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TRUE
FALSE
Direct indexing was developed within the past five years.
Your direct indexing knowledge: Limited
You’ve got a long way to go.
Don’t get left behind.
How much do you know about direct indexing?
Brush up on your knowledge of this exciting investment phenomenon
Your direct indexing knowledge: Familiar
You know what direct indexing is—at least, you think you do. Learning is the only way to be sure.
Your direct indexing knowledge: Moderate
You’re meeting direct indexing halfway.
We’re sure you can do better.
Direct indexing has certainly grown in popularity in recent years, and the market has seen a flurry of related M&A activity beginning in 2020. However, Parametric pioneered the strategy we know today as direct indexing in 1992.
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This information has been provided for discussion purposes only. It does not purport to address all the financial, tax, and legal considerations relevant to investors. No representation or warranty can be given with respect to the accuracy or completeness of the information contained herein. Parametric does not provide legal, tax, or accounting advice or services. Investors should consult with their own tax or legal advisor prior to entering into any transaction or strategy described herein. The views and strategies described may not be suitable for all investors.
Your direct indexing knowledge: None
YOUR RESULTS
This may be the first day you’ve ever seen the words direct indexing before. But there’s much more to it than two words.
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Your direct indexing knowledge: Proficient
You have a pretty good grasp of the basics—
but you have more to learn.
Your direct indexing knowledge: Advanced
You’ve been paying careful attention to industry buzz. Don’t miss out on any details.
Your direct indexing knowledge: Expert
You definitely know your stuff—which means you’re ready to share it with your clients.
INCORRECT
TRUE
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TRUE
FALSE
Direct indexing isn’t always a better choice for investors than ETFs or mutual funds.
Direct indexing offers many advantages for some investors that don’t necessarily apply to other investors. Advisors should carefully consider their clients’ asset pool, risk–return objectives, time horizon, and tax situation before recommending direct indexing.
FALSE
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INCORRECT
TRUE
FALSE
Direct indexing aims to outperform the overall market before taxes.
Direct indexing does aim to use active tax management to outperform the overall market on an after-tax basis. Outperforming the market before taxes isn’t a central goal of direct indexing.
CORRECT
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INCORRECT
TRUE
FALSE
Direct indexing requires investors to purchase
a brand-new portfolio
of assets.
One key advantage of direct indexing is that investors can fund their new portfolios with cash, existing securities, or both. Better still, direct indexing allows investors to transition their current securities, including concentrated positions, with greater tax efficiency.
CORRECT
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INCORRECT
TRUE
FALSE
Investors can use direct indexing for their fixed income allocations as well as their equities.
A direct-indexed fixed income strategy allows investors to track popular bond benchmarks while managing credit risk and harvesting tax losses. Investors are able to customize their benchmarks based on maturity, quality, sector, and industry.
INCORRECT
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CORRECT
TRUE
FALSE
Investors use direct indexing in a vehicle known as a special miscellaneous account (SMA).
The acronym is indeed SMA, but when we’re talking about direct indexing, that stands for separately managed account. A special miscellaneous account holds excess margin generated from a margin account, which brokerage firms offer to allow investors to borrow money for security purchases.
INCORRECT
SEE RESULTS
SEE RESULTS
CORRECT
This information has been provided for discussion purposes only. It does not purport to address all the financial, tax, and legal considerations relevant to investors. No representation or warranty can be given with respect to the accuracy or completeness of the information contained herein. Parametric does not provide legal, tax, or accounting advice or services. Investors should consult with their own tax or legal advisor prior to entering into any transaction or strategy described herein. The views and strategies described may not be suitable for all investors.
YOUR RESULTS
This information has been provided for discussion purposes only. It does not purport to address all the financial, tax, and legal considerations relevant to investors. No representation or warranty can be given with respect to the accuracy or completeness of the information contained herein. Parametric does not provide legal, tax, or accounting advice or services. Investors should consult with their own tax or legal advisor prior to entering into any transaction or strategy described herein. The views and strategies described may not be suitable for all investors.
