You’re Leaving Money On The Table If You’re Not Direct Indexing

Make your investments work harder for you

Track the performance of an index like the S&P 500 but end up with more money – for the same effort and at a lower cost. And the first three months are free.1 Seems too good to be true? It’s called Frec Direct Indexing.
Direct indexing is no secret. It’s been around for decades but used to only be accessible via expensive wealth advisors and at high minimums. It’s a complex investment strategy that we’ve simplified and automated, removing the middleman. Even better, at Frec you can access it at a similar low cost to owning an ETF.2

So, how does it work?

Frec Direct Indexing is a better way to invest in a broad index like the S&P 500 than buying into an index ETF. It tracks the performance of the index (we currently support S&P 500 and the S&P 500 Info Tech index), but you own the underlying individual stocks instead of a piece of the ETF. This unlocks powerful tax loss harvesting and customization options. More on the details of how that works here. 

Keep more of your earnings

Powerful tax loss harvesting leads to tax savings, which can earn you up to 2.11%3 annually on top of market returns. Our algorithms perform daily tax loss harvesting that can capture up to 45%4 of a portfolio’s value in capital losses. Depending on your tax bracket, this can translate to savings of $24 in real tax savings for every $100 deposited. When reinvested in the market, this could mean an additional 2.11% per year over 10 years.5

When compared to more traditional ETF-to-ETF tax loss harvesting, direct indexing. This is because direct indexing looks for tax loss harvesting opportunities of the 500+ underlying S&P stocks instead of swapping one ETF out for another.

Low cost

Frec Direct Indexing has a low fee of 0.10% – at almost the cost equivalent of the largest S&P 500 ETF.6 Assuming 2.11% tax alpha, your fee would be 20x covered by reinvesting your tax savings. Compare this to robo-advisors 0.25%,8 traditional brokerages at 0.40%9 and wealth managers at north of 1.00%.10 In fact, a small portion of your tax losses harvested will cover your fees.

Our mission at Frec is to build excellent financial products to help you make more money, full stop. Direct indexing is simply the smarter way to index invest.

Footnotes

  1.  See terms and conditions.
  2.  Based on SPY expense ratio of .0945% as of 10/3/2023. 
  3. This projection was generated by Frec’s Direct Indexing Model tracking the S&P 500 and is hypothetical, does not reflect actual investment results, and is not a guarantee of future results. Simulations were run on a monthly basis from December 17, 2003 through August 1, 2022 based on a $50,000 initial deposit invested for ten years. The simulation at the end of year ten resulted in 45.1% accumulated tax loss savings that were reinvested with a 42.5% tax rate. and includes Frec’s .10% advisory fee. Results may vary.
  4. This projection was generated by Frec’s Direct Indexing Model tracking the S&P 500 and is hypothetical, does not reflect actual investment results, and is not a guarantee of future results. Simulations were run on a monthly basis from December 17, 2003 through August 1, 2022 based on a $50,000 initial deposit invested for ten years. Results from the model may vary with each use and over time.
  5.  This projection was generated by Frec’s Direct Indexing Model tracking the S&P 500 and is hypothetical, does not reflect actual investment results, and is not a guarantee of future results. Simulations were run on a monthly basis from December 17, 2003 through August 1, 2022 based on a $50,000 initial deposit invested for ten years. The simulation at the end of year ten resulted in % accumulated tax loss savings that were reinvested with a 42.5% tax rate and includes Frec’s .10% advisory fee. Results may vary.
  6.  SPY expense rate is .0945% as of 10/3/2023
  7.  Wealthfront charges 0.25%. Fees as of 10/3/2023.
  8.  Fidelity charges 0.40%. Fees as of 10/3/2023. 
  9.  “What to know about financial costs” U.S. News & World Report, July 27, 2023, https://money.usnews.com/financial-advisors/articles/financial-advisor-fees-and-costs.