Create Customized Portfolios Using Direct Indexing
Create Customized Portfolios With Direct Indexing
Learn how index portfolios can be customized for environmental, social, religious, or investment reasons, using positive and negative screening techniques.
- Indexing is a popular strategy, but many investors would prefer not to own some of the companies in traditional indexes.
- Direct indexing allows investors to create a personalized index in a separately managed account (SMA).
- Active screening can exclude specific securities by name, selected industries within a sector, or entire market sectors.
- Direct indexing can also support environmental/social/governance investing by including certain companies or sustainable industries through positive screening based on ESG ratings.
- Other uses include reducing overlapping risk for investors who have large individual stock positions and factor tilting to favor momentum, value or dividend yield.
The views and opinions expressed may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted. Actual results may vary.
Sustainable investing focuses on investments in companies that relate to certain sustainable development themes and demonstrate adherence to environmental, social and governance (ESG) practices; therefore the universe of investments may be limited and investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria. This could have a negative impact on an investor's overall performance depending on whether such investments are in or out of favor.
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