Wednesday, 22 March 2023 06:22

Curtain time for direct indexing

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Direct indexing? It seems you’re on.

It’s the next large splash in the financial industry, according to And, get this: it’s under consideration as the future. In investing, that is.

Direct indexing’s been around the blocks a few times, of course. It’s been available in this country for, well, decades, according to nucleuswealth/com. Sparked by factors such as affordability and the personalization of portfolios, direct indexing’s popularity’s burgeoned.

Rather than tooling through a motherlode of available ETFs, you can personalize passive investments with direct indexing.

Damien Klassen, Chief Investment Officer at Nucleus Wealth, says: “Direct indexing is the next generation of exchange-traded funds – ETFs 2.0. Direct indexing involves the investor owning the individual shares that make up an index in a separately managed account.

“Because the investor directly owns each of the shares in their own account, they can (customize) their superannuation or investments. “Where an index mutual fund, an index ETF or traditional superannuation fund merely tracks the index, direct investing allows investors to control their investment decisions. Investors can modify their portfolios by creating ‘tilts’, which is the ability to remove or add certain holdings or sectors according to personal preferences.”

Last June, Kiplinger reported, as far as adoption among investors, direct indexing’s had gained the upper hand over both ETFs and mutual funds. Unique benefits that can’t be mirrored in a traditional ETF or mutual fund structure available through direct indexing, and that’s especially so around personalization and tax management. 

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