| Direct indexing may soon be available to more individual investors.
CNBC's Kate Dore reports that while ultra-high-net-worth investors have historically used this investment strategy, those with fewer assets may soon have access as more financial services companies double down on these solutions.
For example, Dore reports that Vanguard acquired Just Invest, a direct indexing company. BlackRock has also made investments, acquiring Aperio in 2020 and recently buying a minoring stake in SpiderRock Advisors. Additionally, Morgan Stanley last year acquired Eaton Vance, parent company of custom indexer Parametric.
So, what is direct indexing? Basically, it's a strategy that attempts to replicate the performance of an index by purchasing the underlying individual equities instead of using a mutual fund or an exchange-traded fund in an investor's portfolio.
This strategy may appeal to those seeking portfolio customization or tax-saving opportunities. Additionally, it allows investors to have a little more control over what they are investing in, a financial advisor told Dore.
However, the technique won't work for all investors, some financial experts say. To that point, since direct indexing is an active strategy, it is more costly than owning passively managed assets, such as index funds and ETFs.
For more cool stuff like this, please follow me on Twitter @jimpavia and check out CNBC's Financial Advisor Hub and CNBC + Acorns Invest in You: Ready. Set. Grow. |
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