what is smart beta investing

30 Mar: What is smart beta investing?

Smart beta investing

“Smart beta defines a set of investment strategies that emphasize the use of alternative index construction rules to traditional market capitalization-based indices. Smart beta emphasizes capturing investment factors or market inefficiencies in a rules-based and transparent way.

Smart beta strategies seek to passively follow indices, while also considering alternative weighting schemes such as volatility, liquidity, quality, value, size and momentum. That’s because smart beta strategies are implemented like typical index strategies in that the index rules are set and transparent. These funds don’t track standard indices, such as the S&P 500 or the Nasdaq 100 Index, but instead, focus on areas of the market that offer an opportunity for exploitation.

KEY TAKEAWAYS
Smart beta seeks to combine the benefits of passive investing and the advantages of active investing strategies.
Smart beta uses alternative index construction rules to traditional market capitalization-based indices.
Smart beta emphasizes capturing investment factors or market inefficiencies in a rules-based and transparent way.
Smart beta strategies may use alternative weighting schemes such as volatility, liquidity, quality, value, size and momentum.
In 2019, smart beta funds command $880 billion in total cumulative assets.”

Source: https://www.investopedia.com/terms/s/smart-beta.asp

What is smart beta investment?

“”Smart” refers to the use of an alternative methodology rather than following an index’s size-based (market-cap) allocations. A smart beta investment strategy is designed to add value by strategically choosing, weighting and rebalancing the companies built into an index based upon objective factors.”

Source: https://www.cnbc.com/2016/01/19/10-things-investors-need-to-know-about-smart-beta.html

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