October 20, 2025 • 17 mins
In this episode of Lead-Lag Live, I sit down with Sam Nofsinger, General Manager of Brokerage at Public, to discuss how the company’s new direct indexing feature is bringing institutional investing tools to everyday investors.
For the first time, investors can build their own index, own every underlying stock, and optimize for taxes with just $1,000 minimum. Sam explains how fractional shares, automation, and tax-loss harvesting are transforming what used to be a high-net-worth strategy into something anyone can use.
In this episode:
– What direct indexing is and how it differs from ETFs and mutual funds
– Why customization and tax-loss harvesting matter for long-term returns
– How Public’s technology makes personalized portfolios accessible to everyone
– How fractional shares broke down the biggest barriers to entry
– Why the future of investing is personal, automated, and tax-efficient
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_00 (00:00):
There are a couple of important differences we
think relative to indexescompared to an ETF or a mutual
fund.
So one is it's a pooled fundthat you're investing in if it's
an ETF or a mutual fund.
You have no ability to changewhat's in that fund.
You get what it is, and you arebeholden to whatever Vanguard's
doing, whatever the manager ofthat fund is doing.
And so it's a great strategy,but it does have limits in terms
(00:23):
of you can't customize it if youwanted to not um you know uh
invest in a certain security,you know, that the index is a
good thing.
SPEAKER_01 (00:42):
I'm your host, Melanie Schaefer.
Welcome to Lead Leg Live.
Now these days, everyone'slooking for smarter ways to
invest, not just to chaseperformance, but to actually
manage it.
With this in mind, Public, amulti-asset investing platform,
just rolled out fullycustomizable direct indexing, a
feature that lets investorsbuild their own index, own the
(01:03):
individual stocks inside it, andeven optimize for taxes
automatically.
And here's what's different youdon't need to be a millionaire
to do it.
For the first time, public'sbringing direct indexing to
everyday investors with just a$1,000 minimum and an annual fee
that's under 20 basis points.
That's a massive shift fromwhat's traditionally been a high
(01:26):
net worth strategy.
My guest today is Sam Nossinger,the general manager of brokerage
at Public.
Sam's been leading this rollout,and it's great to have him here.
Thank you so much for beinghere, Sam.
SPEAKER_00 (01:38):
Thanks so much, Melly.
Uh, pleasure to be here, andwe're really excited for this
launch.
SPEAKER_01 (01:42):
So um, just to get started, can you tell us a
little bit about what the bigpicture is?
Why direct or why did you launchdirect indexing now?
And what problem are you tryingto solve?
SPEAKER_00 (01:52):
Sure.
Uh index investing, I think, hasbeen around for a long time.
And I think most investors knowthat tracking an index,
following an index, investing inindex funds is generally a
relatively good way to buildlong-term wealth.
Historically, uh, the only wayto access uh you know
investments in an index, whichare uh you know, basically
baskets of stocks that you knoware tracking some type of
(02:15):
methodology, whether it's the SP500 or the NASDAQ, uh, the only
way to access investments inthese indexes was to buy a
mutual fund or an ETF thattracked these indexes.
So you would buy the Vanguard SP 500 ETF.
Uh, that would be one ETF thatwould track the SP 500.
And that was how most investors,um, in individual investors
(02:35):
would get access to a lot ofthese index products.
So ETFs and mutual funds are agreat way to access these
indexes, but that we thinkthere's an even better way,
which is direct indexing.
Uh, direct indexing is aninvestment strategy, has been
generally, as you mentioned,available to ultra-high net
worth investors.
And so what is it?
Instead of buying an ETF or amutual fund that tracks the
(02:56):
index, you actually go out andbuy all of the underlying
constituents of these index.
So if you're tracking the SP500, you'd go out and buy all
500 securities within thatindex, and then you would track
it that way instead of owninguh, you know, a fund or uh you
know an ETF.
And the ability to own theunderlying holdings directly as
(03:16):
opposed to a fund comes with alot of benefits.
