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

💵

SCHD — Schwab US Dividend Equity ETF

Tracks high-dividend US stocks screened for quality — yield + sustainability.

Expense ratio: 0.06%/yr

SPY QQQ VTI VXUS SCHD ITA XLV XLE HACK

Holdings

Ticker	Company	Sector	ETF Weight %
ABBV	AbbVie	Healthcare	4.50%
MO	Altria Group	Consumer	4.30%
CVX	Chevron	Energy	4.20%
PFE	Pfizer	Healthcare	4.00%
MRK	Merck	Healthcare	3.90%
CSCO	Cisco Systems	Technology	3.80%
HD	Home Depot	Consumer	3.70%
KO	Coca-Cola	Consumer	3.60%
PEP	PepsiCo	Consumer	3.50%
VZ	Verizon	Telecom	3.40%
IBM	IBM	Technology	3.20%
T	AT&T	Telecom	3.10%
LMT	Lockheed Martin	Defence	3.00%
TXN	Texas Instruments	Technology	2.90%
UPS	United Parcel Service	Industrials	2.80%

Basket Stats

Coverage100%

Est. R²0.990

✅ 15 stocks — good tracking (R² target met)

Portfolio size ($)

Annual savings$30

10-yr compounded$550

20-yr compounded$2,158

Buy List — $50,000 portfolio

Ticker	Company	Allocation %	Buy Amount
ABBV	AbbVie	8.3%	$4,174
MO	Altria Group	8.0%	$3,989
CVX	Chevron	7.8%	$3,896
PFE	Pfizer	7.4%	$3,711
MRK	Merck	7.2%	$3,618
CSCO	Cisco Systems	7.1%	$3,525
HD	Home Depot	6.9%	$3,432
KO	Coca-Cola	6.7%	$3,340
PEP	PepsiCo	6.5%	$3,247
VZ	Verizon	6.3%	$3,154
IBM	IBM	5.9%	$2,968
T	AT&T	5.8%	$2,876
LMT	Lockheed Martin	5.6%	$2,783
TXN	Texas Instruments	5.4%	$2,690
UPS	United Parcel Service	5.2%	$2,597
Total			$50,000

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