Direct Indexing Revisited

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parentsretirement
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Direct Indexing Revisited

Post by parentsretirement »

Every year I revisit Direct Indexing and generally the risks have outweighed the benefits. This year, a few developments have changed that balance:
  • The race to $0 commissions for Stocks and ETFs.
  • New Fin Tech platforms like M1 Finance that simplify portfolio management.
  • Wide-array of ETFs that sample different parts of the market.
  • Large charitable contributions create tax opportunity with appreciated shares.
  • High state and federal tax brackets create tax-loss harvesting opportunities.
With M1 Finance's platform, it is possible to create a portfolio with 5 ETFs and 95 Individual Stocks and easily group and allocate by percentages. Using this system, I decided to set up a proof of concept and wanted to share my findings.

Caveats: Do keep in mind I'm in the early stages of exploring this strategy. There are unknowns that are yet to be found. It also requires $100,000+ taxable portfolio and high tax brackets to start providing some meaningful tax benefits.

### Direct Indexed Portfolio ###

A key metric was to minimize tracking-error against US Total Stocks. I found the S&P 100 index to be a good replication target as it hops a bit around the top 250 stocks by market-cap. Then I paired with Vanguard mid/small cap ETFs to match the rest of VTI. Vanguard's use of CRSP indexes helps here as mid-cap is higher up the market-cap chain than other mid-cap indexes.

Next, a sanity check in Portfolio Visualizer for the following two portfolios shows near-identical performance. It remains to be seen whether tracking error can be significantly overcome with tax-efficiency.

Code: Select all

### 70/30 Three-fund Portfolio ###
42% - Vanguard Total Stock Market ETF (VTI)
28% - Vanguard Total International Stock ETF (VXUS)
30% - Vanguard Total Bond Market ETF (BND)

Code: Select all

### 70/30 Slice-and-dice Portfolio ###
25% - S&P 100 Individual Stocks (OEF)
11% - Vanguard Mid-Cap ETF (VO)
 6% - Vanguard Small-Cap ETF (VB)
28% - Vanguard Total International Stock ETF (VXUS)
30% - Vanguard Total Bond Market ETF (BND)
Image

The other key metric was managing complexity. Here is a sample 70/30 M1 Direct Index Portfolio which is easy to understand and rebalance. At the top level, it looks like a classic three-fund portfolio.

Image

Under the hood, the Total US Stock Market Pie is a slice-and-dice of mid/small cap ETFs and the direct-indexed S&P 100. For this pie, I grouped the top 90+ S&P 100 stocks into sectors and then grouped them into a single S&P 100 pie all weighed by Market-cap.

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livesoft
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Re: Direct Indexing Revisited

Post by livesoft »

One of the main negatives of direct investing is unwinding the portfolio into something simpler when one gets tired of it or is incapacitated and someone else has to step in. How do you address this disadvantage?

How do you stay on top of all the dividends various companies are sending your way? That is, how quickly do you get them reinvested?

What are the extra steps that one needs for their tax return?
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gogleheads.orb
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Re: Direct Indexing Revisited

Post by gogleheads.orb »

I tried a version of this first with motif and then with Merrill edge (100 free trades a month). I never tried to track an index really, but just tried to buy a whole bunch of different stocks. At one point I owned 1000 companies at Merrill edge. The problem I had was doing my taxes. I figured everything would transfer automatically into TurboTax. Not true. I ended up with 50 transactions without cost bases. Apparently , all for different reasons. It took me more than a day to figure out them all by hand. I decided then to sell them all over the next year. Unwinding them didn't turn out to be such a big deal. That year I had a very long tax return, but I ended up with fewer cost bases that I had to do manually.
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Re: Direct Indexing Revisited

Post by typical.investor »

parentsretirement wrote: Tue May 12, 2020 7:54 pm
With M1 Finance's platform, it is possible to create a portfolio with 5 ETFs and 95 Individual Stocks and easily group and allocate by percentages. Using this system, I decided to set up a proof of concept and wanted to share my findings.

