Advantages of Direct Indexing
A primary difference between this strategy and buying a fund that attempts to track the index is that, with direct indexing, you can customize this position. In contrast, the manager of an ETF and mutual fund decides the components of the fund and how closely to track the index—assuming that is the fund's objectives.
Additionally, direct indexing can enable tax management. Given that you are purchasing individual stocks, it can be possible to tax-loss harvest each position to help manage your tax bill. By contrast, an ETF or mutual fund does not offer the ability to harvest individual positions. Typically, direct indexing is done in a taxable brokerage account for this reason, and not tax-advantaged accounts.