Uh, you know, for one, uh, youknow, our investors are allowed
to customize the direct index.
So if you don't want energy inthe SP 500 or you don't want you
know NVIDIA or Tesla, forinstance, you know, you could
exclude those from your personalindex.
And now your index is nottracking the index, but tracking
a more personalized, customizedversion uh that is suitable to
(03:38):
you in your investment strategy.
And so, you know, you're able tocustomize it, you're able to
personalize it.
Um, there are also extra taxbenefits.
Uh so we have a tax lossharvesting methodology that we
employ.
So every day, you know, we'researching for losses, trying to
generate uh you know losses tooffset gains in your other
portfolio so that yourcompounded returns are even
(03:58):
greater than they otherwisewould have been.
And so for us, we think directindexing, we're able to invest
in the underlying securities, isa really, really good way for
investors to build long-termwealth and achieve their
financial goals uh, you know,over the coming years.
SPEAKER_01 (04:12):
Yeah.
So I just want to take a stepbackward to the side actually,
just for a minute.
And and and let's speak topeople who um are hearing about
direct indexing for the veryfirst time.
How can you describe it veryplainly in plain English and in
the most simplest way possible?
SPEAKER_00 (04:27):
Uh, direct indexing is an investment strategy where
an investor chooses an index andinstead of buying a fund or an
ETF that tracks that index, youactually purchase the underlying
holdings of the index instead.
SPEAKER_01 (04:38):
So, what's really the difference then between
owning an ETF and owning theactual stocks inside the index
itself?
I know you've touched on that alittle bit, but I want to get
more into it.
SPEAKER_00 (04:46):
There are a couple of important differences we
think relative to indexescompared to uh you know an ETF
or a mutual fund.
So one is it's a pooled fundthat you're investing in if it's
an ETF or a mutual fund.
So you have no ability to changewhat's in that fund.
You get what it is, and you arebeholden to whatever Vanguard's
doing, whatever the manager ofthat fund is doing.
And so it's a great strategy,uh, but it does have limits in
(05:09):
terms of you can't customize itif you wanted to not um you know
invest in a certain security,you know, that the index is.
I think another one is you know,you don't have the ability to
um, you know, uh tax lossharvest an ETF, and tax loss
harvesting is a very importantstrategy um, you know, compared
in in direct indexing relativeto an ETF.
(05:29):
So if you think about um owningan ETF, if the stock market is
up in a year, that stock markethas gains and there's no ability
to tax those harvest.
If you own the 500 individualstocks, have a however that
replicate that index, in anygiven year, there's a good
chance that a lot of thosestocks will be down, even if
right in aggregate they are up.
And so by owning the individualholdings, you are able to sell
(05:52):
uh you know the the stocks at aloss and reinvest them in
similar securities, and you'restill able to get the exact same
performance as the ETF or themutual fund, but you have an
extra tax benefit that you wouldnot have had in the ETF.
So I think it's you knowpersonalization, customization,
the ability to tax loss harvestthe underlying holdings are
(06:13):
very, very big benefits for anETF, you know, for sorry, for a
direct index over an ETF.
SPEAKER_01 (06:18):
Yes, and for advisors watching, how should
they think about using directindexing for their clients?
And when does it make sense forthem to use it alongside maybe
ETFs?
SPEAKER_00 (06:27):
I think for financial advisors, it's a
really, really good toolkit, youknow, tool that they can have in
their toolkit.
Uh for one, I think they can goout to their customers and say,
you know, instead of investingin this broad index that
everyone can invest in, youknow, let's devise a strategy
that is bespoke to yoursituation.
So what are your values?
You know, where do you think uhyou know growth lies in the
economy?
(06:48):
Let's build an index thatactually replicates where you
want to invest as opposed tokind of where the industry wants
you to invest.
And so for advisors, it reallyallows that one-on-one
relationship to blossom asthey're able to basically dig
into this, you know, thisinvestor's actual personal
values and create um you know avehicle that will perform
(07:08):
similarly to the broader market,but is bespoke to them and
really captures their values andwhere they're you know they
think they should be invested.
