Direct indexing is driving many headlines but investors want to know the brass tax: if they are really worth it compared to ETFs. ETFs' advantages over direct indexing are their ease of use and flexibility because they trade like stocks. They tend to have lower fees than a strategy like direct indexing as well, but hiccups happen and an ETF could make a mistake when tracking the underlying asset. Direct indexing investors own the stocks that make up the index, this gives huge advantages when it comes to tax loss harvesting. Moreover, it gives a different level of flexibility by customizing risk exposure. There are two big drawbacks, the first being this is essentially an active management strategy that requires careful attention and rebalancing. Finally, fractional shares can vastly limit your brokerage options.

Finsum: The biggest component appears to be tax-loss harvesting, if you can get enough alpha here direct indexing could prove viable.

Advisors have been rapidly increasing their use of model portfolios to better address clients' needs. More astounding is that despite market volatility their inflows are up over $350 billion in the last nine months. Morningstar launched a list of their best model portfolios and taking the top of the list was BlackRock's long-horizon ETF with a Gold rating. Shortly after was BlackRock Target Allocation ETF, and then a slue of Vanguard models. Core, CRSP, Russel, S&P, and Tax-Efficient Vanguard portfolios also got the highly touted gold rating from Morningstar. They also praised BlackRock's team and their highly respected research processes. These are all great options for those who want to add models.

Finsum: Target date funds are some of the most intuitive models for clients and the easiest to implement.

With inflation running hot and the Fed well into a tightening cycle yields are beginning to look attractive to income investors, which means the underlying value of bond funds could start to turn around. The second half of 2022 could be ripe for a comeback for an asset class that has had a dismal year and here are some bond funds to look out for. AGG is a prime example of broad exposure to the market with a very safe asset allocation with extensive holdings of treasuries and high-grade corporate debt. Vanguards Total Bond ETF is another example similar to AGG but has more international exposure, but almost exclusively in on investment grade debt. TIP is another ETF with especially great inflation protection measures given the exclusive focus on treasury inflation-protected securities.

Finsum: Leaning into debt has the added benefit of a volatility cushion in these trying times.

Cryptocurrencies are no stranger to volatility but the latest fluctuations could prove terminal at least for the companies. Goldman Sachs downgraded Coinbase Global to a sell this weak as the stock tumbled by almost 10%. The new price target according to GS is $45 which is a far cry from the +$300 it traded at after it IPO’d. While bitcoin, Ethereum, and the rest of the asset class may survive the slowdown companies supported, or rather supported by, crypto might not make it. Bitcoin has lost 55% of its value which is putting lots of pressure on the revenue streams of the company forcing layoffs and other drastic measures. Just recently Coinbase cut nearly a fifth of its workforce in order to weather the brunt of the storm.

Finsum: This might not prove fatal for bitcoin but could for the companies relying on the asset, even international troubles and inflation aren’t lifting up the asset class yet.

Usually, bonds get a bump in bear markets and surging volatility but the largest bond funds have been taking a beating lately. AGG, TIP, HYG, TLT, and LQD are all down over double digits from the beginning of the year. Driving much of that change is a Fed-induced tightening cycle which on top of inflation is sending yields climbing and prices falling. This is all shaping up for the worst H1 in the history of the bond market according to Dow Jones Market Data. In addition to the increasing pressure due to monetary policy, there is real fear the US is already in a recession which could be the bane of the bond market moving forward. One of the growing concerns is that ETFs trade quickly and the less liquid underlying bonds could be left behind causing real market chaos.

Finsum: The liquidity difference in ETFs and bonds is becoming alarming and a full-blown panic with huge amounts of corporate debt could be a liability.