Quick Note: Smart Beta or “Dumb Beta”

Be wary of a growing array of “smart beta” funds that try to gain an edge on the rest of the #market through technical and timing advantages. The more specialized and complicated their approach, the more skeptical you should probably be. The smart-beta trend is especially pronounced in the world of #ETFs, where a new generation of #funds segment the market according to a range of risk factors, sectors, regions, and asset classes.

In the “New Normal” of uncertain returns, investors are understandably looking for ways to improve their odds while minimizing risk, and the proliferation of specialized ETFs is directed at such anxious investors. They are heavily marketed, and increasingly popular: accounting for over 30% of new money coming into the industry. Yet they are sold to consumers as if they were in keeping with a low-risk approach — which they are anything but!

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