Um there are also, I think, costbenefits.
Um a lot of direct index um youknow uh products are very, very
cheap.
Ours is you know 19 basispoints.
The average ETF, I think, is 75basis points.
So it can also be a good costsavings for advisors as opposed
(07:32):
to investing in ETFs.
And so I think for advisors, youknow, looking uh whether they
want an ETF or whether they wantdirect indexing, you know,
direct indexing gives them a lotmore customization.
Uh, and it also allows them tohave much, much deeper
conversations and understandtheir clients and build those
personal relationships that arevery, very important in the
advisor-customer relationship.
(07:52):
And that's not said that ETFs uhyou know don't deserve a place
in the portfolio.
ETFs you know can have a very,very important role.
Um, you know, for instance, it'sharder to direct index in an
international stocks.
So you may want an ETF for yourinternational exposure because
it's more difficult for domesticinvestors to you know access the
underlying stocks of a Chineseindex or a European index.
(08:14):
So international may be a very,very good place to still have um
you know kind of uh you know ETFexposure, while you know, if
you're investing in the US,direct indexing may be more
appropriate there.
SPEAKER_01 (08:24):
Yeah, and you've mentioned it a couple of times,
but one of the biggest draws istax loss harvesting, the idea of
turning Mercado Dips intopotential tax advantage was that
can you explain how it actuallyworks behind the scenes at
public?
And what do investors need tounderstand about when and how uh
it kicks in?
SPEAKER_00 (08:39):
Sure.
So tax loss harvesting um uh ata high level is the process of
looking through all of theholdings in a portfolio, looking
for uh you know, holdings thatare at a loss, an unrealized
loss, selling those securitiesto actually turn that unrealized
loss into a realized loss, andthen using the cash proceeds to
buy a stock that is similar innature and is expected to
(09:00):
perform similarly so that youroverall portfolio still is on,
you know, tracking the index.
And so if you're still trackingthe index, but you've harvested
this realized loss.
And that's a really, really goodtax benefit that in the future
you can use to reduce your taxpayments.
And so instead of paying$10 tothe government next year, you
can put$10 back in yourinvestment portfolio and that
(09:21):
compounds year after year afteryear after year.
And so it's not just the firstyear of savings that you get
from tax loss harvesting, it'sthat these savings in this first
year and the second year and thethird year compound for the rest
of your life.
And so the tax compoundingbenefits of tax loss harvesting
is really a huge benefit ofdirect indexing versus an ETF.
SPEAKER_01 (09:41):
Yeah, and as I mentioned uh in my intro, you
dropped the minimum to just$1,000, big change from
traditional direct indexing, um,which used to start even in the
six figures.
SPEAKER_00 (09:50):
Why was it important to lower that barrier?
So I've been in this industryfor 20 years, and direct
indexing has been the next thingfor literally the past 25 years.
And I think finally this year,uh, you know, it's gonna ring
true.
And a lot of that has becomeadvancements in technology.
25 years ago, there was notfractionalizing of securities.
So if you wanted to buy, youknow, the SP 500, you had to buy
(10:12):
one share of each of thosethings.
At the time, you know, Amazonwas$1,800.
So, you know, if you wanted tobuy all every the whole index
for$1,000 and one stock costs$1,800, you can see how that
doesn't add up very, veryquickly.
So one of the things that theindustry had to do was
fractionalize securities so thatyou could buy any stock for as
little as$1 or$5.
(10:32):
And so that opened up that sothat reduced the minimums a lot
because it became a lot easierto access every single
investment in these indexesbecause instead of having to
have the dollars for the priceof the stock, you just had to
have the ability to invest adollar or five dollars in the
underlying.
And so that was a huge benefit,was just bringing the dollar
size of each stock down.
(10:53):
Another thing was lowering coststhrough automation and
technology.
So historically, um, you know,there would be a portfolio
manager who would be looking atthese portfolios, placing the
trades, making sure they were inline with targets.
