Investing has evolved dramatically over the past few decades.
While mutual funds and ETFs have dominated the scene, a growing number of investors are seeking more customized solutions that align with their financial goals, values, and tax strategies.
Direct indexing can provide many of the benefits of index investing, while also allowing for greater flexibility, personalization, and potential tax advantages.
However, these benefits are not guaranteed, and outcomes may vary depending on market conditions, client objectives, and the strategy’s implementation.
What is Direct Indexing?
At its core, direct indexing allows investors to own the individual securities that make up an index, rather than buying a mutual fund or ETF that tracks the index.
For example, instead of buying an S&P 500 ETF, an investor using direct indexing would purchase the 500 individual stocks in that index in the same proportion as the index. While this may sound complex, modern technology and investment platforms make it seamless and accessible for investors of various levels, especially in the wave of fractional share ownership.
