Is direct indexing right for you?
Of course, direct indexing strategy isn't right for everyone. It still requires a sufficient amount of capital to implement effectively, even with fractional shares trading capabilities.
Moreover, because direct indexing involves active management to track the index as desired, it is significantly more complex compared with simply buying a fund that attempts to track a benchmark. This means having to keep tabs on the index, for example, to know when it rebalances or changes individual constituents. If you are unable to track the index changes, your investment performance could deviate from the performance of the benchmark (i.e., tracking error). You can also be exposed to tracking error if you choose to customize the position or tax-loss harvest.
As with any investing decision you make, you should ensure that it aligns with your specific goals, risk tolerance, liquidity needs, tax considerations, and any other factors that might be relevant to your situation.
With that said, if you want to mimic the performance of an index and you want the ability to customize that position, with the possibility of enhanced tax management capabilities, direct indexing might be something you want to consider.