All of that is now done behindthe scenes, you know, through
our software, through ourautomatic, you know, rebalancing
tools that look for all thenuances, look across all the
portfolios, run a whole bunch ofmath behind the scenes to
(11:15):
recommend their actual tradesthat we place every day in order
to keep you in line with yourindex, but also generate losses
so that you have tax benefitsthat you can use in the future.
And then I think the third pointwhy it's actually the time for
direct indexing is because youknow the average individual
investor is very, very smart andsophisticated these days.
(11:36):
You know, every day we areseeing your investors get more
smart, more sophisticated, andmore intelligent about what
products they want and wheretheir investments, you know,
where they want theirinvestments to be.
And so we've had a lot morepeople asking about direct
indexing over the past couple ofyears because I think the
individual investor nowunderstands the benefits not
just of investing in index,index funds, but actually owning
(11:57):
the underlying securities andthe added benefits of uh you
know investing in index directlyas opposed to the ETFs.
So I think a lot of it istechnology, bringing down the
size of a share from hundreds ofdollars or thousands of dollars
to$1,$5.
It's you know, behind the scenestechnology so that all this
automatic portfolio managementcan be scaled across thousands
(12:18):
and millions of accounts.
And then I think a lot of it isus and our peers have done a
great job educating investorsover the past five, 10 years
about the benefits of long-terminvesting, the benefits of index
products, and the benefits ofowning stocks directly and being
able to customize to yourpersonal needs.
And so finally, I think, youknow, for for anybody out there,
you know,$1,000 is pretty um,you know, low hurdle for folks
(12:41):
to get uh you know aninstitutional quality asset that
they can have around for therest of their lives.
SPEAKER_01 (12:47):
Yeah, and to add on to that, since the launch and
even more in general, how areyou seeing investors using the
this flexibility?
And are you seeing people buildaround values, sectors, or
performance themes, et cetera?
SPEAKER_00 (12:58):
Yes, uh there are a lot of people who, you know,
certainly I think the the thecore of our base continues to
just want very, very standardindex products.
So a lot of people do thetwo-click S P 500.
That's good enough for me.
But we are seeing about aquarter of our investors either
choosing more niche investors,whether they're sectors or even
subsectors such assemiconductors.
(13:20):
Um, but we're also seeing folksexclude a lot of companies.
Um, and a lot of folks, youknow, are you it's you know the
energy companies that peoplethat may not ascribe to their
values.
Um, we're seeing a lot of youknow, folks you know exclude
certain companies that may notalign with their values.
We're also seeing um, you know,folks exclude holdings that they
have a lot of exposure toalready.
(13:42):
Um, you know, a lot of ourinvestors are uh you know have a
very large holdings in Tesla andNVIDIA and Microsoft and Apple.
And so a lot of our investorsare actually designing indexes
that diversify their currentholdings away from some of these
concentrated positions.
Uh and so, you know, forinstance, um, you know, we have
a couple folks, you know, wehave a lot of folks, you know,
who work at large tech companiesand a lot of their compensation,
(14:05):
for instance, is in theircompany's stock.
And so if they wanted to, youknow, they can build a direct
index basically exclude theircompany's stock.
And then as the losses generatein their direct indexing, they
can take gains in theirconcentrated position.
And so we've we've seen a lot ofdifferent use cases for it.
Uh, people are either targetingspecific sectors or areas that
(14:26):
they think are poised to grow,or you know, they're building
diversification around theirmain holdings in their main
brokerage accounts.
And so we're seeing a lot ofdifferent use cases for direct
indexing.
Um, and they're all you knowgreat in you know, as far as we
can tell.
SPEAKER_01 (14:40):
Yeah, and finally, for anyone who wants to learn
more about public's new directindexing uh platform or try it
out, where's the best place tostart?
SPEAKER_00 (14:47):
Public.com uh is the place for everything about uh
where you can find informationon you know on our firm, on all
the different products, ondirect indexing.