Image
I am not impressed by your M1 allocations. 26% in AAPL isn't direct indexing.

Interactive Brokers has a Basket Trader tool that lets you create a basket based off an index. It looks to be closer to direct indexing since fractional shares are supported and you can:
Instantly create a basket based on the composition of an index, and fine-tune the index components based on weight, market cap, beta, price range, or symbol. TWS maintains the basket composition based on changes in the index and user-defined criteria.
https://www.interactivebrokers.com/en/index.php?f=736

I recommend looking in to it for those Expats in Europe who can't buy ETFs due to EU restrictions. It might be useful for those looking to customize and index and remove their employer or industry.

Of course so many individual positions looks like a potential tax nightmare, but again, some Expats have little choice and might just have to accept the accounting cost.

This would be US stocks only. I can't imaging trading on different exchanges to obtain Intl exposure as the currency reporting on every transaction just seems like too much of a burden. Using options that settle in ETFs shares looks much easier for those unable to purchase the ETF.
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Re: Direct Indexing Revisited

Post by parentsretirement »

typical.investor wrote: Tue May 12, 2020 8:52 pm I am not impressed by your M1 allocations. 26% in AAPL isn't direct indexing.
So with the nesting it's 60% S&P 100 -> 29% Technology sector -> 26% AAPL. M1 breaks that down to 4.52%. Using iShares Total Market holdings to check, they have AAPL at 4.58%

Image
typical.investor wrote: Tue May 12, 2020 8:52 pmInteractive Brokers has a Basket Trader tool that lets you create a basket based off an index. It looks to be closer to direct indexing since fractional shares are supported and you can:
IB IndexTrader is an awesome tool but you'd pay commissions on every trade and It requires a desktop application (TWS).
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Re: Direct Indexing Revisited

Post by typical.investor »

parentsretirement wrote: Tue May 12, 2020 9:13 pm
typical.investor wrote: Tue May 12, 2020 8:52 pm I am not impressed by your M1 allocations. 26% in AAPL isn't direct indexing.
So with the nesting it's 60% S&P 100 -> 29% Technology sector -> 26% AAPL. M1 breaks that down to 4.52%. Using iShares Total Market holdings to check, they have AAPL at 4.58%

Image
Ah, it was complicated to understand your allocation.

parentsretirement wrote: Tue May 12, 2020 9:13 pm
typical.investor wrote: Tue May 12, 2020 8:52 pmInteractive Brokers has a Basket Trader tool that lets you create a basket based off an index. It looks to be closer to direct indexing since fractional shares are supported and you can:
IB IndexTrader is an awesome tool but you'd pay commissions on every trade and It requires a desktop application (TWS).
Well let's look at M1 costs.

First, they estimate they earn $0.002/share from order flow. Then, they take 100% of revenue from lending out the shares.

IB on their fixed tier plan charges $0.005/share. In the event IB routes like M1 does, it will pass the full amount of that rebate to Fixed-commission customers as a commission discount.

Or choose the free IB plan and pay no commission. The free IB plan sells for order flow like M1 does though. You don't get the rebate.

Then seeing how you can earn 50% of the revenue from IB when you enroll in share lending, IB might be cheaper. I'm not lending there so don't know how much you can earn.
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Re: Direct Indexing Revisited

Post by aristotelian »

If all you're trying to do is replicate the index, what is the benefit? Saving .03% ER? I don't see any major downside but any upside doesn't seem remotely worth it to me.

For the record I am a happy user of M1.
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parentsretirement
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Re: Direct Indexing Revisited

Post by parentsretirement »

aristotelian wrote: Wed May 13, 2020 10:28 am If all you're trying to do is replicate the index, what is the benefit? Saving .03% ER? I don't see any major downside but any upside doesn't seem remotely worth it to me.
Agreed that there is not much to save on expense ratio front. The appeal is in after-tax returns using tax-loss harvesting and donating appreciated shares. TLH is covered well here, but donating appreciated shares can also boost benefit. Some positions will easily grow shrink 50%-100% over short period of time creating great tax opportunities.

