Direct Indexing is an investment product that allows you to directly own the individual stocks that make up an index - like the S&P 500® - rather than owning a single fund, such as an ETF, that tracks the index. This provides greater control and customization over your portfolio.
At its core, Direct Indexing is the practice of directly purchasing the individual stocks that make up an index in the same proportions as the index itself.
For example:
An ETF is like buying a pre-made basket of groceries. You buy one item (the ETF share) and you get all the ingredients for the S&P 500® inside.
Direct Indexing is like getting the shopping list for that same basket and buying each ingredient yourself. You walk through the store and purchase the individual shares of all, or a specific amount, of the companies in the index.
Some Benefits of Direct Indexing:
Allows for more tax management strategies, potentially leading to lower year-end tax requirements via tax loss harvesting
Greater customization. Investors can tailor their portfolio to their specific preferences and values, whether it be changing the weighting methodology, excluding specific symbols, and more
Offer greater transparency into the underlying holdings of a portfolio 5
* As with any investment, there is always a risk of loss of principal when investing in the Direct Indexing Account.
** Always consult a tax advisor for tax information and recommendations
How do I get started?
You can start creating a Direct Indexing portfolio from several places on the platform:
1. "Build your portfolio" card on your home screen
2. Under the "Invest" dropdown menu on Web
3. Within the "Trade" tab on the Mobile app
4. Directly from the asset page of a trackable index (e.g., the SPX asset page).
Any reference to securities, indexes, or strategies in this communication is for informational and illustrative purposes only, and should not be construed as investment or tax advice.
Investment advisory services for Direct Index Accounts (“DI Accounts”) are provided by Public Advisors LLC, an SEC-registered investment adviser, and brokerage services are provided by Open to the Public Investing, Inc., member FINRA / SIPC. Public Advisors and Public Investing are affiliates, and both charge fees for their respective services. Before investing, consider your investment objectives, all fees and expenses, and any potential conflicts of interest. For more details, see Public Advisors’ Firm Brochure, Form CRS, and Fee Schedule.
Your DI Account’s composition and performance may deviate from the benchmark index due to tracking error, market conditions, the frequency of rebalancing and tax loss harvesting, and any portfolio customizations. Indexes are not available for direct investment; therefore, their performance does not reflect the expenses associated with management of a DI Account. See additional disclosures.
Tax-loss harvesting (“TLH”) occurs whenever your DI Account rebalances or experiences a cash inflow or outflow. In order to opt out of TLH, you must set your rebalancing schedule to “None.” The ability of TLH to reduce tax liability is not guaranteed and will depend on your entire tax and investment profile. The performance of replacement stocks purchased through TLH may be worse than the securities sold, and TLH may cause the composition and performance of your portfolio to deviate from the benchmark index. Learn more about additional TLH risks. Public Advisors does not provide tax advice or assume liability for tax consequences of client transactions.
Any S&P index (“S&P Index”) referenced in this communication is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by Public Holdings. S&P® and S&P 500® are trademarks of S&P Global, Inc. or its affiliates (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Public Holdings. Public Advisors’ Direct Indexing products are not sponsored or, sold by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of any S&P Index.