Uh, you can see all of thedifferent indexes that we have
to choose from.
There's over hundreds of them.
Um and then you can sign up foran account and you can you'll
see how it works for yourself.
SPEAKER_01 (15:07):
Sam, thanks so much for joining me, and thanks to
everyone for watching.
Be sure to like, share, andsubscribe for more episodes of
Lead Leg Live.
SPEAKER_00 (15:13):
Thanks so much for having me, Melanie.
There are a couple of important differences we
think relative to indexescompared to an ETF or a mutual
fund.
So one is it's a pooled fundthat you're investing in if it's
an ETF or a mutual fund.
You have no ability to changewhat's in that fund.
You get what it is, and you arebeholden to whatever Vanguard's
doing, whatever the manager ofthat fund is doing.
And so it's a great strategy,but it does have limits in terms
(00:23):
of you can't customize it if youwanted to not um you know uh
invest in a certain security,you know, that the index is a
good thing.
SPEAKER_01 (00:42):
I'm your host, Melanie Schaefer.
Welcome to Lead Leg Live.
Now these days, everyone'slooking for smarter ways to
invest, not just to chaseperformance, but to actually
manage it.
With this in mind, Public, amulti-asset investing platform,
just rolled out fullycustomizable direct indexing, a
feature that lets investorsbuild their own index, own the
(01:03):
individual stocks inside it, andeven optimize for taxes
automatically.
And here's what's different youdon't need to be a millionaire
to do it.
For the first time, public'sbringing direct indexing to
everyday investors with just a$1,000 minimum and an annual fee
that's under 20 basis points.
That's a massive shift fromwhat's traditionally been a high
(01:26):
net worth strategy.
My guest today is Sam Nossinger,the general manager of brokerage
at Public.
Sam's been leading this rollout,and it's great to have him here.
Thank you so much for beinghere, Sam.
SPEAKER_00 (01:38):
Thanks so much, Melly.
Uh, pleasure to be here, andwe're really excited for this
launch.
SPEAKER_01 (01:42):
So um, just to get started, can you tell us a
little bit about what the bigpicture is?
Why direct or why did you launchdirect indexing now?
And what problem are you tryingto solve?
SPEAKER_00 (01:52):
Sure.
Uh index investing, I think, hasbeen around for a long time.
And I think most investors knowthat tracking an index,
following an index, investing inindex funds is generally a
relatively good way to buildlong-term wealth.
Historically, uh, the only wayto access uh you know
investments in an index, whichare uh you know, basically
baskets of stocks that you knoware tracking some type of
(02:15):
methodology, whether it's the SP500 or the NASDAQ, uh, the only
way to access investments inthese indexes was to buy a
mutual fund or an ETF thattracked these indexes.
So you would buy the Vanguard SP 500 ETF.
Uh, that would be one ETF thatwould track the SP 500.
And that was how most investors,um, in individual investors
(02:35):
would get access to a lot ofthese index products.
So ETFs and mutual funds are agreat way to access these
indexes, but that we thinkthere's an even better way,
which is direct indexing.
Uh, direct indexing is aninvestment strategy, has been
generally, as you mentioned,available to ultra-high net
worth investors.
And so what is it?
Instead of buying an ETF or amutual fund that tracks the
(02:56):
index, you actually go out andbuy all of the underlying
constituents of these index.
So if you're tracking the SP500, you'd go out and buy all
500 securities within thatindex, and then you would track
it that way instead of owninguh, you know, a fund or uh you
know an ETF.
And the ability to own theunderlying holdings directly as
(03:16):
opposed to a fund comes with alot of benefits.
Uh, you know, for one, uh, youknow, our investors are allowed
to customize the direct index.
So if you don't want energy inthe SP 500 or you don't want you
know NVIDIA or Tesla, forinstance, you know, you could
exclude those from your personalindex.
And now your index is nottracking the index, but tracking
a more personalized, customizedversion uh that is suitable to
(03:38):
you in your investment strategy.
And so, you know, you're able tocustomize it, you're able to
personalize it.
