This article was originally published on ETFTrends.com.
By IndexIQ via Iris.xyz
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As an advisor, you’re well aware of the value of ETFs. These versatile investment vehicles can provide your clients with tax-efficient exposure to specific areas of the market. It wasn’t long ago that ETFs shared another common trait: they were passively managed. Designed to closely replicate the performance of a market index, most ETFs used a market cap-weighted approach that gave larger companies a higher weight in the index, and smaller companies a lower weight. But recent innovations have delivered a whole new family of ETFs called Smart Beta.
Unlike traditional ETFs, Smart Beta ETFs use a different approach to indexing—one that helps bridge the gap between active and passive investing.
Smart Beta ETFs are similar to active strategies in that they seek to take advantage of current market opportunities. At the same time, they adhere to a rules-based, transparent approach that looks very similar to traditional passive funds. It’s an attractive combination.
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