Displaying items by tag: direct indexing

The Nasdaq-100 Index has long rewarded investors with strong returns, delivering a 19.43% annualized gain over the past decade, outpacing the broader U.S. market’s 13.93% return, though with greater volatility. This volatility, often seen as a drawback, can actually benefit investors through direct indexing, a strategy that allows ownership of individual stocks within an index. 

Unlike ETFs, direct indexing enables tax-loss harvesting, where investors sell underperforming stocks to offset capital gains and lower tax bills while maintaining market exposure. Wealthfront has pioneered this approach with its new Nasdaq-100 Direct portfolio, offering retail investors access to innovative companies and potential tax savings with a low 0.12% annual advisory fee. 

Direct indexing can help investors turn volatility into an advantage by improving after-tax returns while closely tracking the index’s performance.

Finsum: Ultimately, the strategy offers a cost-effective, tax-efficient way to capture the long-term growth potential of the Nasdaq-100’s most dynamic companies.

The rise of direct indexing is transforming public equity portfolio construction, giving institutional investors unprecedented control over market exposures through access to increasingly granular trading data. 

Instead of relying on traditional benchmarks, allocators can now customize portfolios to reflect sector convictions, exclude undesirable industries, and manage risk concentrations, like avoiding overexposure to mega-cap stocks such as Microsoft. Experts note that direct indexing's growth has been supercharged by post-pandemic volatility and evolving client expectations around values-based investing and tax efficiency. 

Industry leaders view custom indexing as a flexible, modular solution that enables investors to “build any sector tilt, factor fiesta, or thematic maze,” as one CIO put it. As technology advances and AI becomes embedded in portfolio design, managers must evolve into tech-savvy strategists capable of leveraging these tools for tailored outcomes. 

Finsum: What began as a “nice-to-have” has rapidly become essential in a market where precision, personalization, and proactive risk management drive success.

Advisors are rapidly embracing direct indexing, with 76% already using or planning to adopt it within a year, especially among wirehouse and younger “NextGen” advisors. FTSE Russell’s latest survey shows 74% of advisors view direct indexing as essential for serving high- and ultra-high-net-worth clients, who benefit most from its tax-efficient, personalized strategies. 

Despite high awareness—92% of advisors say they’re familiar with the concept—barriers like complexity, lack of client demand, and tech integration challenges persist. Notably, 79% of advisors expect friction in implementation, even though most current users report it’s easier than expected, suggesting a disconnect that education could help address. 

Adoption is strongest among wirehouse firms and younger advisors, who view it as critical for staying competitive in wealth management. 

Direct indexing’s appeal lies in its ability to offer customization, tax benefits, and risk management—features increasingly in demand by affluent clients.

Apex Fintech Solutions has introduced a new Direct Indexing platform designed to help advisors and fintechs create tailored, tax-smart portfolios for their clients. The solution enables investors to directly hold the individual stocks within an index, allowing for fine-tuned adjustments based on personal goals or values like ESG preferences. 

With a minimum investment of $10,000, it opens access to advanced portfolio customization for a broader range of users. The platform offers built-in benchmarks for large, mid, and small-cap equities, and incorporates automated tax-loss harvesting to improve efficiency and returns. 

Seamlessly integrated into Apex’s Augmented Advice™ suite, it simplifies portfolio management while supporting deep personalization. Future upgrades will further enhance customization, including user-defined indices and more precise portfolio adjustments.

Finsum: ESG is a great spot for custom indexing because it is ripe for picking companies that align with investor value. 

Direct indexing has emerged as a popular strategy for investors looking to enhance tax efficiency by owning individual stocks rather than traditional ETFs or mutual funds. Its growing adoption is driven by the rise of passive investing and advancements in fractional share technology, making it more accessible to a broader range of investors.

By selectively selling underperforming stocks and replacing them with others in the index, investors can realize capital losses to offset future gains—a key advantage of this approach.

However, tax benefits are generally front-loaded, meaning that over time, opportunities for tax-loss harvesting diminish as portfolio gains accumulate. To sustain tax efficiency, investors can reinvest funds, donate appreciated stocks, or explore strategies like transitioning holdings into ETFs through in-kind transfers.

Finsum: As direct indexing expands beyond passive strategies, advisors are also exploring actively managed SMAs with built-in tax management features, offering more tailored solutions.