morningstar’s wealth group has launched direct indexing to help stockmarket investors customize their portfolios in a taxefficient way providing a type of investment offering that the firm says has risen in popularity among financial advisers the new offering has become available after engaging a council of advisers for almost a year and starting a pilot program in june according to a morningstar statement expected to be released tuesday it will help advisers assist their clients in building personalized portfolios tied to a broad index and a subset of its holdings “generally they’re going to own a subset of the stocks in the index” said daniel needham president of morningstar wealth in a phone interview “you can build a broadly diversified portfolio of a subset of the companies in the index that’ll track pretty closely” to it direct indexing allows individual investors to directly invest in shares of companies according to their “specific preferences” said needham that may mean excluding certain securities and industries or expressing views tied to “esg” he said referring to environmental social and governance criteria “personalization is just everywhere” said needham “people just want things to be more personalized” and “financially planning and investment management is no exception” needham said that morningstar will work with financial advisers to deliver direct indexing helping them construct portfolios on behalf of their clients according to the firm interest in direct indexing has been accelerating among advisers the “approach makes direct ownership of underlying securities practical for more individuals” morningstar said in the statement as investors may customize their holdings plus select additional services such as “taxloss harvesting” “you’re able to manage the portfolio in a taxaware way” said needham “tax management is really a key driver for the adoption of direct indexing” opinion is direct indexing really the next big thing morningstar’s announcement comes about a week after fidelity investments said oct 24 that it was expanding its directindexing capabilities with the launch of the fidelity institutional custom separately managed account offering for certain wealthmanagement firms and institutions in june fidelity had announced that it was launching fidelity solo fidfolios to bring “a new directindexing capability to doityourself retail investors” morningstar’s directindexing portfolios include morningstar us target market exposure morningstar us smallmid cap morningstar us large cap broad growth morningstar us large cap broad value and morningstar global markets adr according to an email from a spokesperson for the firm on the sustainability front morningstar us sustainability dividend yield focus morningstar us sustainability moat focus and morningstar women’s empowerment will also be available as portfolio options for direct indexing on tuesday the email from the spokesperson shows as for excluding particular securities from the various indexes some investors may desire to do so based on their values and “political beliefs” said needham that may mean eliminating areas such as alcohol tobacco firearms fossil fuels or animal testing from their portfolios according to morningstar us stocks remain in a bear market this year with major benchmarks such as the sp 500 index mired in losses for example shares of the spdr sp 500 etf trust spy slid about 07 monday for a 2022 loss through october of almost 19 according to factset data check out marketwatch’s weekly etf newsletter sign up for etf wrap here