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Why Direct Indexing Is Better Than an ETF

Alex Michalka, Ph.D

July 7, 2026

We recently asked an LLM (a large language model) a question we know our clients have from time to time: Which is better, investing in an index-based ETF or a direct indexing product that tracks the same index? We think the answer is pretty straightforward, which is why we were surprised to see the LLM provide guidance that we believe was clearly incorrect. That guidance was based on some common misconceptions about direct indexing rather than data, and we wanted to clear things up.

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