Maybe the SpaceX IPO was the highlight of your financial year so far. Or maybe you wanted to keep your portfolio grounded and far, far away from that rocket ship.
The largest go-public deal in history was just the first blockbuster IPO of the year; markets are anticipating offerings from Anthropic and OpenAI, with both targeting eye-watering valuations. These companies entering the market could have a significant impact on index investors with portfolios tied not to individual stocks, but to the market as a whole.
“Even without IPOs, some customers know how over-represented Magnificent Seven stocks are in a portfolio.”
Hwan Kim, Questrade
Investors who use Questrade now have a way to modify their exposure. The Toronto FinTech company recently launched custom indexing, a feature that lets retail investors build and maintain their own exchange-traded funds (ETFs) without fees. The company, which recently obtained a banking license to launch the separate Questbank, frames the custom indexing feature as a way to give its clientele of advanced traders a hot commodity in today’s market: control.
“A lot of the time, customers have good conviction on certain things happening in the market, but giving up diversification is also not a good idea, right?” Questrade chief product officer Hwan Kim said in an interview with BetaKit. He added that custom indexing allows investors to follow those convictions without necessarily giving up the benefits of a broader ETF.
“Even without IPOs, some customers know how over-represented Magnificent Seven stocks are in a portfolio,” Kim added. For instance, these megacap tech stocks make up more than a third of the S&P 500 index.
Canadian securities will likely only be available through this tool in July, once Questrade receives approval for fractional shares from the Canadian Investment Regulatory Organization, he added.
Building on the IPO craze, Questrade is also gearing up to launch a private markets feature that gives investors access to IPOs well in advance of their launch. Unlike competitor Wealthsimple’s recent early IPO trading launch, Kim claimed Questrade’s feature will operate more like a secondary market for buying shares in private companies before they go public.
To Kim, it’s all part of Questrade’s quest to solve the “impossible trade-off” of time, control, and good outcomes for its customers. People who mainly buy ETFs give up a certain amount of control while saving time and taking less risk; custom indexing gives them some back (though it can also carry a proportional risk of losses).
RELATED: Questrade doubles down on tools for advanced traders at first product showcase
Founded in 1999, Questrade was one of Canada’s earliest FinTech companies and one of the first to offer a digital investing platform. Since then, it has rolled out more sophisticated digital investing tools, but Canada’s big banks, as well as domestic and foreign FinTech players, have come to play, too. The profitable company employs approximately 2,000 people and manages over $100 billion in assets.
The custom indexing launch follows two milestones for Questrade: an approved banking license and a slew of new product releases, including a revamped media strategy. The firm now has an associated personal finance publication called The Margin, which Kim said aims to “make financial information more accessible.”
That media strategy feeds into custom indexing, too. Questrade has brought in popular Canadian finance content creators—including Dan Kent of the Canadian Investor Podcast and Tal Schwartz, who authors the Canadian Fintech Newsletter—to contribute to a library of index templates.
Image courtesy Questrade and Chab Agency.