What is direct indexing?

Direct indexing is an investment strategy where you buy the individual stocks that make up an index or ETF instead of buying the fund itself. This eliminates the fund's annual expense ratio and gives you full control over which stocks you hold, enabling tax-loss harvesting and portfolio customization.

Is direct indexing better than ETFs?

It depends on your situation. Direct indexing is better if you have $25K+ invested, pay more than 0.20%/yr in ETF fees, want tax-loss harvesting, or need portfolio customization. ETFs are better for smaller portfolios, ultra-low-cost funds like VTI (0.03%), or investors who prefer zero maintenance.

How much does ETF expense ratio cost over time?

ETF fees compound against you over time. On a $100,000 portfolio at 7% annual growth, a 0.40% expense ratio costs over $81,000 in lost returns over 30 years. Even a 0.09% fee (SPY) costs about $19,000 over the same period. Direct indexing eliminates this cost entirely.

What is tax-loss harvesting and how does it work?

Tax-loss harvesting is selling investments at a loss to offset capital gains taxes. With direct indexing, you own stocks individually, so you can sell losers to harvest losses while keeping winners. ETF holders cannot do this because they own one bundled security. High-income investors in taxable accounts benefit most.

Who is direct indexing suitable for?

Direct indexing is best suited for investors with $25,000 or more in taxable brokerage accounts, those paying 0.20%+ in ETF expense ratios, high-income earners who benefit from tax-loss harvesting, and anyone who wants to exclude or overweight specific stocks for personal or ESG reasons.

What is the difference between an index fund and direct indexing?

An index fund (ETF or mutual fund) pools investor money to buy all stocks in an index, charging an annual expense ratio. Direct indexing means you buy the individual stocks yourself, paying no ongoing fees. You get similar market exposure but with added benefits: zero expense ratio, tax-loss harvesting on individual positions, and full control to customize holdings.

← All ETFs

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ITA — iShares US Aerospace & Defence ETF

Tracks US aerospace and defence companies — contractors, weapons, space.

Expense ratio: 0.4%/yr

SPY QQQ VTI VXUS SCHD ITA XLV XLE HACK

Holdings

Ticker	Company	Sector	ETF Weight %
RTX	Raytheon Technologies	Defence	19.20%
LMT	Lockheed Martin	Defence	14.80%
GD	General Dynamics	Defence	8.90%
NOC	Northrop Grumman	Defence	8.10%
BA	Boeing	Aerospace	7.20%
LHX	L3Harris Technologies	Defence	5.60%
HII	Huntington Ingalls	Defence	3.80%
TDG	TransDigm Group	Aerospace	3.50%
AXON	Axon Enterprise	Defence Tech	3.10%
CACI	CACI International	Defence IT	2.40%
KTOS	Kratos Defence	Defence	2.10%
LDOS	Leidos Holdings	Defence IT	2.00%
CW	Curtiss-Wright	Aerospace	1.80%
WWD	Woodward	Aerospace	1.60%
MOOG	Moog Inc	Aerospace	1.40%

Basket Stats

Coverage100%

Est. R²0.990

✅ 15 stocks — good tracking (R² target met)

Portfolio size ($)

Annual savings$200

10-yr compounded$3,616

20-yr compounded$13,964

Buy List — $50,000 portfolio

Ticker	Company	Allocation %	Buy Amount
RTX	Raytheon Technologies	22.5%	$11,228
LMT	Lockheed Martin	17.3%	$8,655
GD	General Dynamics	10.4%	$5,205
NOC	Northrop Grumman	9.5%	$4,737
BA	Boeing	8.4%	$4,211
LHX	L3Harris Technologies	6.5%	$3,275
HII	Huntington Ingalls	4.4%	$2,222
TDG	TransDigm Group	4.1%	$2,047
AXON	Axon Enterprise	3.6%	$1,813
CACI	CACI International	2.8%	$1,404
KTOS	Kratos Defence	2.5%	$1,228
LDOS	Leidos Holdings	2.3%	$1,170
CW	Curtiss-Wright	2.1%	$1,053
WWD	Woodward	1.9%	$936
MOOG	Moog Inc	1.6%	$819
Total			$50,000

💡 Use fractional shares at brokers like Fidelity, Schwab, or Interactive Brokers to hit these exact allocations.