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Auto convert self-managed stocks or ETFs into a classic direct index

Overview

Frec's auto conversion watches specific stocks or ETFs in your self-managed account and, once a position drops 3% or more below its tax lot cost, automatically sells it and moves the cash into your direct index.

Before you turn this on: once a stock or ETF is enrolled, the sale happens automatically the next time it qualifies. There's no confirmation step or heads-up before it executes. If you'd rather review each sale first, this may not be the right fit for that position.

Frec checks in on your enrolled positions once each trading morning, against that day's prices. When a sale happens, you'll see a "Sell XXX (Auto conversion)" entry in your Activity page, and a matching "Deposit (Auto conversion)" entry in your Direct Indexing Activity page.

Setting it up

You'll need stocks or ETFs already in your self-managed stocks account first, either by buying them directly or by transferring them in from another brokerage.

  1. Open your self-managed stocks account.
  2. On the right side of the screen, find the box titled "Auto convert stocks into your direct index" and select Select stocks to auto convert.
  3. Choose where the converted cash goes, under "Convert to":
    • If you use direct index allocation, funds distribute automatically across your allocation targets.
    • If you hold more than one index and don't use allocation, you'll need to pick a strategy yourself.
  4. Toggle on the individual stocks or ETFs you want to enroll, or use All eligible stocks at the top to select everything at once.
  5. Select Save changes.

Once saved, you'll see an "Auto conversion" box on your self-managed account page showing how many positions are enrolled and which index is receiving the converted cash.

What's eligible

All ETFs are eligible. Some individual stocks aren't. Anything already part of one of your index strategies is excluded, since converting it would risk a wash sale.

Keep in mind

  • Each converted sale is a realized capital loss for tax purposes, but like any tax loss harvest, the loss can be disallowed under the wash sale rule if you, your spouse, or a household member buys the same or a substantially identical security elsewhere (at another brokerage) within 30 days before or after the sale. Frec can only see activity in accounts it manages.
  • Eligibility is evaluated daily.
  • Frec doesn't provide tax advice. Consult a tax professional about how these automatic sales affect your specific situation.