Um, there are also extra taxbenefits.
Uh so we have a tax lossharvesting methodology that we
employ.
So every day, you know, we'researching for losses, trying to
generate uh you know losses tooffset gains in your other
portfolio so that yourcompounded returns are even
(03:58):
greater than they otherwisewould have been.
And so for us, we think directindexing, we're able to invest
in the underlying securities, isa really, really good way for
investors to build long-termwealth and achieve their
financial goals uh, you know,over the coming years.
SPEAKER_01 (04:12):
Yeah.
So I just want to take a stepbackward to the side actually,
just for a minute.
And and and let's speak topeople who um are hearing about
direct indexing for the veryfirst time.
How can you describe it veryplainly in plain English and in
the most simplest way possible?
SPEAKER_00 (04:27):
Uh, direct indexing is an investment strategy where
an investor chooses an index andinstead of buying a fund or an
ETF that tracks that index, youactually purchase the underlying
holdings of the index instead.
SPEAKER_01 (04:38):
So, what's really the difference then between
owning an ETF and owning theactual stocks inside the index
itself?
I know you've touched on that alittle bit, but I want to get
more into it.
SPEAKER_00 (04:46):
There are a couple of important differences we
think relative to indexescompared to uh you know an ETF
or a mutual fund.
So one is it's a pooled fundthat you're investing in if it's
an ETF or a mutual fund.
So you have no ability to changewhat's in that fund.
You get what it is, and you arebeholden to whatever Vanguard's
doing, whatever the manager ofthat fund is doing.
And so it's a great strategy,uh, but it does have limits in
(05:09):
terms of you can't customize itif you wanted to not um you know
invest in a certain security,you know, that the index is.
I think another one is you know,you don't have the ability to
um, you know, uh tax lossharvest an ETF, and tax loss
harvesting is a very importantstrategy um, you know, compared
in in direct indexing relativeto an ETF.
(05:29):
So if you think about um owningan ETF, if the stock market is
up in a year, that stock markethas gains and there's no ability
to tax those harvest.
If you own the 500 individualstocks, have a however that
replicate that index, in anygiven year, there's a good
chance that a lot of thosestocks will be down, even if
right in aggregate they are up.
And so by owning the individualholdings, you are able to sell
(05:52):
uh you know the the stocks at aloss and reinvest them in
similar securities, and you'restill able to get the exact same
performance as the ETF or themutual fund, but you have an
extra tax benefit that you wouldnot have had in the ETF.
So I think it's you knowpersonalization, customization,
the ability to tax loss harvestthe underlying holdings are
(06:13):
very, very big benefits for anETF, you know, for sorry, for a
direct index over an ETF.
SPEAKER_01 (06:18):
Yes, and for advisors watching, how should
they think about using directindexing for their clients?
And when does it make sense forthem to use it alongside maybe
ETFs?
SPEAKER_00 (06:27):
I think for financial advisors, it's a
really, really good toolkit, youknow, tool that they can have in
their toolkit.
Uh for one, I think they can goout to their customers and say,
you know, instead of investingin this broad index that
everyone can invest in, youknow, let's devise a strategy
that is bespoke to yoursituation.
So what are your values?
You know, where do you think uhyou know growth lies in the
economy?
(06:48):
Let's build an index thatactually replicates where you
want to invest as opposed tokind of where the industry wants
you to invest.
And so for advisors, it reallyallows that one-on-one
relationship to blossom asthey're able to basically dig
into this, you know, thisinvestor's actual personal
values and create um you know avehicle that will perform
(07:08):
similarly to the broader market,but is bespoke to them and
really captures their values andwhere they're you know they
think they should be invested.
Um there are also, I think, costbenefits.
Um a lot of direct index um youknow uh products are very, very
cheap.
Ours is you know 19 basispoints.
The average ETF, I think, is 75basis points.
So it can also be a good costsavings for advisors as opposed
(07:32):
to investing in ETFs.