YOUR RESULTS
This information has been provided for discussion purposes only. It does not purport to address all the financial, tax, and legal considerations relevant to investors. No representation or warranty can be given with respect to the accuracy or completeness of the information contained herein. Parametric does not provide legal, tax, or accounting advice or services. Investors should consult with their own tax or legal advisor prior to entering into any transaction or strategy described herein. The views and strategies described may not be suitable for all investors.
YOUR RESULTS
This information has been provided for discussion purposes only. It does not purport to address all the financial, tax, and legal considerations relevant to investors. No representation or warranty can be given with respect to the accuracy or completeness of the information contained herein. Parametric does not provide legal, tax, or accounting advice or services. Investors should consult with their own tax or legal advisor prior to entering into any transaction or strategy described herein. The views and strategies described may not be suitable for all investors.
YOUR RESULTS
This information has been provided for discussion purposes only. It does not purport to address all the financial, tax, and legal considerations relevant to investors. No representation or warranty can be given with respect to the accuracy or completeness of the information contained herein. Parametric does not provide legal, tax, or accounting advice or services. Investors should consult with their own tax or legal advisor prior to entering into any transaction or strategy described herein. The views and strategies described may not be suitable for all investors.
YOUR RESULTS
This information has been provided for discussion purposes only. It does not purport to address all the financial, tax, and legal considerations relevant to investors. No representation or warranty can be given with respect to the accuracy or completeness of the information contained herein. Parametric does not provide legal, tax, or accounting advice or services. Investors should consult with their own tax or legal advisor prior to entering into any transaction or strategy described herein. The views and strategies described may not be suitable for all investors.
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YOUR RESULTS
CORRECT
INCORRECT
CORRECT
INCORRECT
Direct indexing offers many advantages for some investors that don’t necessarily apply to other investors. Advisors should carefully consider their clients’ asset pool, risk–return objectives, time horizon, and tax situation before recommending direct indexing.
Direct indexing does aim to use active tax management to outperform the overall market on an after-tax basis. Outperforming the market before taxes isn’t a central goal of direct indexing.
Direct indexing has certainly grown in popularity in recent years, and the market has seen a flurry of related M&A activity beginning in 2020. However, Parametric pioneered the strategy we know today as direct indexing in 1992.
The acronym is indeed SMA, but when we’re talking about direct indexing, that stands for separately managed account. A special miscellaneous account holds excess margin generated from a margin account, which brokerage firms offer to allow investors to borrow money for security purchases.
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Share
Share
Share
Share
Share
Share
Share
Share
Share
Share
Share
Share
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Share
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Share
One key advantage of direct indexing is that investors can fund their new portfolios with cash, existing securities, or both. Better still, direct indexing allows investors to transition their current securities, including concentrated positions, with greater tax efficiency.
A direct-indexed fixed income strategy allows investors to track popular bond benchmarks while managing credit risk and harvesting tax losses. Investors are able to customize their benchmarks based on maturity, quality, sector, and industry.
One key advantage of direct indexing is that investors can fund their new portfolios with cash, existing securities, or both. Better still, direct indexing allows investors to transition their current securities, including concentrated positions, with greater tax efficiency.
A direct-indexed fixed income strategy allows investors to track popular bond benchmarks while managing credit risk and harvesting tax losses. Investors are able to customize their benchmarks based on maturity, quality, sector, and industry.
One key advantage of direct indexing is that investors can fund their new portfolios with cash, existing securities, or both. Better still, direct indexing allows investors to transition their current securities, including concentrated positions, with greater tax efficiency.
A direct-indexed fixed income strategy allows investors to track popular bond benchmarks while managing credit risk and harvesting tax losses. Investors are able to customize their benchmarks based on maturity, quality, sector, and industry.
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Learn more about direct indexing
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