Direct indexing on Frec now starts at $5,000

You can now start direct indexing the S&P 500®, Nasdaq-100®, and other popular indices on Frec with $5,000, down from $20,000.

We’ve also lowered the minimum for our 140/40 S&P 500 Long short direct indexing and Diversify to $50,000, down from $100,000. Our mission has always been to make sophisticated investment strategies more accessible, and lower minimums make it easier to get started.

Why we lowered minimums

Since launching Frec, we’ve continued to improve how we build and manage portfolios, including the risk models that guide how each direct index tracks its benchmark. Our latest risk model upgrade gave us the confidence to lower minimums and make these strategies available to more people.

A quick note on tracking performance

Smaller portfolios generally have higher tracking error, which means returns can vary more from the index. In our simulations of the S&P 500 strategy, starting with $5,000 instead of $20,000 added only ~0.30% in tracking error.

If staying close to the index matters most to you, starting with a larger amount may help keep tracking error lower.

Minimums

Minimum	Strategies
$5,000	S&P 500, Nasdaq-100, S&P 500 Information Technology, and other popular indices (previously $20,000)
$20,000	ADR indices and broader indices including the Russell 3000, Russell 2000, and Morningstar US Total Market (broader indices were previously $50,000)
$50,000	140/40 S&P 500 Long short direct indexing and Diversify (previously $100,000)

You can see the minimum and fee for every index on our pricing page.

Getting started

The new minimums apply whether you’re opening a Frec account for the first time or adding a new direct index to an existing account.

• Fund with cash. Move cash into your Frec account via ACH or wire, then start your direct index.
• Fund with stocks or ETFs. Use assets already in your self-managed Frec account or transfer assets from another brokerage. You can use a mix of cash, stocks, and ETFs to fund a single direct index.

If you already hold a direct index on Frec and add one with significant overlap, we’ll show you the estimated capital gains impact before you confirm.

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The 0.30% is the average increase in annualized tracking error from starting a long only direct index strategy benchmarked to the S&P 500 with a one-time initial $5,000 investment instead of $20,000. Results are based on 39 simulation runs of 10-year periods, with one start date each quarter from April 2005 to September 2014, averaged across start dates. Portfolios were rebalanced about once a month (every 31 days). The results are hypothetical, do not reflect actual investment results, and are not a guarantee of future results.

Investing involves risk, including the risk of loss. Long short strategies increase risk through margin borrowing and short positions. Funding with existing securities may require selling positions, which can realize taxable gains, and transfer fees may apply. Frec does not provide tax advice. Consult a tax advisor about your specific situation.