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 %
LLY	Eli Lilly	Pharma	12.10%
UNH	UnitedHealth	Insurance	11.80%
JNJ	Johnson & Johnson	Pharma	7.20%
ABBV	AbbVie	Biotech	6.80%
MRK	Merck	Pharma	5.40%
TMO	Thermo Fisher	Life Sciences	4.20%
ABT	Abbott Labs	Medical Devices	3.80%
ISRG	Intuitive Surgical	Medical Devices	3.50%
AMGN	Amgen	Biotech	3.20%
PFE	Pfizer	Pharma	3.00%
DHR	Danaher	Life Sciences	2.80%
BSX	Boston Scientific	Medical Devices	2.50%
CI	Cigna	Insurance	2.20%
ELV	Elevance Health	Insurance	2.00%
SYK	Stryker	Medical Devices	1.90%

XLV — Health Care Select Sector SPDR