For example, a position that grows to $10,000 from $5,000 cost basis could be donated to a Donor Advised Fund. You would get an income tax deduction of $10,000 and save cap gains on $5,000 appreciation. In 32%/15% tax brackets that comes out to almost $4,000 benefit.
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Re: Direct Indexing Revisited

Post by aristotelian »

parentsretirement wrote: Wed May 13, 2020 11:08 am
aristotelian wrote: Wed May 13, 2020 10:28 am If all you're trying to do is replicate the index, what is the benefit? Saving .03% ER? I don't see any major downside but any upside doesn't seem remotely worth it to me.
Agreed that there is not much to save on expense ratio front. The appeal is in after-tax returns using tax-loss harvesting and donating appreciated shares. TLH is covered well here, but donating appreciated shares can also boost benefit. Some positions will easily grow shrink 50%-100% over short period of time creating great tax opportunities.

For example, a position that grows to $10,000 from $5,000 cost basis could be donated to a Donor Advised Fund. You would get an income tax deduction of $10,000 and save cap gains on $5,000 appreciation. In 32%/15% tax brackets that comes out to almost $4,000 benefit.
Fair enough. In fact, that is one of my own reasons for trying M1 (although my thinking was more along the lines of increased opportunities for tax loss harvesting, albeit with a much smaller bucket of stocks). Still, you have to assume that some of the gains you are harvesting could also be harvested through the strategic use of SpecID, with the same net effect on your basis. And to have a significant number of positions with that kind of growth you will be needing to commit millions of dollars to this endeavor.
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Re: Direct Indexing Revisited

Post by parentsretirement »

It's been a few months since I set up this portfolio and thought I'd post an update. Here is the portfolio I set up: https://m1.finance/su9QLan1u18q

Adjusting for deposits and withdrawals, I can benchmark against VTI using Yahoo! Finance historical price and return data. This gives me true Time-weighed rate of return and growth of $10k data points to graph.

Growth of $10,000
Image

So far it is meeting the objectives:
* Track closely to Vanguard Total Stock Market.
* Minimal maintenance. Once a month I re-invest dividends and tax-loss harvest.
* Create tax-loss opportunities. Earlier harvested Intel with Broadcom. Recent opportunities with Financials & Energy.
* Create tax-gain opportunities. Various positions have grown at excess rates. Tech at +40%. Fedex/UPS close to +100%.

Time-Weighted Rate of Return
Image

Tax-loss & Tax-gain Opportunities
Image
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Re: Direct Indexing Revisited

Post by alpine_boglehead »

Thanks for sharing your findings, very interesting.

I have also been thinking about this for some time because in Europe investors would have an even greater advantage when using direct indexing, because of dividend withholding tax leakage in funds/ETFs (withholding taxes on stocks are taken into account, and reduce local taxes, but not so for funds).

However, due to the lack of zero commission trading (apart from some fintechs, which I wouldn't entrust with a significant part of a portfolio), and a much smaller number of specific ETFs with which to complement the direct-indexed part of a portfolio (most notably the lack of a VXUS equivalent), it is currently not practically feasible. Tax reporting could be pretty much automated (but might still create a headache).

The #1 tax-loss harvesting opportunity (XOM) made me chuckle because there's a discussion right now about the great opportunity oil companies might be (or not) in this thread this thread
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Re: Direct Indexing Revisited

Post by simba1 »

I'm in the middle of the Animal Spirits podcast listening to Direct Indexing and I'm just confused.

If you sell your losers (to get tax loss) to offset your gains, are you not market timing?

I don't understand the tax arbitrage, by definition if you own the constituents of a broad based index you get those returns.

How is there an added magical benefit without inducing tracking error?
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Re: Direct Indexing Revisited

Post by UpsetRaptor »

simba1 wrote: Fri Nov 20, 2020 12:36 pm I'm in the middle of the Animal Spirits podcast listening to Direct Indexing and I'm just confused.

If you sell your losers (to get tax loss) to offset your gains, are you not market timing?

I don't understand the tax arbitrage, by definition if you own the constituents of a broad based index you get those returns.

How is there an added magical benefit without inducing tracking error?
Let's say S&P 500 is up 10% in a year, so a regular index fund ETF holder has little, if any, availability for TLH. Let's say in that same year the energy sector is down, and let's say you're direct indexing 100 stocks to match the S&P 500 as much as possible, matched by sector, etc. You can swap out, say, Exxon for Chevron (and vice-versa after wash sale period) and book a tax loss while keeping basically the same indexed portfolio weights.

Edit: This does of course increase tracking error to some degree, but if done right it shouldn't be too bad, and tracking error may hurt or help.

Edit 2: This does of course also increase complexity significantly. I see this used more by wealthy investors who can pay someone like the speaker in that podcast you mention do it for them, as opposed to individuals managing themselves.

Where I can't conceptually follow is how one gets around the long-term trend towards just holding a bunch of winners with higher gains that will inevitably diminish/eliminate TLH capabilities over time, until eventually you're stuck with just a more complex portfolio of winners most of which you'll unlikely ever be able to TLH. I guess you have to have some way to churn these winners, E.G. donating appreciated shares to a DAF like a previous poster mentioned. Or I could also see estate planning benefits for large taxable accounts, leveraging the step-up basis for heirs for all those winners.
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Direct Indexing (aka Creating Your Own Funds?)

Post by ResearchMed »

[Thread merged into here, see below. --admin LadyGeek]

From the New York Times:

"A New Way to Invest for the Vengeful and the High-Minded"

This seems to involve creating personalized mutual funds or ETFs, by omitting certain holdings one finds objectionable (Wells Fargo used as an example) or including only the types of holdings one prefers (ESG used as an example).

Apparently it's originally planned for wealthier clients, but may be trickling down.

It would be nice to be able to "kick out" some group of companies that one finds particularly objectionable.

(Whether that actually has any effect on said objectionable companies is a different matter, but doesn't seem to be part of the goal here. Has "divesting" in the past, with large institutions who own company stock directly, made any difference in those divested companies, or do others just buy them right up?)

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Re: Direct Indexing (aka Creating Your Own Funds?)

Post by David Jay »

It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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Re: Direct Indexing (aka Creating Your Own Funds?)

Post by ResearchMed »

David Jay wrote: Mon Dec 07, 2020 1:32 pm May I suggest:

https://www.google.com/search?sitesearc ... t+indexing
Thanks.

I've just flagged my own post to ask for it to be moved to that thread.
(Otherwise, if I move it, this thread here will remain, even it I delete my post above. :( )

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Re: Direct Indexing Revisited

Post by mcblum »

I don't understand any of this. The whole idea of mutual funds was to make things easy for the small investor. This is too much work.
I am 2+2 with a two fund portfolio and 2 commas. KISS!
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Re: Direct Indexing Revisited

Post by LadyGeek »

ResearchMed wrote: Mon Dec 07, 2020 1:38 pm I've just flagged my own post to ask for it to be moved to that thread.
Flag received, thanks! I merged ResearchMed's thread into the ongoing discussion.
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Re: Direct Indexing Revisited

Post by woganaga »

Two of the theoretical advantages of direct indexing i did not see mentioned is:
1) You can hold your "direct index" fund through a broker that has a fully paid lending product to potentially increase your returns
2) you could write covered calls on portions of your holding where it makes sense. Using a straight ETF (SPY, VTI) it rarely makes sense to write covered calls but having the ability to write covered calls on a screened selection of securities makes sense. Thats another percent or two.

For either to work efficiently, you would have to have a sizable portfolio - e.g. you would want at least 1 round lot of most holdings.
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Re: Direct Indexing Revisited

Post by usagi »

One advantage, at least to my way of thinking, is you could actually, meaningfully vote your shares. In all honesty, this weighs on me a great deal.
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Re: Direct Indexing Revisited

Post by tj »

One disadvantage is the start ups that create these options don't stick around. Motif disappeared shortly after the 500 Index Direct Indexing Product came out. People got stuck with cap gains or 500 stocks.
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Re: Direct Indexing Revisited

Post by Tingting1013 »

mcblum wrote: Mon Dec 07, 2020 1:56 pm I don't understand any of this. The whole idea of mutual funds was to make things easy for the small investor. This is too much work.
I am 2+2 with a two fund portfolio and 2 commas. KISS!
Maybe you would change your mind if you were in the 45% tax bracket and had the opportunity to save almost $1,500 / year in taxes by direct indexing.
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Re: Direct Indexing Revisited

Post by snailderby »

tj wrote: Mon Dec 07, 2020 11:00 pm One disadvantage is the start ups that create these options don't stick around. Motif disappeared shortly after the 500 Index Direct Indexing Product came out. People got stuck with cap gains or 500 stocks.
Do you think Schwab will introduce some sort of Direct Indexing after buying Motif's technology and intellectual property?
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Re: Direct Indexing Revisited

Post by Jags4186 »

Tingting1013 wrote: Mon Dec 07, 2020 11:13 pm
mcblum wrote: Mon Dec 07, 2020 1:56 pm I don't understand any of this. The whole idea of mutual funds was to make things easy for the small investor. This is too much work.
I am 2+2 with a two fund portfolio and 2 commas. KISS!
Maybe you would change your mind if you were in the 45% tax bracket and had the opportunity to save almost $1,500 / year in taxes by direct indexing.
I feel there are easier ways to save and or earn an extra $1500/yr. I also wonder if you’re really saving that money vs a mutual fund when you consider the bid ask spread on hundreds or thousands of trades and intraday pricing you are inevitably getting vs. just buying something like VFIAX at a fair market price at close.
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Re: Direct Indexing Revisited

Post by tj »

snailderby wrote: Tue Dec 08, 2020 6:38 am
tj wrote: Mon Dec 07, 2020 11:00 pm One disadvantage is the start ups that create these options don't stick around. Motif disappeared shortly after the 500 Index Direct Indexing Product came out. People got stuck with cap gains or 500 stocks.
Do you think Schwab will introduce some sort of Direct Indexing after buying Motif's technology and intellectual property?
They haven't yet.
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Re: Direct Indexing Revisited

Post by slowandsteadywins »

parentsretirement wrote: Tue May 12, 2020 7:54 pm
Hi, how has the Direct Indexing vs. all ETFs/funds continued to perform? I am considering this option as well, and the management and tax loss harvesting no issue as I am okay with Wealthfront's 0.25% fee to manage the nuances and management for that cost. If Direct Indexing works well, the only downside I can see is transferring to another broker, if needed. The pros: lower expense ratio from no ETF in a portion of S&P 100 indexing fund and more opportunities for tax loss harvesting.
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Re: Direct Indexing Revisited

Post by nisiprius »

usagi wrote: Mon Dec 07, 2020 10:49 pm One advantage, at least to my way of thinking, is you could actually, meaningfully vote your shares. In all honesty, this weighs on me a great deal.
Fill out 500 proxy forms? No thanks.

If you were really dead serious about it... attend 500 annual meetings? Well, that would keep you busy in retirement...
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Re: Direct Indexing Revisited

Post by wineandplaya »

typical.investor wrote: Tue May 12, 2020 8:52 pm ...
Interactive Brokers has a Basket Trader tool that lets you create a basket based off an index. It looks to be closer to direct indexing since fractional shares are supported and you can:
Instantly create a basket based on the composition of an index, and fine-tune the index components based on weight, market cap, beta, price range, or symbol. TWS maintains the basket composition based on changes in the index and user-defined criteria.
https://www.interactivebrokers.com/en/index.php?f=736

I recommend looking in to it for those Expats in Europe who can't buy ETFs due to EU restrictions. It might be useful for those looking to customize and index and remove their employer or industry.

