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Wall Street Wants You to Ditch Your Mass Market Fund for This Tool

One of the main selling points for custom indexing is that an investor can add or remove companies they like.

Wall Street firms like Morgan Stanley ( (MS) - Get Morgan Stanley Report) and Vanguard Group ( (VFIAX) - Get Vanguard 500 Index Adm Report) are  rolling out techs tools that combine active and passive investing in order to compete with mass market index funds, according to Bloomberg.

Wall Street analysts, eager to stay competitive, are hoping that a custom blend of active and passive investing could lure people back to working directly with financial advisers. 

According to Investopedia, passive investment funds now account for about about 60% of all equity assets, which is twice the share these funds had a decade ago.

This style of investment is popular in part because it typically involves less fees than a hand-on approach, where your portfolio is picked and managed by a professional. 

Because investors are increasingly showing an appreciation for mass market index funds — where stocks are picked by computerized-driven trading strategies — these companies are hoping to get back into the mix with new tools.

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Canvas is one of the custom-indexing platforms that investors are looking at: It launched in late 2019 and accumulated $1.8 billion in assets before being acquired by the fund manager Franklin Resources Inc. in September.

According to Bloomberg, one of the main selling points for custom indexing is that an investor can add or remove companies they like or don’t want to be associated with overall. 

That's an important feature for many investors who want to make their decisions based on social and environmental factors and thus decline to own shares in, say, fossil fuel companies. 

Additionally, investors can choose to sell individual losing stocks to help lower their tax bills. 

At last check-in, Vanguard’s stock price was up 1.41%, and Morgan Stanley’s stock price was up 1.96%.