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Smart Beta ETF, the most recommended investing strategy

Posted June. 02, 2018 07:49,   

Updated June. 02, 2018 07:49


There are many investors who have made a huge profit through value investing other than the famous Berkshire Hathaway (BRK.A) Chairman and CEO Warren Buffett. The most important factor in value investing is not to be swayed by a temporary loss and go for long-term investing. Domestic investors prefer short-term investing that makes it difficult for them to succeed in value investing. Most of them find it hard to bear even a small loss.

For those investors, who are reluctant to make a long-term investment, passive management, such as exchange traded fund (ETF) rather than active management is worth considering. The most recommended investing strategy is to invest in Smart Beta ETFs, such as Value ETFs.

Smart Beta ETF is a combination of active management, which aims to outperform an investment benchmark index, and ETF, which targets gains in index funds.

There are diverse types of Smart Beta ETF: High-dividend ETFs, which are focused on stocks with high dividend yield or increasing dividends; Low Volatility ETFs, which are centered on owning stocks with low volatility; Value ETFs, which target undervalued stocks; and Momentum ETFs, which seek out stocks that are gaining momentum.

Value ETFs are believed to be better than other value funds in terms of consistency and transparency. For example, investors cannot tell if a value fund has given up pursuing the philosophy of value investing and followed the market as the fund’s portfolio is made public three months later. On the other hand, the portfolio of ETF can be checked immediately.

For those investors, who feel it is risky to put all their eggs in the same basket, there are various combinations of Smart Beta ETFs like Smart Beta EMP (ETF-managed Portfolio) funds. Investors can expect a stable profit since Smart Beta EMP funds are a mix of High-dividend ETFs and Low Volatility ETFs as well as Value ETFs.