries as a “baseless political stunt” and says independent third-party managers run the accounts to avoid any appearance of a conflict of interest.

The trading pattern that has drawn attention has a familiar name in wealth management: direct indexing. Instead of buying an exchange-traded fund that tracks an index such as the S&P 500, an investor owns the underlying stocks directly. That structure lets the investor trade individual names while still roughly mimicking the index, and — critically — use losing positions as tax write-offs.

The strategy is no longer confined to the ultrarich. Direct indexing assets reached $864 billion at the end of 2024, more than double their 2020 level, according to Cerulli Associates. Falling trading costs, fractional shares and automated platforms have made the approach accessible to ordinary investors, even though fees and complexity vary.

What Direct Indexing Delivers — and Where It Falls Short

Why Trump Looks Like the Textbook Direct-Indexing Client

Financial advisor Gabriel Shahin of Falcon Wealth Planning says Trump is the “perfect candidate” for direct indexing: he sits in the top tax bracket, has significant tax liability, and as a real-estate investor has capital gains to offset and a recurring need for liquidity. That combination is what converts tax-loss harvesting from a marginal tactic into a meaningful annual benefit.

The Tax Engine: Dispersion and Deferral

Even in a rising market, not every stock rises. Direct indexing uses that dispersion by selling losing positions to create realized losses, which can offset capital gains in the portfolio or elsewhere. If losses exceed gains, up to $3,000 can be deducted against wages each year, with unused losses carried forward. Wealthfront’s Alex Michalka notes the tax saved is effectively deferred until the portfolio is liquidated, letting the investor reinvest the amount in the meantime.

Wealthfront and the New Economics of the Strategy

Wealthfront, which says it coined “direct indexing” in 2012 and now oversees $99 billion in client assets, reports that one medium-sized account made more than 4,500 distinct large-cap trades in 2025 solely to increase tax savings. Its S&P 500 direct-indexing product carries the same fee as State Street’s SPY ETF. That is a sharp departure from an earlier era when Falcon Wealth’s Shahin would not consider the strategy for clients below roughly $5 million because of management costs, trading costs and a lack of fractional shares.

The Limits and the Tracking-Error Trade-Off

Direct indexing is “not a free lunch,” Michalka says. Some providers charge far more than a plain ETF, and the tax-loss strategy can cause a portfolio to drift from the index it is designed to track. Wealthfront estimates its own tracking error at roughly 1% in normal years, but says it can be higher in volatile years such as 2020 or when an investor customizes the portfolio — for example, by excluding oil and gas stocks or avoiding more exposure to a company that already pays a large share of their income in equity.

Who Might Benefit From Direct Indexing — and Who Should Skip It

For individuals considering the strategy, the decision rests on whether the tax savings exceed the extra cost and tracking deviation:

  • Calculate your offset first. Direct indexing is most valuable for someone in Trump’s position: a high tax bracket with realized capital gains or other investment gains to offset, plus the ability to use the $3,000 annual deduction against ordinary income when losses exceed gains.
  • Compare total cost, not just management fees. Wealthfront’s S&P 500 product is priced in line with State Street’s SPY ETF, but other providers can charge well above typical ETF fees. Ask for the all-in fee and the provider’s historical tracking error.
  • Expect some index drift. Wealthfront reports about a 1% tracking error in typical years, with more in volatile markets or heavily customized portfolios. If precise index replication is your priority, a plain ETF may be a better fit.
  • Use customization only when it solves a real problem. Excluding sectors such as oil and gas or avoiding additional exposure to employer stock can be useful, but each customization raises the chance the portfolio diverges from the benchmark.
  • Treat the $5 million threshold as obsolete — but not the caution. Direct indexing is now accessible at much smaller sizes because of automated trading and fractional shares, yet the underlying point stands: you need to analyze your own tax situation rather than assume the strategy works for everyone.