What is direct indexing and how does it help with tax-loss harvesting?

Direct indexing means owning the individual stocks that make up an index in your own account rather than buying a single index fund. Because you hold dozens or hundreds of separate positions, some stocks will be down even when the overall index is up, letting you harvest those individual losses to offset gains elsewhere while keeping your market exposure roughly intact. This produces more harvesting opportunities than a single fund, where you can only harvest when the whole fund is underwater. The trade-offs are complexity, more transactions, potential higher fees, and wash-sale tracking across many holdings. It generally makes sense only for larger taxable accounts in higher brackets. For most investors a plain index fund plus occasional harvesting is simpler and sufficient.