Smart Beta ETFs: Literally a Smarter Way to Invest

Posted by Terrance Wyatt on

In case you've been under a rock, ETFs or Exchange Traded Funds have been, for a lack of a better term, "all the rage" in the world of investing (i.e. very popular or fashionable). With currently over 1,900 ETFs trading on US exchanges alone with over $2.5 trillion in market capitalization ETFs are truly a subject any investor needs to be aware of (We explain ETFs in our lecture located here). 

However, not all ETFs were created equal. One type of ETF category in particular - "Smart-beta ETFs" are using modern finance concepts to create unique investment opportunities. Smart Beta is the fastest growing segment, as measured by new issues, in the ETF sector. So what exactly does Smart Beta mean and what are smart Beta ETFs? Well, if you're not familiar with No Bull Investing, we're always seeking to give you answers with no hint of B.S.- Smart Beta strategies seek to replicate both active and passively managed funds by way of having the fund (ETF or outright index fund) track an index (ex. S&P 500, Russell 2000) at it's core but also consider other external weighted factors similar positions within the fund may have such as dividend growth, volatility, total earnings and/or, momentum. In relation to the core indexes the Smart beta ETFs are tracking they are designed to increase portfolio returns, maximize dividends, and lower portfolio risks. Does that always happen with the Smart Beta strategy or ETF in question? NOPE,but nothing in investing is a sure thing. 

However, A 2016 European study from the EDHEC-Risk Institute shows 86% of investors are satisfied with smart beta indexes, which bypass stock or sector concentration. That sentiment has helped push smart beta ETFs passed $500 billion in assets, as of January, 2017. So what are some the of top performing Smart Beta ETFs? Well check out this list of  the top 500 or so from etfdb.com. If you're a subscriber to etfdb.com (which we recommend) then you can sort and filter this list among other very cool and potentially profitable activities. So what do you think? Are you ready for a little actively managed automation flavor in your ETF portfolio?

Comment below and let us know your thoughts. 


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