And so I think for advisors, youknow, looking uh whether they
want an ETF or whether they wantdirect indexing, you know,
direct indexing gives them a lotmore customization.
Uh, and it also allows them tohave much, much deeper
conversations and understandtheir clients and build those
personal relationships that arevery, very important in the
advisor-customer relationship.
(07:52):
And that's not said that ETFs uhyou know don't deserve a place
in the portfolio.
ETFs you know can have a very,very important role.
Um, you know, for instance, it'sharder to direct index in an
international stocks.
So you may want an ETF for yourinternational exposure because
it's more difficult for domesticinvestors to you know access the
underlying stocks of a Chineseindex or a European index.
(08:14):
So international may be a very,very good place to still have um
you know kind of uh you know ETFexposure, while you know, if
you're investing in the US,direct indexing may be more
appropriate there.
SPEAKER_01 (08:24):
Yeah, and you've mentioned it a couple of times,
but one of the biggest draws istax loss harvesting, the idea of
turning Mercado Dips intopotential tax advantage was that
can you explain how it actuallyworks behind the scenes at
public?
And what do investors need tounderstand about when and how uh
it kicks in?
SPEAKER_00 (08:39):
Sure.
So tax loss harvesting um uh ata high level is the process of
looking through all of theholdings in a portfolio, looking
for uh you know, holdings thatare at a loss, an unrealized
loss, selling those securitiesto actually turn that unrealized
loss into a realized loss, andthen using the cash proceeds to
buy a stock that is similar innature and is expected to
(09:00):
perform similarly so that youroverall portfolio still is on,
you know, tracking the index.
And so if you're still trackingthe index, but you've harvested
this realized loss.
And that's a really, really goodtax benefit that in the future
you can use to reduce your taxpayments.
And so instead of paying$10 tothe government next year, you
can put$10 back in yourinvestment portfolio and that
(09:21):
compounds year after year afteryear after year.
And so it's not just the firstyear of savings that you get
from tax loss harvesting, it'sthat these savings in this first
year and the second year and thethird year compound for the rest
of your life.
And so the tax compoundingbenefits of tax loss harvesting
is really a huge benefit ofdirect indexing versus an ETF.
SPEAKER_01 (09:41):
Yeah, and as I mentioned uh in my intro, you
dropped the minimum to just$1,000, big change from
traditional direct indexing, um,which used to start even in the
six figures.
SPEAKER_00 (09:50):
Why was it important to lower that barrier?
So I've been in this industryfor 20 years, and direct
indexing has been the next thingfor literally the past 25 years.
And I think finally this year,uh, you know, it's gonna ring
true.
And a lot of that has becomeadvancements in technology.
25 years ago, there was notfractionalizing of securities.
So if you wanted to buy, youknow, the SP 500, you had to buy
(10:12):
one share of each of thosethings.
At the time, you know, Amazonwas$1,800.
So, you know, if you wanted tobuy all every the whole index
for$1,000 and one stock costs$1,800, you can see how that
doesn't add up very, veryquickly.
So one of the things that theindustry had to do was
fractionalize securities so thatyou could buy any stock for as
little as$1 or$5.
(10:32):
And so that opened up that sothat reduced the minimums a lot
because it became a lot easierto access every single
investment in these indexesbecause instead of having to
have the dollars for the priceof the stock, you just had to
have the ability to invest adollar or five dollars in the
underlying.
And so that was a huge benefit,was just bringing the dollar
size of each stock down.
(10:53):
Another thing was lowering coststhrough automation and
technology.
So historically, um, you know,there would be a portfolio
manager who would be looking atthese portfolios, placing the
trades, making sure they were inline with targets.
All of that is now done behindthe scenes, you know, through
our software, through ourautomatic, you know, rebalancing
tools that look for all thenuances, look across all the
portfolios, run a whole bunch ofmath behind the scenes to
(11:15):
recommend their actual tradesthat we place every day in order
to keep you in line with yourindex, but also generate losses
so that you have tax benefitsthat you can use in the future.
