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Direct indexing is an investment strategy that allows you to own the actual stocks in an index, rather than buying into a mutual fund or ETF (exchange-traded funds). Instead of investing in a bundled fund, you’re directly holding the individual stocks. This approach offers more flexibility so you can easily customize your portfolio to match your personal goals.
Direct indexing lets you pick investments that align closely with your personal values, financial goals, or risk preferences. This strategy can also lower your taxes by allowing you to strategically sell certain stocks at a loss to offset gains elsewhere. Once you get familiar with direct indexing, you can build a portfolio that’s tailored to you. It might even save you money at tax time.
Why Do Investors Choose Direct Indexing?
Direct indexing has become popular because it offers the flexibility you don’t often get with traditional funds. Investors appreciate the option to personalize their portfolio to match their values or financial goals. Also, the potential tax savings are appealing.
Common scenarios where you might use direct indexing include:
- Optimizing taxes
- Aligning investments with personal beliefs
- Targeting specific financial goals
When investors want more control over their money, direct indexing could be a good fit..
Direct Indexing vs. ETFs and Mutual Funds
Understanding the difference between direct indexing, ETFs, and mutual funds lets you choose the best investment approach for your goals. Below, we’ll cover how direct indexing stacks up against these more traditional options.
Customization and Personalization
Direct indexing lets you customize your portfolio to your preferences. ETFs and mutual funds, however, offer less flexibility because investments are bundled into pre-set groups of stocks.
Cost and Fees
Of course, costs and fees are important to consider when deciding how you want to invest. Here’s a look at how direct indexing compares to ETFs and mutual funds in terms of expenses and potential fees.
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Ryan Bond is a senior financial advisor and a CERTIFIED FINANCIAL PLANNER™ at Savvy. He has eight years of experience as a financial advisor and initially launched his career as an intern at Morgan Stanley during college. After he graduated, he joined Pennington Partners, a smaller firm, where I managed Separately Managed Accounts (SMA ) portfolios. He oversaw several hundred million dollars on their platform for several years. His commitment to advancing his expertise led him to Vanguard, where he achieved the CERTIFIED FINANCIAL PLANNER™ (CFP®) designation. Over the next three years, he worked as an advisor on their platform. More recently, he spent a couple of years with Personal Capital, which was later acquired by Empower. In the past three years, I have had the privilege of serving as an advisor with both firms.
Material prepared herein has been created for informational purposes only and should not be considered investment advice or a recommendation. Information was obtained from sources believed to be reliable but was not verified for accuracy. All investments involve some degree of risk, including loss of principal. All advisory services are offered through Savvy Advisors, Inc. (“Savvy Advisors”), an investment advisor registered with the Securities and Exchange Commission (“SEC”).
Ryan Bond is an investment adviser representative with Savvy Advisors, Inc. (“Savvy Advisors”). Savvy Advisors is an SEC registered investment advisor. The views and opinions expressed herein are those of the speakers and authors and do not necessarily reflect the views or positions of Savvy Advisors. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy.
Direct Indexing: What It is & How It Works
Direct indexing is an investment strategy that allows you to own the actual stocks in an index, rather than buying into a mutual fund or ETF (exchange-traded funds). Instead of investing in a bundled fund, you’re directly holding the individual stocks. This approach offers more flexibility so you can easily customize your portfolio to match your personal goals.
Direct indexing lets you pick investments that align closely with your personal values, financial goals, or risk preferences. This strategy can also lower your taxes by allowing you to strategically sell certain stocks at a loss to offset gains elsewhere. Once you get familiar with direct indexing, you can build a portfolio that’s tailored to you. It might even save you money at tax time.
Why Do Investors Choose Direct Indexing?
Direct indexing has become popular because it offers the flexibility you don’t often get with traditional funds. Investors appreciate the option to personalize their portfolio to match their values or financial goals. Also, the potential tax savings are appealing.
Common scenarios where you might use direct indexing include:
- Optimizing taxes
- Aligning investments with personal beliefs
- Targeting specific financial goals
When investors want more control over their money, direct indexing could be a good fit..
Direct Indexing vs. ETFs and Mutual Funds
Understanding the difference between direct indexing, ETFs, and mutual funds lets you choose the best investment approach for your goals. Below, we’ll cover how direct indexing stacks up against these more traditional options.
Customization and Personalization
Direct indexing lets you customize your portfolio to your preferences. ETFs and mutual funds, however, offer less flexibility because investments are bundled into pre-set groups of stocks.
Cost and Fees
Of course, costs and fees are important to consider when deciding how you want to invest. Here’s a look at how direct indexing compares to ETFs and mutual funds in terms of expenses and potential fees.
Meet
Ryan Bond, CFP®
Ryan Bond is a senior financial advisor and a CERTIFIED FINANCIAL PLANNER™ at Savvy. He has eight years of experience as a financial advisor and initially launched his career as an intern at Morgan Stanley during college. After he graduated, he joined Pennington Partners, a smaller firm, where I managed Separately Managed Accounts (SMA ) portfolios. He oversaw several hundred million dollars on their platform for several years. His commitment to advancing his expertise led him to Vanguard, where he achieved the CERTIFIED FINANCIAL PLANNER™ (CFP®) designation. Over the next three years, he worked as an advisor on their platform. More recently, he spent a couple of years with Personal Capital, which was later acquired by Empower. In the past three years, I have had the privilege of serving as an advisor with both firms.
Material prepared herein has been created for informational purposes only and should not be considered investment advice or a recommendation. Information was obtained from sources believed to be reliable but was not verified for accuracy. All investments involve some degree of risk, including loss of principal. All advisory services are offered through Savvy Advisors, Inc. (“Savvy Advisors”), an investment advisor registered with the Securities and Exchange Commission (“SEC”).
Ryan Bond is an investment adviser representative with Savvy Advisors, Inc. (“Savvy Advisors”). Savvy Advisors is an SEC registered investment advisor. The views and opinions expressed herein are those of the speakers and authors and do not necessarily reflect the views or positions of Savvy Advisors. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy.
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