7 Must Know Facts About Smart Beta
If you are interested in the index services, then you must have a brief knowledge about each and every aspect of the same. There is a lot to equity index besides the common things that you know. Around 10 years back the first smart beta was introduced. Since then things have come a way to far. Here are must know facts about smart beta.
- The term smart beta is derived by the Professional services firm Towers Watson. You will be amazed to know that in 2003, the first smart beta ETF was launched.
- Beta helps in measuring the volatility of a single individual security or the portfolio. The rank of an individual stock depends on the deviation of the of the stock from the beta.
- Smart beta depends on the series of the objective and the rule-based screen to each of the component of the index company. These specific factors lead to ranking of the companies. Smart beta makes use of the objective rules-based screens instead of cap-weighted methods to solve the biasness in the size.
- ETFs of Smart beta are the tools that include passive investment. These are so designed that these can track the selected or the new built weighted indexes and the component companies.
- Smart beta does not weigh companies based on their size but make use of the principles of fundamental analysis to make out that which company deserves the more price. This is a fair strategy or say the methodology to work appropriately.
- Smart beta has strategies that can make available the factor diversification for the investors. It tends to give the tremendous performance. It can help you to move ahead of the benchmark indices.
- After 10 long years of functioning the strategies of Smart beta are quite refined which is a very good thing. These are highly accurate.
All in all, these are the must know facts about smart beta. These might help you to explore the Index Services in a better way.
Source : https://smartbetaindex.wordpress.com/2017/10/09/7-must-know-facts-about-smart-beta/