Moving stock into and out of your existing direct index

Frec permits you to edit your direct index with stock you already own and also add or remove stocks to your strategy after you’re already invested. You can learn more about seeding your direct indexing strategy during setup in this article here.

How can you move stock into your existing direct index?

You’re able to add most stocks or ETFs into a direct index you’ve already funded by clicking into your direct index strategy, then clicking the black button titled, “Transfer” and selecting “Move stocks” from the drop down. From there, you’ll be shown a list of stocks held in your self-managed account and they will be broken down into stocks that are within your index and stocks that are outside your index. 

You’re able to select the stocks you want to move in by clicking the white box next to the symbol. You can also adjust the number of shares you want to transfer into your portfolio by selecting the pencil icon to the right of the symbol. You’ll then be able to de-select the tax lots you do not want to move.

1. What happens when you move a position into your index that’s included in your index?
   If you move in a stock that’s already invested in your index, then you will most likely
   make that position overweight in your index. As such, the algorithm may seek to sell out of some of the position to bring it closer to its target weight. We will show the estimated tax impact of moving a position into your index that you already hold once you click the “Continue” button. You can read more about estimated tax calculations here. 
2. What happens when you move a position into your index that’s not included in your index?
   If you move a stock or ETF into your index that’s not already included in the index itself, the algorithm will automatically give the position a 0% target weight and attempt to sell out of it. We will show the estimated tax impact of moving a position into your index that is outside your index when you click the “Continue” button. You can read more about estimated tax calculations here.

How can you move stock out of your existing direct index?

We allow you to move already invested stock from your direct index into your self-managed account and keep the position in your index or exclude it.

1. Move the full amount of a specific stock from your index to your self-managed account while continuing to keep the stock position as part of your index: 

You can move stock out of your index into your self-managed account and still keep the stock position in your index  after you’ve invested. You can do this by clicking into your index strategy and clicking on  “View all positions” within the “Your direct index” box. From there, you’ll hover to the right of a position and click on the three dots that will appear and select “Move to Self managed stocks.”
Once you click, “Move to Self managed stocks” a pop-up will appear with a box automatically selected to also exclude the stock from your index. If you want to keep the stock in your index, you’ll want to de-select the box and then select “Continue.” You’ll then be shown the estimated tax impact of moving the stock into your Self-managed account and keeping it in your index. You can read more about estimated tax calculations here.
Once you move the stock into your self-managed portfolio the algorithm will work to buy back into that stock’s target weight by either selling out of overweight positions or with new cash you deposit. If no cash is deposited, this action may cause you to incur taxes due to the algorithm selling out of overweight positions to buy into your now underweight position.
Customers may want to use this functionality to move positions that have large capital gains and donate them to a charity for a tax benefit. Keep in mind if you trade the stock you’ve moved into your self-managed account and keep the stock as part of your index, the trading you do in your self-managed account may cause wash sales within the direct index portfolio. 

2. Move the full amount of a specific stock from your index to your self-managed account while also excluding the stock position as part of your index: 

You can move stock out of your index into your self-managed account and also exclude the stock position from your index  after you’ve invested. You can do this by clicking into your index strategy and clicking on  “View all positions” within the “Your direct index” box. From there, you’ll hover to the right of a position and click on the three dots that will appear and select “Move to Self managed stocks.”
Once you click, “Move to Self managed stocks” a pop-up will appear with a box automatically selected to also exclude the stock from your index. There is “Move.” This will move all the current shares of that stock into your self-managed account and exclude the stock from your index. The excluded stock’s target weight will be reduced to 0% and its weight will be distributed into the rest of the index in proportion to their market cap weights.
Customers may want to use this action if they no longer wish to invest in a specific stock. There is no tax estimate for this action since you’re not triggering any trades to happen by moving the stock out and removing it as part of your index.