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Who Are Smart Beta ETF Funds For?

Posted on: 28.10.2016
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A Smart Beta ETF strategy is for the investor seeking to outperform the total market. This new investment strategy that eschews the traditional market-cap weighting style is for those that believe superior value resides in companies with greater fundamentals. Investors engaging in a Smart Beta strategy have a close eye on the granular level, published formulas comprising the fund. This has a distinct advantage that’s less evident with traditional actively managed funds that are at the whim of a nebulous…
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Smart Beta ETFs focus on fundamentals that, in the long-term, generate value for investors. Without the appropriate due diligence, no investment decision is sound. Reviewing a Smart Beta ETF should include a look at the problems an investor may face. In this article, we'll look at some of the risk involved. Non Outlined Strategies Can Drift If a Smart Beta ETF manager doesn't have a carefully prescribed, rules-based approach, the investors can suffer from "style drift." This drifting occurs when…
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The consideration of tax implications is the most ignored aspect of nearly any investment plan. It’s easy to see why. Tax rules and governance are complex and ever changing. For this reason, it is important to understand the tax benefits and efficiencies of Smart Beta ETFs. ETFs offer greater tax efficiency compared to their mutual fund counterparts. Mutual funds hold a portion of their total assets in cash. This cash component serves the purpose of meeting investor redemptions.  However, if…
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Jack Bogle, the founder of Vanguard, sat down for an interview with Christine Benz which was published with the title: "Bogle: Smart Beta ETFs Do Not Work".  I'm not sure how Christine Benz came up with that title as not one time in the interview did he say they "do not work", but I'll come back to that later.  Interestingly enough Bogle reveals that he "created the two oldest and largest strategic beta funds in the business".   They were the Vanguard Value…
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