Of course so many individual positions looks like a potential tax nightmare, but again, some Expats have little choice and might just have to accept the accounting cost.

This would be US stocks only. I can't imaging trading on different exchanges to obtain Intl exposure as the currency reporting on every transaction just seems like too much of a burden. Using options that settle in ETFs shares looks much easier for those unable to purchase the ETF.
I am interested in direct indexing for precisely the reason above; we plan to move from the US to the EU and ETFs seem to be tricky to own due to the combination of US and EU restrictions. My idea was not to do it for US stocks as you suggest but for stocks domiciled where we eventually plan to retire in order to get a stronger home bias. Specifically, we are considering retiring in Spain and then a natural index to replicate would be IBEX 35, i.e. the 35 largest companies on the Madrid Stock Exchange, or maybe MSCI Spain 25/50. That's a lot less stocks than buying S&P 500, and while the trading fees aren't free, they seem to be manageable. IBKR charges the higher of 3 EUR/trade or 0.05 %, so you should be able to buy IBEX 35 for as little as 105 EUR in trading fees. My understanding is that IBKR also allow fractional shares on international exchanges.

Is the currency reporting really so bad? I would think that having all the trades in EUR on a single exchange would make the European tax reporting *easier* not harder. The US tax reporting is probably trickier indeed, but I would assume that the currency fluctuations would be captured on my 1099 from IBKR.
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Re: Direct Indexing Revisited

Post by tj »

wineandplaya wrote: Tue Jul 27, 2021 7:52 pm
typical.investor wrote: Tue May 12, 2020 8:52 pm ...
Interactive Brokers has a Basket Trader tool that lets you create a basket based off an index. It looks to be closer to direct indexing since fractional shares are supported and you can:
Instantly create a basket based on the composition of an index, and fine-tune the index components based on weight, market cap, beta, price range, or symbol. TWS maintains the basket composition based on changes in the index and user-defined criteria.
https://www.interactivebrokers.com/en/index.php?f=736

I recommend looking in to it for those Expats in Europe who can't buy ETFs due to EU restrictions. It might be useful for those looking to customize and index and remove their employer or industry.

Of course so many individual positions looks like a potential tax nightmare, but again, some Expats have little choice and might just have to accept the accounting cost.

This would be US stocks only. I can't imaging trading on different exchanges to obtain Intl exposure as the currency reporting on every transaction just seems like too much of a burden. Using options that settle in ETFs shares looks much easier for those unable to purchase the ETF.
I am interested in direct indexing for precisely the reason above; we plan to move from the US to the EU and ETFs seem to be tricky to own due to the combination of US and EU restrictions. My idea was not to do it for US stocks as you suggest but for stocks domiciled where we eventually plan to retire in order to get a stronger home bias. Specifically, we are considering retiring in Spain and then a natural index to replicate would be IBEX 35, i.e. the 35 largest companies on the Madrid Stock Exchange, or maybe MSCI Spain 25/50. That's a lot less stocks than buying S&P 500, and while the trading fees aren't free, they seem to be manageable. IBKR charges the higher of 3 EUR/trade or 0.05 %, so you should be able to buy IBEX 35 for as little as 105 EUR in trading fees. My understanding is that IBKR also allow fractional shares on international exchanges.

