Direct Indexing offers a compelling innovative solution for increased portfolio customization and tax efficiency.
Farkas Private Wealth Management is uniquely positioned within Canada to offer this type of investment strategy. Learn more about the potential advantages of direct indexing and how it can help you meet your financial goals.
What is direct index investing?
In its simplest form, direct indexing is a strategy in which an investor purchases a selection of the securities that make up a specific index. This is vastly different from an Exchange-Traded Fund (ETF) that tracks an index or a mutual fund that follows a benchmark index such as the S&P 500. Mutual funds and ETFs are comingled funds: everyone who buys that mutual fund or ETF gets the same combination of securities.
There are a few unique advantages to owning the individual positions of an index over a mutual fund or ETF, including:
- Tax Efficiency and capital gain/loss planning
Potential of significant tax benefits through tax-loss harvesting, which involves selling positions that are down and using those losses to offset capital gains from other positions. This can be done throughout the year, even in positive years.
Unlike EFTs of Mutual Funds, investors have complete control over their portfolio and can customize securities based on their preferences and goals. In-kind transfer also allows for existing positions to be included rather than sold.
The flexibility of direct indexing allows investors to ensure their portfolio aligns precisely with their unique risk tolerance.
Stocks can be excluded or included based on faith-based, values-based, or beliefs-based preferences
- Impactful Charitable Giving
Individual stocks can be donated which match the selected charity’s focus and principles all the while maximizing tax efficiency.
Interested in finding out if direct investing is right for you? Reach out today for a friendly conversation.
