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 %
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%

ITA — iShares US Aerospace & Defence ETF