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Direct indexing is an investment approach that involves purchasing individual stocks directly, rather than using mutual funds or exchange-traded funds (ETFs) to track an underlying index.  

Direct indexing offers several benefits for investors, particularly in terms of autonomy, control, and tax advantages. With the rise of zero-commission trading and fractional shares, direct indexing has become accessible to more investors. Here are some key benefits:

  • Tax Efficiency: Direct indexing can be more tax-efficient than owning mutual funds or ETFs. It allows for tax-loss harvesting, where investors can sell positions at a loss to offset capital gains and reduce their tax bill.
  • Customization: Investors can tailor their portfolios to their values and goals, such as excluding certain stocks or sectors, or focusing on environmental, social, and governance (ESG) criteria
  • Strategic Rebalancing: Investors can adjust their holdings to overweight or underweight certain sectors based on their investment strategy.

These benefits make direct indexing an attractive option for investors looking for a personalized approach to index investing.  You can contact us at hello@brightscape.com to learn more about these strategies and how they can align with your goals.