Question 1

What is direct indexing?

Accepted Answer

Direct indexing is the practice of owning the individual stocks that make up an index or ETF, rather than buying the ETF itself. This eliminates the fund's expense ratio (annual management fee), which can save thousands of dollars over time through compounding.

Question 2

How many stocks do I need to replicate an ETF?

Accepted Answer

Research shows that 15-20 stocks representing the top holdings of a sector ETF achieves R² > 0.95 correlation to the full fund. For broad market ETFs like SPY, 50 stocks achieves R² ≈ 0.97-0.98.

Question 3

How much money do I save by direct indexing?

Accepted Answer

It depends on the ETF. SPY (0.09%/yr) saves $90/yr on $100K — modest. ITA defence ETF (0.40%/yr) saves $400/yr, which compounds to $88,000 over 30 years on a $100K investment.

Question 4

Is direct indexing free?

Accepted Answer

Yes — Direct Index Club is completely free to use. No account required, no signup, no fees. Most major brokers also offer zero-commission stock trading, making the basket itself free to build.

Question 5

What ETFs can I replicate?

Accepted Answer

Direct Index Club currently supports SPY (S&P 500), QQQ (Nasdaq-100), ITA (US Defence), XLV (Healthcare), XLE (Energy), and HACK (Cybersecurity), with more being added.

Ticker	Company	Sector	ETF Weight %
PANW	Palo Alto Networks	Network Security	8.50%
CRWD	CrowdStrike	Endpoint Security	7.90%
FTNT	Fortinet	Network Security	6.80%
ZS	Zscaler	Cloud Security	5.40%
S	SentinelOne	Endpoint Security	4.90%
CYBR	CyberArk	Identity Security	4.20%
OKTA	Okta	Identity Security	3.80%
RPD	Rapid7	Vulnerability Mgmt	3.50%
TENB	Tenable	Vulnerability Mgmt	3.10%
VRNT	Verint Systems	Analytics	2.80%
QLYS	Qualys	Cloud Security	2.50%
SAIL	SailPoint	Identity Security	2.20%
NTCT	NetScout Systems	Network Security	2.00%
PFPT	Proofpoint	Email Security	1.90%
CACI	CACI International	Defence IT	1.70%

HACK — ETFMG Prime Cyber Security ETF