Charles Schwab unveiled a new feature that allows customers to invest in personalized indexes, an
Clients will be able to invest directly in securities of an index through Schwab Personalized Indexing, according to a statement Thursday from the Westlake, Texas-based brokerage. The approach can help reduce taxes compared to investing in mutual or exchange-traded funds.
“Our goal since the very beginning has been to bring these sophisticated research and investment products to a wider audience,” said Divya Krishnan, Schwab’s product management director, in an interview.
Schwab investors will have three strategies that can be modified, including a U.S. large cap, U.S. small cap and an environmental, social and governance-focused index. Schwab will start at a fee of 0.4% of assets, or $400 for the minimum account size of $100,000.
Direct index strategies come with flexibility. A customer can own the stocks in an index, but can sell shares that lost value to reduce their overall tax bill — something that’s not possible with an ETF. For a customer who owns stock as part of a compensation package, direct indexing also allows for tailoring and trimming exposure elsewhere in their investment portfolio.
