How to implement direct indexing without buying fractional shares

External question — Personal Finance Stack Exchange Author: Claudiu Original post: https://money.stackexchange.com/questions/144052 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I wish to invest passively, using dollar-cost averaging, in my local stock market, whose market-cap index is composed of only 17 companies. Since the only ETF available has a very high management fee (1.85%), I'm thinking direct indexing is the way to go. However, there are a few hurdles: I can't buy fractional shares (there is no broker which allows it afaik) in order to minimize the broker commissions, the minimum trade is around 1/4 of my monthly allocated sum; so I can do a maximum of 4 trades a month also because of commissions, only 9 of the 17 companies make it above the minimum trade threshold; fortunately, they cover 90% of the index Should I use a certain strategy when choosing what companies to buy in a month, or just randomly pick 4 every month and go with that? I've considered the following filters so far: avoid buying a company in the period close to the ex-dividend date, because the price falls abruptly after that (sometimes more than the dividend) avoid buying if the price falls below a long-term moving average (like 200 days) What strategy would you use?

External answer — Personal Finance Stack Exchange Author: 0xFEE1DEAD Original post: https://money.stackexchange.com/a/144054 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Should I use a certain strategy when choosing what companies to buy in a month, or just randomly pick 4 every month and go with that? I've considered the following filters so far: avoid buying a company in the period close to the ex-dividend date, because the price falls abruptly after that (sometimes more than the dividend) avoid buying if the price falls below a long-term moving average (like 200 days) What strategy would you use? This flies in the face of passive indexing. Also, there's no reason the stock price should fall by more than the dividend amount, so you should be indifferent between buying it ex-dividend or paying for the dividend and receiving it. However, there are a few hurdles: I can't buy fractional shares (there is no broker which allows it afaik) in order to minimize the broker commissions, the minimum trade is around 1/4 of my monthly allocated sum; so I can do a maximum of 4 trades a month also because of commissions, only 9 of the 17 companies make it above the minimum trade threshold; fortunately, they cover 90% of the index I would rebalance less often, e.g. monthly or quarterly, and use the same weights as the benchmark, i.e. the ETF you're trying to replicate. Alternatively, you could use an equal-weight or cap-weighted approach, which may or may not replicate the ETF performance. Additionally, when you compute the number of shares to buy, you could save the cash from the fractional shares until you have enough saved to buy the minimum number of shares, i.e. 1 share or the minimum trade size required by your broker.

External answer — Personal Finance Stack Exchange Author: Orange Coast- reinstate Monica Original post: https://money.stackexchange.com/a/144072 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. For this smaller part of your overall portfolio, you are right to focus on minimizing costs rather than perfectly replicating your home-country stock index. Even 4 stock purchases per month may be too many, paying 4 commission fees. The goal is to accumulate steadily your home country shares. If seeking a rationale for buying one or two specific stocks each month, you could buy the worst-performers that month. This would seek to benefit from short-term reversal . Or, as you suggest, you could randomly choose the stocks each month.

External answer — Personal Finance Stack Exchange Author: rhaskett Original post: https://money.stackexchange.com/a/144140 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. With only 17 stocks in the index and with high commissions, you could build a fairly simple interactive spreadsheet to help track the index (you can modify examples online too). Fairly recent ETF holdings (available for many ETFs on public websites). Though in this case it appears to be equal weight so you can just calculate this directly. Your holdings (downloadable from your broker?) Difference between the two (in % or Leu) An interactive bit "if you trade X shares of AAA (BBB, CCC, ...) stock what is the new difference and how much money would that purchase cost" Play with the Xs monthly/quarterly until you are happy with the result Trade I used to run a portfolio with a similar plan from a spreadsheet like this. With this you can even trade the 8 stocks that are below the minimum as you can trade more than one share at a time but on a less frequent basis. I would recommend this as with only 17 stocks in the index you want to buy them all of them to track well. Other people's advice of following a market-cap ETF rather than a equal weight one (I couldn't find a Romanian market-cap ETF but maybe you can find or fake your own), diversifying with non-Romanian stocks and not worrying about technical indicators like 200-day moving average (which are meaningless in most markets) are all good advice as well.

External answer — Personal Finance Stack Exchange Author: Earth Original post: https://money.stackexchange.com/a/144170 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Direct indexing, while avoiding a management fee, involves trade commissions and a time investment in setting up the process and adjusting for changes. You'd also be subject to the limitations of your brokerage account, meaning some stocks might need to be excluded, or bought at larger weightings than their market cap weight. I would say that a simpler approach would be to purchase a broad stock index that already includes your local stock market. You will likely be able to find this at a much lower expense ratio than the local ETF you're looking at, and has the added benefit that it helps avoids a home country bias, which is generally a bad idea. You might even want to check whether any of your existing broad-market ETFs track an index that includes your country.