Direct Indexing Definition
Learn the definition of direct indexing and other ETF terminology from the etf.com glossary.
Learn more about Direct Indexing
Direct indexing within the realm of ETFs involves replicating the performance of a specific index by owning individual securities directly, rather than through a fund structure. Investors can construct a customized portfolio mirroring the index's holdings, providing greater flexibility for tax optimization, socially responsible investing, or personalized strategies. Unlike traditional ETFs that pool assets, direct indexing allows investors to own the underlying securities directly. This approach offers customization, tax efficiency through tax-loss harvesting, and the ability to exclude specific stocks. While it can be costlier for small portfolios, direct indexing provides tailored solutions aligned with individual preferences and investment goals.