Direct Indexing | How it Works and Whether It Is Worth It for Investors

Many believe that direct indexing will be the next big trend in investing. While it used to be reserved for high-net-worth individuals, zero commissions and the ability to trade partial shares has now brought it to the masses. But does it make sense for investors to utilize the strategy? As is usually the case with all investing tools, the answer is “it depends”. In this episode, Lee Boudouris of Sunpointe Investment joins us to look at how direct indexing strategies work and the pros and the cons of the approach.

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03:12 – What is direct indexing?
04:58 – The types of investors direct indexing works best for
08:22 – The factors that determine whether a direct indexing approach is appropriate
11:09 – The costs of direct indexing strategies relative to index ETFS
12:35 – The importance of the path of returns
13:59 – Do direct indexing portfolios overweight large companies relative to index ETFs?
17:30 – How direct indexing portfolios handle index changes
20:01 – ESG, factors and direct indexing
24:02 – Is there a behavioral advantage to direct indexing?
28:27 – How direct indexing portfolios limit tracking error while selling losing positions
34:11 – Direct indexing and gifting strategies
37:19 – Five (or six) things to look for in a direct indexing manager
44:08 – Jack needs a collared shirt

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Originally Posted September 20, 2023 – Direct Indexing | How it Works and Whether It Is Worth It for Investors

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