How Instant Indexing Can Work for You

Utilizing investment strategies only institutional or ultra-high-net-worth investors have access to in the past. Increase your after-tax investment portfolio. Build your own index fund to invest in what’s important to you. It’s tempting to dismiss these marketing claims as hyperbole, except they come from some of the best-known and most respected names in the investment world, including Fidelity, Schwab and even Burton Malkiel, author of investment classics. A Random Walk Down Wall Street.

The fanfare is about a controversial trend: A growing number of investment firms now offer Main Street investors a strategy called “personal” or “direct” indexing that typically requires buying and trading stocks directly, mimicking an index. Investment firms and advisors have long offered this strategy to the wealthy for an annual management fee that often exceeds 1% of the portfolio’s value. But now, enabled by trading no commission, a smart supercomputer program with the ability to buy fractions of shares, at least three firms-Fidelity, Schwab and Wealthfront-are repackaging services for cost-conscious index investors. The new offer allows you to index your personal and portfolio for as little as $1, for fees ranging from $4.99 a month to 0.4% a year (see table below).

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