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  • Writer's picture Treavor Dodsworth CFP®, CPA, CKA®

#162 - Three Benefits of Direct Indexing

Three Benefits to Direct Indexing

An advancement that continues to gain traction in the investment world is direct indexing. Many of you own ETFs and Mutual Funds in your investment accounts. These may represent/own 1,000+ or even 10,000+ individual stocks. With direct indexing instead of buying ETFs or Mutual Funds, you utilize technology to buy the stocks directly. There are several advantages to this:

  1. Tax benefits. Owning the stocks directly will give more opportunities to give long-term appreciated securities and/or do tax loss harvesting than owning a Mutual Fund that owns the stocks.

  2. Ethical investing. There may be stocks within indexes that are diametrically opposed to what you value or believe. Many direct indexing technologies allow you to exclude specific stocks.

  3. Voting. When you own stock of a company, you own part of that company. That means you may have the opportunity to vote on some decisions that the company is making (oftentimes via proxy). In this way, you are actually using your influence as an owner to bring about positive change.

Technologies keep advancing in this space. This past week I looked at two options for this. Let me know your thoughts!

  • While it is tempting to shift to a US biased portfolio, I am generally a proponent of having global diversification.

  • I originally saw this on chartr. The tooth fairy is now paying an average of $6.23 in the U.S. What a time to be a kid!

  • Bob and Leslie Doll share how they approach giving even when they don’t always agree.


Thank you for reading!

Images from Pexels: photographer Liza Summer


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