Custom Indexing
ADVISOR TOOLS
Custom Indexing
Build Customizable Stock Portfolios Modeled on Index ETFs
The IBKR Advantage
- Create and customize direct index models based on a wide variety of US based ETFs.
- Modify target weights or use a customized rules module that supports ESG-related exclusion lists.
- Overweight or underweight stocks related to benchmark weights on a variety of financial metrics.
- Unlike traditional ETF investing, Custom Indexing does not have an expense ratio, allows you to customize and personalize investing to your client’s needs and comes with low minimums.
Our Custom Indexing tool makes it easy for advisors to build portfolios that are modeled after Index ETFs and easily customizable for client investment goals. Unlike ETFs, clients own fractional shares of each component stock, so advisors can adjust weightings and exclude stocks or sectors in accordance with client needs.
How It Works
As an illustrative example, the SPY ETF, which tracks the SPDR S&P 500, is comprised of over 500 stocks, each with its own weighting. Using Custom Indexing, advisors can copy a list of SPY’s individual holdings and weightings, save the list as a customized index and deploy it as a model that can be tailored to your strategy or client needs.
Custom Indexing offers several advantages over ETFs:
- No expense ratio
- Low commissions
- Low minimums
- Customize and personalize models to suit client needs
In addition, advisors can:
- Set cash targets
- Exclude any selected stocks
- Apply ESG-related exclusion lists (e.g., “Fossil fuels”)
- Set custom rules (e.g exclude small cap stocks; overweight stocks where PE is within a certain range and stock is in a particular sector; and so on)
- Swap stocks in the model for stocks you want to own with a single click.
Tiered Commissions
| Basket Value | Minimum Commission |
|---|---|
| ≤ USD 700 | USD 0.35 |
| > USD 700 and ≤ USD 10,000 | Min (0.0005 * Basket Value OR USD 0.35 * Number of orders) |
| > USD 10,000 and less than 15 orders | USD 0.35 * Number of orders |
| > USD 10,000 and 15 or more orders | USD 5.00 |
| Maximum per order | 1% of Basket Value |
Fixed Commissions
| Basket Value | Minimum Commission |
|---|---|
| ≤ USD 2,000 | USD 1.00 |
| > USD 2,000 and ≤ USD 10,000 | Min (0.0005 * Basket Value OR USD 1.00 * Number of orders) |
| > USD 10,000 and less than 5 orders | USD 1.00 * Number of orders |
| > USD 10,000 and 5 or more orders | USD 5.00 |
| Maximum per order | 1% of Basket Value |
Custom Indexing is currently available in Trader Workstation (TWS).
Interactive Brokers’ Custom Indexes for Advisors
Use Interactive Brokers' Custom Indexing feature to create models from a wide selection of popular index-based ETFs. Advisors may replicate the actual weights and holdings in a variety of popular broad-based ETFs and then customize the selection by changing individual sector weights or by excluding stocks based upon fundamental financial criteria.
Video Tutorial Read Notes
Investing Clients and Rebalancing in a Custom Index
The Interactive Brokers Custom Indexing tool allows advisors to invest their client’s money into portfolios modeled after Index ETFs and easily rebalance them using weights calculated from a variety of choices.
Video Tutorial Read NotesDisclosures
- Any discussion or mention of an ETF is not to be construed as a recommendation, promotion or solicitation. All investors should review and consider associated investment risks, charges and expenses of the investment company or fund prior to investing. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
