Direct Indexing

Direct Indexing

Direct Indexing is a process that seeks to replicate the performance of an index by directly purchasing the underlying individual securities instead of using an ETF or mutual fund in an investor’s portfolio. For example, rather than purchasing an ETF or a mutual fund that replicates an index, the investor using a direct indexing approach would simply buy all of the securities in an index.

The ability to own fractional shares is typically required to participate in direct indexing. Fractional share trading allows very small dollar amounts to be invested in each security.