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Post by roi2020 on Jul 19, 2021 0:29:44 GMT
Vanguard has entered a definitive agreement to acquire Just Invest, a company which provides direct indexing capabilities. Just Invest's technology will only be available to advisers at first. Direct indexing allows investors to personalize portfolios (by removing select companies) and to optimize tax-loss harvesting. Will Vanguard offer direct indexing for retail clients, and if so, what will be the cost? WSJPress Release |
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Post by yogibearbull on Jul 19, 2021 1:03:59 GMT
Customized indexes for wealthy individuals and special groups are becoming popular. But I doubt that those will be offered to retail customers.
ETFs can be thought of as specialized indexes. So, there are now almost 8,000 ETFs and only about 3,500 stocks. There are multiple ETFs for broad indexes, and there are also bond and futures-based ETFs. But even then, there are lots of ETFs and lots of indexes for the retail customers to choose from.
I don't know if VG will one day will switch to controversial internal-indexing for its listed funds. Right now VG uses various external indexes from CRSP, MSCI (only some now as most were replaced by CRSP after fee dispute with MSCI a few years ago), FTSE, S&P/DJI (for years, VG had dispute over SP500 name and auto-use of licensed S&P indexes for its newer products without further approvals/licensing from S&P), Russell, etc.
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Post by roi2020 on Jul 19, 2021 1:46:29 GMT
An investor can filter out their employer or corresponding sector from the parent index (e.g. S&P 500) in order to limit overexposure. ESG investors may find it appealing to "remove" companies they dislike from an index. The popularity of ESG investing can potentially fuel the demand for direct indexing. It will be interesting to watch how this story develops...
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Post by steelpony10 on Jul 19, 2021 10:30:57 GMT
As an index equity investor I find that a great idea, thanks.
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Post by anovice on Jul 19, 2021 10:42:40 GMT
Doesn't this make it active investing?
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Post by racqueteer on Jul 19, 2021 12:17:49 GMT
Doesn't this make it active investing? I think you're going to find a lot of active investors here. Whether/how that corresponds to the general population I'm unsure, but I suspect the vast majority invest on autopilot through pension plans, etc. Their MANAGERS may also be active or not (though I'm not sure of the benefit of being active AND having active managers?). |
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Post by roi2020 on Jul 20, 2021 7:03:16 GMT
Doesn't this make it active investing? Yes, direct indexing could be considered a form of active investing. It can also be argued that the S&P 500 index is somewhat "active". Quantitative criteria including financial viability, public float, adequate liquidity, and company type are used in the stock selection process. However, meeting these basic requirements is not enough. The subjective judgement of index committee members ultimately determines which stocks are included in the S&P 500.
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Post by roi2020 on Aug 7, 2021 2:10:40 GMT
Recent M* article looks at pros/cons of direct indexing.
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