Friday, 31 May 2024 20:16

Low Costs are Brining Direct Indexing to the Masses

Written by
Rate this item
(0 votes)

Traditionally reserved for the wealthy, direct indexing has become more widely accessible thanks to technological advancements. This investment strategy involves owning the individual stocks in an index such as the S&P 500, which allows investors to sell off underperforming stocks to generate tax losses—a technique known as tax-loss harvesting.


 According to Frec, a direct-indexing startup, a simulated S&P 500-based portfolio could boost after-tax annual returns by more than 2% over a decade, compared to an ETF, assuming a tax rate of 42.3% and excluding advisory fees. 


Firms like Charles Schwab, Vanguard, and Fidelity now offer direct-indexing services with various account minimums and fee structures, lowering the entry barrier for average investors. With the market for direct indexing expected to reach $825 billion in assets by 2026, this approach is set to become increasingly popular among a broader range of investors.

Finsum: Computing power has drastically driven down the costs of Direct Indexing allowing more investors to gain its tax alpha. 

Contact Us



Subscribe to our daily newsletter

We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…