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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XLV — Health Care Select Sector SPDR

Tracks S&P 500 healthcare companies — pharma, biotech, medical devices.

Expense ratio: 0.1%/yr

SPY QQQ VTI VXUS SCHD ITA XLV XLE HACK

Holdings

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%

Basket Stats

Coverage100%

Est. R²0.990

✅ 15 stocks — good tracking (R² target met)

Portfolio size ($)

Annual savings$50

10-yr compounded$915

20-yr compounded$3,585

Buy List — $50,000 portfolio

Ticker	Company	Allocation %	Buy Amount
LLY	Eli Lilly	16.7%	$8,356
UNH	UnitedHealth	16.3%	$8,149
JNJ	Johnson & Johnson	9.9%	$4,972
ABBV	AbbVie	9.4%	$4,696
MRK	Merck	7.5%	$3,729
TMO	Thermo Fisher	5.8%	$2,901
ABT	Abbott Labs	5.2%	$2,624
ISRG	Intuitive Surgical	4.8%	$2,417
AMGN	Amgen	4.4%	$2,210
PFE	Pfizer	4.1%	$2,072
DHR	Danaher	3.9%	$1,934
BSX	Boston Scientific	3.5%	$1,727
CI	Cigna	3.0%	$1,519
ELV	Elevance Health	2.8%	$1,381
SYK	Stryker	2.6%	$1,312
Total			$50,000

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