Bond Ladders—Unlocking Direct Indexing Opportunities in Fixed Income

Direct indexing provides an alternative to index fund vehicles that offers more choice, greater flexibility, and tax advantages well beyond the scope of commingled investments. By directly holding index constituents, investors can achieve greater flexibility through environment, social, and governance (ESG) screens to filter the investable universe and generate tax advantages through tax-loss harvesting. These advantages are available in both equities and fixed income. However, fixed income offers additional dimensions of personalization such as duration and tax optimization between taxable and tax-free securities. Bond ladders are an effective way to track the overall bond market because of their unique reinvestment structure, and those reinvestments can be optimized by rules-based allocation decisions.