In this article:
Overview
Direct Indexing lets you invest in a market index from your trading account by owning many of its individual stocks, instead of buying an ETF. You can add an index to your existing trading account, with no new account to open and nothing to transfer. We automatically handle tax-loss harvesting and rebalancing for you. In your holdings, your index shows as one grouped position rather than as hundreds of individual stocks.
You can hold an index in a trading account or in an Automated Investing account. To learn about Automated Investing accounts, see Get started with Automated Investing.
Who can use Direct Indexing in a trading account
To add an index, you need:
- A non-registered trading account
- Canadian dollars (CAD) to invest
Direct Indexing isn't available yet in registered, joint, or Business accounts.
Available indexes
You can choose from four indexes:
- U.S. Market Index*
- Canadian Market Index*
- U.S. Innovation Index*
- Global Markets
You can hold one index at a time in your trading account. To change indexes, sell the one you have and buy the new one, the same way you would with an ETF.
Add an index to your trading account
Follow these steps to add an index to your trading account:
- Log in to the Wealthsimple app
- Tap the Search (magnifying glass) icon at the bottom of the screen
- Tap the Indexes tab
- Tap the index you want. Its details page shows what it holds and its service fee
- Tap Trade, then tap Buy
- Select your non-registered trading account
- Enter how much you want to invest, then tap Next
- Review your investment. If this is your first index, you'll also review your agreements
- Tap Confirm and Invest
- Log in to your Wealthsimple profile
- Select the Search (magnifying glass) icon at the top-left of the screen
- Select the Indexes tab
- Select the index you want. Its details page shows what it holds and its service fee
- Select Buy
- Select your non-registered trading account
- Enter how much you want to invest, then select Next
- Review your investment. If this is your first index, you'll also review your agreements
- Select Confirm
Your money is typically invested on the next business day, but it can take up to two business days around market holidays.
A few things to know:
- Minimums: Your first purchase into an index needs at least $500, or $2,000 for Global Markets, because it buys more stocks. After that, you can add any amount, as long as your index stays at or above its minimum. Minimums are in CAD, even for indexes that hold US stocks.
- One agreement step: The first time you buy an index, you'll review your agreements before your purchase. They're the same terms as your existing trading account, with a disclosure for Direct Indexing added.
- Changing an order: You can cancel an order before it goes through, but you can't change the amount.
What happens automatically
Once you hold an index, we take care of the following for you:
- Automated tax-loss harvesting: When a stock in your index loses value, we may sell it to capture the loss and buy a similar stock to keep you invested. These losses can help offset capital gains. Whether tax-loss harvesting lowers your taxes depends on your overall tax situation, so consider speaking with a tax professional.
- Rebalancing and drift correction: We keep your index on track as markets move or companies are added to or removed from the index. You don't need to rebalance it yourself.
- Corporate actions: Events like mergers, spin-offs, and stock splits affecting stocks in your index are applied automatically.
Tax-loss harvesting and rebalancing only apply to your index. They don't apply to stocks or funds you buy yourself in your trading account.
Sell your index and withdraw
To withdraw money from your index, you sell first:
- Sell some or all of your index. We process your sale on the next business day.
- The cash will be available in your trading account, usually by the next business day and within two business days at most.
- Withdraw the cash to your bank as you normally would from your trading account.
Fees
You pay a service fee only on the money in your index, not on the rest of your trading account. The fee depends on the index, with no cap:
- U.S. Market Index and Canadian Market Index: 0.10% per year
- U.S. Innovation Index and Global Markets: 0.15% per year
You can see the fee on each index's details page. In an Automated Investing account, the service fee is 0.25% a year for the whole account, capped at $250, with no extra fee for Direct Indexing.
When your index buys or sells US-listed stocks, a 1.5% FX fee applies. It's charged once on the net amount converted each time your index buys or sells, not separately on every stock.
Tax slips and statements
You'll get separate tax slips and statements for your index, in addition to the ones for the rest of your trading account. Include all of them when you file your taxes. Because your index can generate a high volume of transactions, we recommend using the CRA's Auto-fill My Return feature in your tax software to import your slips. Your account details will also show two account numbers, labelled Self-directed and Automated investing.
Frequently asked questions
Can I use Direct Indexing in my TFSA or RRSP?
Not in a trading account yet. Direct Indexing in a trading account is only available in non-registered accounts. To hold Direct Indexing in a registered account, like a TFSA or RRSP, you can use an Automated Investing account.
Can I hold more than one index in my trading account?
Not right now. You can hold one index at a time. To change indexes, sell the one you have and buy the new one.
Can I exclude stocks from my index?
Not in a trading account yet. Stock exclusions are available in Automated Investing accounts.
Can I move my index to an Automated Investing account?
No. An index in your trading account is separate from an Automated Investing account. To switch, sell your index and reinvest the money in your Automated Investing account.
Can I transfer my index to another institution?
Not yet. You can't transfer your index out of Wealthsimple right now. If you transfer investments into your trading account, they land in the trading part of your account, not in your index. To learn about moving your account, see Transfer your Wealthsimple account to another institution.
Can I choose which stocks are sold?
No. We manage your index for you, so we choose which stocks to sell to keep it on track.
Can a harvested loss be denied if I buy the same stock elsewhere?
Yes. Under the CRA's superficial loss rule, a loss can be denied if you, or someone affiliated with you like your spouse or common-law partner, buy the same stock within 30 days before or after we sell it to harvest the loss, and you or that person still own it 30 days after the sale. This applies to purchases in any account, including a TFSA or RRSP. A tax professional can help you understand how this applies to you.
Why don't I see dividends from my index in my activity?
Dividends from the stocks in your index are paid as usual, but we hide them from your activity by default so your feed doesn't get flooded. To see them, go to Activity, open Filters, select Indexes, and turn on Show index dividends.
Why is the amount I can withdraw lower than my balance?
If you have a pending purchase, the money set aside for it isn't available to withdraw. If you have a pending sale, the money from it isn't available until the sale goes through and the cash reaches your trading account. Your index still shows at its current value while a sale is pending.
How do I close my index?
Sell your index, then contact our support team. Closing your trading account from Settings also closes your index, but you'll need to sell your index first. You can't close the rest of your trading account on its own while your index is open.
Is my index included in my portfolio line of credit?
Yes. If your trading account is collateral for a portfolio line of credit, your index is included automatically.
Related articles
- Get started with Automated Investing
- Understanding tax-loss harvesting in non-registered accounts
- Learn about withdrawing funds from your account
- Transfer your Wealthsimple account to another institution
- Open and use a personal portfolio line of credit
*Wealthsimple Direct Indexing is powered by Morningstar Indexes.
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