Looking For Diversification, Enhanced Returns? Here Are 2 Smart Beta ETFs – Investing.com

Looking For Diversification, Enhanced Returns? Here Are 2 Smart Beta ETFs – Investing.com

Exchange-traded funds (ETFs) have been growing in number and evolving in style. Smart Beta (SB) ETFs, a new class of funds that aim to provide enhanced returns, have been getting significant attention.

Denys Glushkov of the University of Pennsylvania says:

"SB funds aim to enhance returns and/or minimize risk relative to traditional cap-weighted counterparts by tilting portfolios towards various rewarded factors."

In other words, while they track an index, smart beta funds also have additional rules that guide fund sponsors. Those parameters might consist of low volatility, value, growth, quality, dividends or momentum.

According to BlackRock (NYSE:), which has 800 ETFs globally and $1.9 trillion in assets under management: "Factors are the persistent and well-documented asset characteristics that have historically driven investment risk and return.”

Today we introduces two of these funds that might appeal to a range of investors. However, we should remind readers that the debate on the long-term performance of smart beta ETFs is ongoing.

Research by Burton G. Malkiel of Princeton University points out:

“Smart beta portfolios do not consistently outperform and when they do produce appealing results, they flunk the risk test.”

Therefore, potential investors need to do due diligence in light of their own portfolio objectives.1. First Trust Capital Strength ETFCurrent price: