What is Indexing 2.0?
Indexing 2.0 is where technology makes it increasingly possible to re-create any ETF or index fund from its component parts (e.g., using technology to easily own each of the 500 stocks in the S&P 500, rather than owning the S&P 500 index fund).
Benefits of Indexing 2.0
Once the stocks in an index fund (or smart beta fund, or any other ETF) can be managed directly with technology, the ETF wrapper itself is no longer relevant or necessary, and consumers will have the opportunity to invest into perfectly customized portfolios just for themselves (e.g., a “personal index fund” that adjusts the standard index fund or factor funds for personal preferences, from a greater overweight in small-cap or value, to a tilt away from fossil fuel or vice stocks if the investor so wishes).
In addition, such Indexing 2.0 solutions also have superior tax loss harvesting benefits, due to the ability to loss-harvest each and any of the individual stocks, and not being constrained to only loss-harvesting if the ETF in the aggregate is down.