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Introduced in 2003, dividend ETFs are a new vehicle for a well-tested equity performance metric – dividend yield. Dividends have long been recognized as a key driver of long-run stock returns. Stock performance has been especially strong for the defensive duo of regular and increasing dividend payments. During low interest-rate environments, market volatility, and market downturns, investors in dividend ETFs can continue to receive a steady and reliable income stream. Here’s how: Consistent dividend payout history - A 20-year history…
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Over the long term, small capitalization stocks have produced higher returns than large cap stocks but in exchange for more volatility. After two decades of small cap stocks outperforming large caps in the 1970s and 1980s, investors wanted to know what, if any, premium they were being paid for the bumpy ride. So when an American-Swiss finance professor Rolf Banz analyzed the size effect of small cap stocks in 1982, among the paper’s enthralled  reviewers were three future Nobel laureates…
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Momentum is a common factor in nearly all Smart Beta strategies. Momentum investors seek to ride a wave of strong performance by using recent three to twelve months data to make decisions on which stocks to sell and which stocks to buy. This practice is inherently risky because it's focused on a narrow period and eschews the modern notion of the efficient-market theory. A CFA publication, Investment Risk, and Performance echoes this sentiment of risk. The author warns, "Portfolio managers…
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Value is a primary factor in Smart Beta investing. The value investor takes a pragmatic approach to stock selection focusing on the fundamental of the company and their long-term ability to deliver profits and grow. The simple principle behind a value strategy is this: share price appreciation comes from purchasing stocks that are priced lower than the underlying value. In this post, we'll look at how this factor influences the long-term growth of a Smart Beta ETF. The best way…
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