Is the currency reporting really so bad? I would think that having all the trades in EUR on a single exchange would make the European tax reporting *easier* not harder. The US tax reporting is probably trickier indeed, but I would assume that the currency fluctuations would be captured on my 1099 from IBKR.
Being heavily concentrated in Spain doesn't seem logical, even for Spaniards.
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Re: Direct Indexing Revisited

Post by wineandplaya »

tj wrote: Tue Jul 27, 2021 8:43 pm Being heavily concentrated in Spain doesn't seem logical, even for Spaniards.
It would only be part of our portfolio. Can you suggest a better hedge against rising cost of living in Spain? Buying Spanish real estate?
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Re: Direct Indexing Revisited

Post by tj »

wineandplaya wrote: Tue Jul 27, 2021 8:51 pm
tj wrote: Tue Jul 27, 2021 8:43 pm Being heavily concentrated in Spain doesn't seem logical, even for Spaniards.
It would only be part of our portfolio. Can you suggest a better hedge against rising cost of living in Spain? Buying Spanish real estate?
Rising cost? I thought Spain was one of the cheaper parts of Europe?
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Re: Direct Indexing Revisited

Post by alex_686 »

wineandplaya wrote: Tue Jul 27, 2021 8:51 pm
tj wrote: Tue Jul 27, 2021 8:43 pm Being heavily concentrated in Spain doesn't seem logical, even for Spaniards.
It would only be part of our portfolio. Can you suggest a better hedge against rising cost of living in Spain? Buying Spanish real estate?
Equities from any country.

Over the past 120 years, for almost every currency pair out there, the annual inflation adjusted FX risk is a extra 1% in volatility. For 10 year periods you can’t find any additional risk.
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Re: Direct Indexing Revisited

Post by wineandplaya »

tj wrote: Tue Jul 27, 2021 8:55 pm
wineandplaya wrote: Tue Jul 27, 2021 8:51 pm
tj wrote: Tue Jul 27, 2021 8:43 pm Being heavily concentrated in Spain doesn't seem logical, even for Spaniards.
It would only be part of our portfolio. Can you suggest a better hedge against rising cost of living in Spain? Buying Spanish real estate?
Rising cost? I thought Spain was one of the cheaper parts of Europe?
Spain is relatively cheap now, but there is no guarantee that will be the case in 30-40 years from now. There is a correlation between cost of living and GDP growth. And there is a correlation between GDP growth and equity growth.

Anyway, this thread is about direct indexing, not investment choices.
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Re: Direct Indexing Revisited

Post by minimalistmarc »

wineandplaya wrote: Tue Jul 27, 2021 8:51 pm
tj wrote: Tue Jul 27, 2021 8:43 pm Being heavily concentrated in Spain doesn't seem logical, even for Spaniards.
It would only be part of our portfolio. Can you suggest a better hedge against rising cost of living in Spain? Buying Spanish real estate?
Global equities.
UpperNwGuy
Posts: 9479
Joined: Sun Oct 08, 2017 7:16 pm

Re: Direct Indexing Revisited

Post by UpperNwGuy »

Tingting1013 wrote: Mon Dec 07, 2020 11:13 pm
mcblum wrote: Mon Dec 07, 2020 1:56 pm I don't understand any of this. The whole idea of mutual funds was to make things easy for the small investor. This is too much work.
I am 2+2 with a two fund portfolio and 2 commas. KISS!
Maybe you would change your mind if you were in the 45% tax bracket and had the opportunity to save almost $1,500 / year in taxes by direct indexing.
Saving $1500 in taxes isn't very impressive when you have an income that puts you in the 45% tax bracket.
usagi
Posts: 461
Joined: Wed Jun 05, 2019 1:08 am

Re: Direct Indexing Revisited

Post by usagi »

nisiprius wrote: Sun May 16, 2021 4:14 pm
usagi wrote: Mon Dec 07, 2020 10:49 pm One advantage, at least to my way of thinking, is you could actually, meaningfully vote your shares. In all honesty, this weighs on me a great deal.
Fill out 500 proxy forms? No thanks.

If you were really dead serious about it... attend 500 annual meetings? Well, that would keep you busy in retirement...
Hmmm...let me just say I want companies I own stock in to concentrate on their core business and returning monetary share holder value and not social engineering or political activism.
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