And then I think the third pointwhy it's actually the time for
direct indexing is because youknow the average individual
investor is very, very smart andsophisticated these days.
(11:36):
You know, every day we areseeing your investors get more
smart, more sophisticated, andmore intelligent about what
products they want and wheretheir investments, you know,
where they want theirinvestments to be.
And so we've had a lot morepeople asking about direct
indexing over the past couple ofyears because I think the
individual investor nowunderstands the benefits not
just of investing in index,index funds, but actually owning
(11:57):
the underlying securities andthe added benefits of uh you
know investing in index directlyas opposed to the ETFs.
So I think a lot of it istechnology, bringing down the
size of a share from hundreds ofdollars or thousands of dollars
to$1,$5.
It's you know, behind the scenestechnology so that all this
automatic portfolio managementcan be scaled across thousands
(12:18):
and millions of accounts.
And then I think a lot of it isus and our peers have done a
great job educating investorsover the past five, 10 years
about the benefits of long-terminvesting, the benefits of index
products, and the benefits ofowning stocks directly and being
able to customize to yourpersonal needs.
And so finally, I think, youknow, for for anybody out there,
you know,$1,000 is pretty um,you know, low hurdle for folks
(12:41):
to get uh you know aninstitutional quality asset that
they can have around for therest of their lives.
SPEAKER_01 (12:47):
Yeah, and to add on to that, since the launch and
even more in general, how areyou seeing investors using the
this flexibility?
And are you seeing people buildaround values, sectors, or
performance themes, et cetera?
SPEAKER_00 (12:58):
Yes, uh there are a lot of people who, you know,
certainly I think the the thecore of our base continues to
just want very, very standardindex products.
So a lot of people do thetwo-click S P 500.
That's good enough for me.
But we are seeing about aquarter of our investors either
choosing more niche investors,whether they're sectors or even
subsectors such assemiconductors.
(13:20):
Um, but we're also seeing folksexclude a lot of companies.
Um, and a lot of folks, youknow, are you it's you know the
energy companies that peoplethat may not ascribe to their
values.
Um, we're seeing a lot of youknow, folks you know exclude
certain companies that may notalign with their values.
We're also seeing um, you know,folks exclude holdings that they
have a lot of exposure toalready.
(13:42):
Um, you know, a lot of ourinvestors are uh you know have a
very large holdings in Tesla andNVIDIA and Microsoft and Apple.
And so a lot of our investorsare actually designing indexes
that diversify their currentholdings away from some of these
concentrated positions.
Uh and so, you know, forinstance, um, you know, we have
a couple folks, you know, wehave a lot of folks, you know,
who work at large tech companiesand a lot of their compensation,
(14:05):
for instance, is in theircompany's stock.
And so if they wanted to, youknow, they can build a direct
index basically exclude theircompany's stock.
And then as the losses generatein their direct indexing, they
can take gains in theirconcentrated position.
And so we've we've seen a lot ofdifferent use cases for it.
Uh, people are either targetingspecific sectors or areas that
(14:26):
they think are poised to grow,or you know, they're building
diversification around theirmain holdings in their main
brokerage accounts.
And so we're seeing a lot ofdifferent use cases for direct
indexing.
Um, and they're all you knowgreat in you know, as far as we
can tell.
SPEAKER_01 (14:40):
Yeah, and finally, for anyone who wants to learn
more about public's new directindexing uh platform or try it
out, where's the best place tostart?
SPEAKER_00 (14:47):
Public.com uh is the place for everything about uh
where you can find informationon you know on our firm, on all
the different products, ondirect indexing.
Uh, you can see all of thedifferent indexes that we have
to choose from.
There's over hundreds of them.
Um and then you can sign up foran account and you can you'll
see how it works for yourself.
SPEAKER_01 (15:07):
Sam, thanks so much for joining me, and thanks to
everyone for watching.
Be sure to like, share, andsubscribe for more episodes of
Lead Leg Live.
SPEAKER_00 (15:13):
Thanks so much for having me, Melanie.
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